What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-01 compared with 2023-03-02 · 37 added, 45 removed, 151 unchanged (35% of the section changed)

20 unchanged sentences

invasive and non-invasive blood pressure;

patient temperature, and;

optional advanced multi-gas anesthetic agent unit featuring continuous Minimum Alveolar Concentration measurements.

patient temperature;

and optional advanced multi-gas anesthetic agent unit featuring continuous Minimum Alveolar Concentration measurements.

The IRADIMED 3880 MRI compatible patient vital signs monitoring system has an easy-to-use design and allows for the effective communication of patient vital signs information to clinicians.

5 unchanged sentences

Selling cycles for our devices have varied widely and have historically ranged between three and six months in duration with more recent trends lengthening beyond this historical range due to lingering pandemic issues.

We also enter into agreements with integrated delivery health systems and healthcare supply contracting companies in the U.S.

Our agreements with healthcare supply contracting companies enable us to sell and distribute our products and services to their member hospitals.

Under these agreements, we are required to pay these group purchasing organizations (“GPOs”) a fee of three percent of the sales of our products to their member hospitals.

We also enter into agreements with IDNs and healthcare supply contracting companies, which are commonly referred to as GPOs in the U.S., which enable us to sell and distribute our products to their member hospitals.

GPOs negotiate volume

purchase prices for hospitals, group practices, and other clinics that are members of a GPO.

Under our GPO agreements, we are required to pay the GPOs a fee of three percent of the sales of our products to members of the GPO.

Sales to participating IDNs do not have an associated fee.

Financial Highlights and Outlook

5 unchanged sentences

Patient Vital Signs Monitoring Systems

COVID 19 Considerations

The worldwide COVID-19 pandemic has negatively impacted, and may continue to negatively impact, the macroeconomic environment in the United States and globally.

The magnitude of the impact will depend on numerous evolving factors that we may not be able to accurately predict, including the impact of federal, state, local and foreign governmental actions, consumer, supplier and hospital behavior in response to the pandemic and such governmental actions, and the economic and operating conditions.

Critical Accounting Policies and Estimates

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we sell our products through third-party distributors who resell our products to end users.

For many domestic sales, we enter into agreements with integrated delivery health systems and healthcare supply contracting companies, commonly referred to as Group Purchasing Organizations (“GPOs”).

For many domestic sales, we enter into agreements with IDN systems and healthcare supply contracting companies, commonly referred to as GPOs.

GPO agreements enable us to sell and distribute our products to their member hospitals.

22 unchanged sentences

Percent of Revenue

Years Ended December 31,

Cost of revenue

10 unchanged sentences

Revenue by Geographic Region

Years Ended December 31,

(In millions, except percent change)

United States

2 unchanged sentences

Revenue by Type

Years Ended December 31,

(In millions, except percent change)

MRI compatible IV infusion pump system

MRI compatible patient vital signs monitoring system

MRI Compatible IV Infusion Pump Systems

MRI Compatible Patient Vital Signs Monitoring Systems

Ferro Magnetic Detection Systems

Total Devices revenue

Disposables, service and other

Disposables, services and other

Amortization of extended warranty agreements

6 unchanged sentences

Revenue from sales of devices increased $9.5 million, or 25.9 percent, to $46.0 million from $36.5 million for the same period in 2022.

This increase was the result of higher overall unit sales especially related to our patient vital signs monitoring systems.

This increase was the result of higher overall unit sales, particularly our IV infusion pump systems.

Revenue from sales of our disposables, service and other increased $3.0 million, or 20.2 percent, to $17.6 million from $14.6 million for the same period in 2022.

Revenue from the amortization of our extended warranty agreements increased $0.3 million, or 15.8%, to $2.2 million from $1.9 million for the same period in 2021.

Revenue from the amortization of our extended warranty agreements decreased $0.2 million, or 7.5%, to $2.0 million from $2.2 million for the same period in 2022.

The increase in ancillary product sales aligns with the increased sales of our devices.

The decline in revenue from the amortization of deferred revenue year-over-year is primarily due to a higher initial volume of deferred revenue during the pandemic, as more companies were purchasing extended warranties at that time.

Cost of Revenue and Gross Profit

Years Ended December 31,

(In millions, except gross profit percentage)

Cost of revenue

5 unchanged sentences

The increase in gross profit margin is the result of favorable overhead variance adjustments and higher average selling prices in 2023 compared to 2022, offset by increased raw material costs due to inflation.

The increase in year over year sales also positively impacts the ability to favorably absorb overhead costs increasing gross profit margin.

in year over year sales also positively impacts the Company’s ability to favorably absorb overhead costs and increase gross profit margin.

Operating Expenses

Years Ended December 31,

(In millions, except percentage of revenue)

General and administrative

6 unchanged sentences

General and administrative expense increased approximately $4.4 million, