Roger Susi - Chairman, CEO and President Brent Johnson - EVP of Worldwide Sales and Marketing Chris Scott - CFO and Secretary

Larry Solow - CJS Securities David Solomon - ROTH Capital Larry Haimovitch - HMTC

Thank you, and good morning, everyone. This morning we reported first quarter 2018 revenue of $7.1 million.

GAAP net income of $0.07 per diluted share and non-GAAP net income of $0.10 per diluted share. Q1, 2018 revenue increased nearly 38% over the first quarter, 2017, with GAAP and non-GAAP earnings also meaningfully higher than last year.

Both metrics exceeding prior guidance. Compared with Q4, 2017, revenue grew by nearly 7%.

I am very pleased with these results, and believe they illustrate the strength of our business and positive customer response toward our device offerings, which now include our new MRI patient monitor. Operationally, company is performing well.

During the first quarter the sales team made significant progress towards integrating the new patient bioscience monitor into the sales process, while remaining focused on generating orders for IV pumps. Manufacturing run smoothly meeting demand for all of our products and is fully integrated production of the new patient monitoring to their processes, and engineering is making progress on multiple projects simultaneously as we continue to execute on our product pipeline.

These development efforts are progressing nicely and tracking to my expectations around the timing of commercialization. These operational bright spots are not new development, although they are a continuation of the momentum that has been building for several quarters, and we look to carry this momentum into the future, which what I'd like to discuss right now.

I'd like to take a step back from the quarter-to-quarter details and share with you my vision of what we are driving towards over the next five years. With a new monitor having FDA clearance along with approvals in several major international markets, coupled with our progress developing new products, I am seeing an exciting and clear picture of IRADIMED's future potential.

Based on that vision, I have established an aspirational goal of achieving annual revenue of $100 million five years, with corresponding operational margins of between 35% and 40%. Of the $100 million in revenue in five years, I see it approximately add 47% coming from IV pumps; 28% from our new patient monitor; 16% from disposables and services and 7% from ferromagnetic detection devices chip currently under development with another 2% from the thermal management device.

This breakup can be found on the company presentation located on our website. While there is much work to be done, however, when considering the composition, strengths of our products that will drive us towards this goal, I have great confidence in our ability to achieve this level of revenue in five years, although, we can't expect the path to be a straight line.

First the IV pump, the cornerstone of the $100 million goal is comprised of our IV pump technology, and clearly we have tremendous experience with this device in this market. We are well underway with development efforts actively designing the next generation IV pump system, which I expect will facilitate deeper penetration of this market, and quicker adoption rates by hospitals that have not yet moved from running long lines.

Additionally, the next-generation IV pump will create a replacement opportunity from existing customers that want and need to replace their aging MRI IV pumps, and so I expect the combination of these factors may ultimately result in elevated growth rates and further solidify our leadership in MR fluid delivery. Second, our new patient vital signs monitor, this revolutionary device that was just introduced to the market late last year is becoming a welcomed alternative to many customers that feel they have been restricted by limited historical innovation from other product offerings.

I'm proud to report sales of our new monitor thus far have been as anticipated, and given the continued positive customer feedback, we expect sales to grow as we hone our selling skills and as more customers adopt our solution. Ultimately, I'm hopeful that my expected revenue contribution from the patient monitor towards the $100 million goal may prove conservative.

The third largest portion of our $100 million goal comes from the sale of disposables and services, which are primarily driven by the IV pump system. With the expectation of accelerating growth from the next generation IV pump, and supportive growth from an expanding market share in MR patient monitoring business, I foresee corresponding increases in sales of our disposables and services.

Finally, the remaining portion of my $100 billion goal comes from ferromagnetic detection and thermal management devices. We have already begun development of the ferromagnetic detection product, and look to begin commercialization within the next 12 to 18 months.

Thermal management is a longer-term project that I anticipate beginning to contribute late in the five-year period. So the $100 million in five-year goal is a goal, not guidance, my clear vision of this path is what has led me to make our stakeholders aware of this exciting anticipated outcome.

With the core being predominantly the devices and technology that we possess, along with development of our sales capability and size, we see that the steps that we have taken to continue to press forward with will enable attainment of this five-year goal. Now before passing the call over the Brent, I'd like to review our financial guidance for the second quarter and full year 2018.

As we announced earlier today, we expect second quarter revenues $7.2 million to $7.3 million, GAAP earnings per share of $0.07 to $0.08 and non-GAAP diluted earnings of $0.10 to $0.11. Additionally, we have increased our full year 2018 earnings guidance, and now expect GAAP diluted earnings per share of $0.32 to $0.33 and non-GAAP diluted earnings per share of $0.40 to $0.43.

Our previous guidance was GAAP earnings of $0.22 to $0.27 and non-GAAP earnings of $0.33 to $0.38. For now our full 2018 revenue guidance remains at $29.3 million to $30 million.

And so now I'd like to turn the call over to Brent for discussion of our customers' orders.

Thank you, Roger, and good morning, everyone. First, I'll address the IV pumps and then move on to the new patient monitor.

As Roger said, the sales team had a good quarter, which was a continuation of our strength that's been building for several quarters now. Booking of IV pumps and sets for this quarter exceeded our expectations.

The composition of US orders for our pump system in the first quarter remains consistent with recent quarters, with approximately half of the orders coming from first-time adopters, and the other half coming from our existing customers. Multi pump orders were another bright spot for us this quarter, with a 40 % increase over the first quarter of last year.

These multi pump orders accounted for one third of our total domestic units sold for the period, and again we define multi pump orders as three or more IV pumps on a single order, and they are typically heavily influenced by the critical care department to the hospital. These now well-established customer order trends for the IV pumps give us confidence that our strategy of targeting multiple departments continues to gain traction.

We are experiencing greater rate of success with our critical care strategy by stimulating the demand for MRI safe pumps in those departments. And while changing hospital process is often difficult and time-consuming, we are beginning to see success in converting customers long-standing practice of using conventional pumps with long IV lines extending into the MRI room or just waiting until patients are stable enough to go to MRI or diagnostic scan without IV medication.

As we've discussed before, both of these workaround solutions have negative patient risks associated with them. As for our new 3880MRI compatible patient vital signs monitoring systems, hospitals are impressed by what they see during demonstrations of this device.

The compact form factor resonates with them as they visualize the additional utilization and efficiencies made possible by IRADIMED design. While customers orders for the period were a little below our original aggressive forecast, we're not reading too much into that considering this is the first full quarter we were able to market this device in the US, and there's a certain amount of price discovery that's occurring as we compete for deals.

We remain encouraged about the future of 3880 and anticipate increasing demand from customers, as they move forward to realizing the additional utilization and driving efficiencies in their operation. Bundling of our IV pump and monitor into combined sales remains a great opportunity for us, and only us as IRADIMED is the one company in the world with the capability to provide hospitals with a truly mobile patient care system that allows for transporting patients to the MRI and back without having to make multiple time-consuming equipment change over, having the ability to bundle our products into a single transport package is an advantage that I believe makes us highly competitive throughout the world.

As for the sales team itself, our expansion plans remain on track for the year, and we're currently searching for two additional US sales manager expansions bringing us to a total of 22 direct sales managers, which are supplemented by our three area directors and growing clinical nurse and customer service teams. We remain committed to the expansion plans that I talked about on the last call, and growing our sales teams in both the US and international markets during 2018.

Now I'll turn it over to Chris to summarize our first quarter financial results.

Thanks Brad. Today, I'll be discussing our financial results on a GAAP basis, as well as on non-GAAP basis.

Our non-GAAP operating results excluded stock based compensation expense and the related tax effects, our free cash flow measure is cash flow from operations less cash used for purchases of property and equipment. And lastly infrequent tax items are considered based on their nature and excluded from the provision of income taxes, as these costs are not indicative of our normal or future provisions for income tax.

We believe the presentation of these non-GAAP measures, along with our GAAP financial statements can be helpful in providing more thorough analysis of our ongoing financial performance. You can find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's release.

As already stated, we reported revenue, first quarter revenue of $7.1 million, compared to $5.2 million for the same quarter last year. Domestic revenue was $6 million for the current quarter, compared to $4.3 million for the first quarter last year.

Revenue from international sales was $1.1 million for the current quarter, compared to $0.9 million for the 2017 quarter. Revenue from devices was $4.8 million for Q1, 2018, compared to $3.4 million for the same quarter last year.

Included in revenue from devices for the first quarter of 2018 was $1.1 million in sales of our new MRI compatible patient vital signs monitor, compared to $0.4 million for the same period last year. Revenue from disposables and services was $1.9 million for the current quarter, compared to $1.6 million for the 2017 quarter, and finally revenue from the amortization of our extended maintenance contracts was $0.3 million for the current quarter, compared to $0.2 million for the prior year quarter.

The average selling price of our IV pumps recognizing revenue, during the first quarter of 2018 was approximately $33,300, compared to approximately $34,500 for the same quarter last year. The decrease in ASP is the result of known favorable sales mix from international sales.

Gross margin was 76.2 % for the current quarter and 73.1% for the prior year quarter. The increase in gross margin percent was a result of favorable inventory cost and unit adjustments.

Operating expenses for the first quarter 2018 were $4.3 million or 61% of revenue, compared to $4 million, or 61% of revenue compared to $4 million, or 77.7% of revenue in the first quarter 2017. The increase in operating expenses on a dollar basis is due to higher expenses for payroll and employee benefits, due to higher headcount, higher commissions due to higher sales, partially offset by lower expenses for consulting costs.

Our effective tax rate for the current quarter was 25.4 %, compared to negative 11.7% for the 2017 period. Higher effective tax rate is primarily due to higher taxable income in the current period compared to the prior year period.

Additionally, the lower US Federal tax rate included, as higher US Federal tax rate on percent basis tax rate included the Tax Cuts and Jobs Act, which is reflected in our first quarter 2018 results. On a GAAP basis, net income for the current quarter was $0.07 per diluted share, compared to the loss of $0.02 for the first quarter last year.

On a non-GAAP basis, net income was $0.10 per diluted share for the current quarter, compared to breakeven for the first quarter last year. For the three months ended March 31st, 2018, cash provided by operations was $1.6 million, compared to a net cash outflow of $0.2 million for the 2017 period.

The increase is primarily the result of higher net income and higher net cash inflows related to accounts receivable, and lower net cash outflows related to accounts payable, accrued income and inventory. Our free cash flow a non-GAAP measure was $1.5 million for the current period, compared to a negative $0.4 million for the first quarter last year.

As of March 31st, 2018, we had $27.9 million of cash and investments. And now I'll turn the call over for questions.

Operator?

Good morning, guys. Thanks for taking the questions.

Just on the -- first one just real briefly on your changing guidance. So I know you haven't changed your sales outlook at all.

Is it a little bit lower SG&A at least compared to my expectations this quarter? Is that sort of what's the driver of the sort of the improvement in earnings outlook for the year?

Yes. Lower SG&A is part of that Larry.

I think and also we're being -- we did pretty well with our cost controls, our spending habits in the first quarter. I think that was very helpful and also the further suspension of the medical device excise tax, which didn't happen until after we had released our guidance.

So I think it's a combination of all those things.

Got it, okay. And that just on the SG&A side or the headcount plans.

Is it you guys expect to add two more bodies to the sales because I thought last call you had said you expect to be at 24 targets by year-end and not 22.

Yes, Larry. This is Brent.

Yes, we are adding two this quarter and we plan to two add more next quarter which would bring it to 24.

Got it, so you got 20 today, you actually expect to add two this current quarter and then two more back half of the year, got you. And just on the booking and I know you don't you quantify or give exact numbers there, but on the pump side, you can just speak to I think you Q1 was a little bit of normal little bit of slower quarter anyhow, but can you just speak to that?

And then on data maybe just a little comment on why you think monitor sales were maybe a little bit less than expected other orders?

Sure. First part of your question, the pump sale, so pump orders were, yes, if you look at Q4, Q4 is typically one of our strongest quarters, Q1 is usually a little bit of a weaker quarter.

So quarter-to-quarter we had about the same amount of sales, but once again Q4 is usually our strongest quarter. And so I don't see that as any kind of issues because we typically see a little less in sales in Q1.

So on the pump side like we said, the results exceeded our expectations a little bit. On the patient monitor side, well, yes with the patient monitor, again it's- we don't have a lot of history here to talk about.

So the first quarter was -- we put some pretty aggressive expectations on ourselves for Q1, and we came in a little bit below those expectations, but again we see this as a -- on the domestic side, we're speaking domestically here. We had a strong quarter internationally on patient monitors.

But on the domestic -- so on the domestic side, again it's just --again ramping up with a new product, and you train the salesforce, train sales teams and just again it's a one quarter of results. We've already in April off to a great start domestically, and a little bit ahead of plan.

Got it. Just last maybe question for Roger on the sort of the five year target about $47 million, $48 million in pump sales would imply about 15% annual growth from today.

I don't know if you mention it but did you sort of give us a timeline or a rough time on when you expect a new product out there? And what it drive, would it be more replacement, more new sales, combination of the two, any other color that would be great.

Yes. Well, yes, the change in slope towards the $100 million plan, you'll see a definite mark change in that slope once that new pump is available.

We're expecting to see that in about the third year. So and if I mentioned, we think the real afterburner kicks in because of the replacement business, which we don't really have any of right now.

Right and what drives replacement? Will be that the current product becomes obsolete relative to new one or is it just that you'll need a new one because it won't last as long or the new product have features that well actually that they can't miss, what was sort of a whole --

You're right, Larry. All the above, all the above.

Hey, guys, thanks for taking my questions. Just want to start off on the pumps.

So you said 40% increase in multi pump orders. Were those more from first-time users?

Are those from experienced users that are now China double and triple down?

David, yes, I don't have that granularity on this quarters sales, but I can tell you in general it really once again follows those guidelines are the what we talked about in my previous remarks, where it's typically pretty much 50:50. I mean we have new installations, where we do that.

We have some existing installations where we may have broken in and got one into the MRI area. And then once we get a beachhead in there like that we go after the ICU, and we try to bring them on board with buying pumps for their department or buying multiple pumps, so that they can bring their patients out.

Okay, and then on the pumps again, so higher international sales is that people that now have gotten your monitor and are interested in the pumps on the international side that weren't aware of the company? Can you just give a little bit more color on that shift to the pumps?

So we had higher sales on top end monitors internationally and international business is a little different than the domestic business, and it has more large, there's some larger orders tend to influence that, and it tends to be more up and down in the international business. But this is the second quarter in a row where we've seen strong sales.

And I think, again I think we are becoming more and more known in the international area with our efforts and the patient monitor is a big part of helping us do that because that is something that's like we said, we said in previous call is an established market that we're starting to get some a major recognition out there as a player in that area.

Excellent and just on the monitor side. You said that international group did you escrow or can I get a rough breakdown a US versus international for the monitors?

Well, yes, we really don't go into that granularity as far as the unit counts and things like that. I think you can see from the financials that Chris has spoken about and present, you can see revenue wise with that reference.

Maybe I should add a little something I might have not -- I mean by that my previous comment when I mentioned that the FDA clearance happened and we have these international approvals as well. You don't forget internationals been at this now for really about 15 months, and domestically we only began to sell this thing in November of last year.

So there's a difference in when the starting gun went off for the two areas, and it's quite a difference.

Absolutely and on that end in the US side are you seeing --I know it's a capital equipment purchase and probably heavy towards the back half of the year if not the fourth quarter, are you seeing some conversations where, can you give a little bit more color on how it's going when you approach these healthcare systems and maybe they're saying, oh, we love it but we don't want it to make them order until November. Anything like that you're seeing right now or is it kind of do not have those kind of indications yet.

Well,. sure, that's natural process to when you introduce a product, unfortunately, we're not able to quote products in the US until we have the 510- K and as Roger talked about, we didn't get that until the first part of November last year.

So as a natural order of sales, as you put out more and more quotations and quotations aged out there in the market, you typically glean more and more orders. Now this is different in the pump, it's not a market that we're pioneering.

It's not a market that we are pioneering. It's not market there is not a sale taking place unless we're out there selling it.

So we do get involved in lots of deals that are going -- in deals that are going down right now. But, yes, I mean it's a natural progression of things we've got lots of customers that are budgeting for our systems that have made again verbal commitments to us about buying the system, but sure those purchases don't take place until sometimes later in the year.

So as time goes on and we put more and more quotations out in the field on qualified opportunities, we're going to be bringing in more and more of those deals.

Great and then on just some bundling side. Have you guys had any official orders that have been bundled or nothing where you done that specifically?

Is that just something a plan for the future?

Yes. We have gotten some orders.

We've bundled, kept pumps and monitors. Sometimes that actually comes at two separate orders just because the hospital is purchasing them that way, but we have gotten orders that are combined like that.

Great and then last question just on whether or not there's any response from the competitor from the monitor side regards to pricing or anything else you're hearing out there? Thank you so much.

Yes. We have seen it and I'll tell you I mean we've experimented a little bit with our price come down.

And one thing we have seen is our competitor really come in and aggressively discount. I guess you could look at it two ways.

I like to look at it is that we've got a entrenched competitor out there that's got basically a 100% of the market and has the corner slope market leading product, yet they are in deals coming down and aggressively coming down in price to try to speed us in place on deals, which to me is a good thing in my book because they're taking us seriously as a competitor. And they're not necessarily trying to sell in the merits of what they've done the reputation everything else or they're coming down to try to compete with us price for price on deals.

So again that's pretty much what we've seen out there thus far, but again we're early into this. And don't have a lot of months of experience doing this yet.

So we'll be able to give you more information on that as we go along.

Good morning, gentlemen, and congrats on a very solid quarter. All my other questions have been answered by the previous questioners.

I just had one Brent and you mentioned in your prepared remarks the term price discovery. I thought that might be an interesting euphemism and wanted to hear what you really meant by that.

Maybe I'll take it first, Larry. Because I'm basically pushing the experimentation so when we first got approval in the US market, we've been pricing this thing, we priced it one way or the international stuff down more than a year ago.

But as we got to the approval point in the US market late last year sales had a plan on how to price the device. And we did that and frankly I felt that we did really, really well with that price, possibly showing that we could raise it a bit.

So we pushed it up in the first quarter and I might have over thought that a little bit. And so that's what we mean by price experimenting.

So we're feeling our way through exactly where the pricing shall be your long-term, tight rate --

And also the Roger it sounds like your competitors are reacting with lower prices.

Yes. They are, well, I am sure I mean they've got a long way to go.

They're been used to quoting and occasionally getting numbers that are well into the $100,000 area. We see quotes out there as much as a $120,000 plus and with us around now we're seeing them come in and you know they're cutting it down into the 70s and even a little bit in the low 70s I think we've seen right.

Depending upon the configuration of course.

Yes. So, yes, that's a big haircut for them and our list are under that.

So, yes, they got to go a long wait up to push us underwater price-wise.

What do you guess your ASP will be for the year ballpark or give me a range for the new monitor?

Well, that's a titration of this pricing that we're doing.

And the other thing, Larry, it depends on that the configuration because when you fully configure a patient monitor, it sells for a lot more than if you buy a basic patient monitor. Whereas with the IV pump there's really not as much, there's not as much variance there, right.

I mean there's not as many options there to speak up and so it's a little easier to forecast that on the patient monitor, and we're still kind of feeling our way through that what is going to be the average of those configurations.

So a fully loaded new monitor vis-à-vis barebones new monitor, what's the difference in price approximately? How much are we talking about?

About $10,000 -$20,000.

Oh no, it's bigger range in there. The range is probably on the top end to the low end, Larry, is probably about $30,000.

Okay.

That is the difference, that's the delta.

Yes. And then one other question.

I'm assuming there are no manufacturing capacity issues if the monitor does do better than you even have expected?

Right, now we're -- as I mentioned operational wise here, we're not only up to speed but we've got good capacity. Larry, we don't plan to take over a 100% of this market.

Our ambitions aren't quite that high as you can probably tell from my sharing of the $100 million plan, even over the next five years, we're only showing ourselves taking not even 30% of that market. So to exceed our production capacity and have to go out and rent more space would be great, but we can do very, very well meeting our goal especially even this $500 million -- $100 million goal over the next five years with the space that we have.

What is the comp -- five year compounded annual growth right if you were to hit a $100 million in five years? What does the average rate, annual rate turn out to be?

It won't happen like the average.

Yes. It's about 34%.

34%, okay. So if things go according to your plan over the next five years, your top line will grow 34% on a compounded annual basis.

Average.

Okay, right it would obviously, no obviously it's going to vary year by year. And what does that imply for operating margins or earnings?

I'm assuming that the earnings rate would be even higher than 34% compounded?

Well that on the year of achievement of $100 million we are talking about 35% to 40% operating margins on a GAAP basis.

And what does that turn out to be Chris in terms of a compounded annual growth rate of operating income?

I don't have it with right now, Larry.

But more than 34%.

Yes. Well, yes, you'll get some leverage out of it.

Yes. So it could be just to pick a ballpark number you could grow, if you achieve your goals you could grow 34% compounding average growth right for five years on the top line, and on the operating income line could be call it just 40% just to pick a number that's above that for the time being.

Greater than the revenue CAGR. Thank you.

And I am showing no further questions from our phone lines. I would now like to turn the conference back over to Roger Susi for any closing remarks.

Again, I'm very pleased with our financial results and how we are performing in all areas of the business. Our aim is to continue this momentum throughout 2018.

And to make positive and deliberate steps towards achieving the goal of $100 million in revenue in the five years coming. Thank you for participating in today's call.

And for your continued support of IRADIMED.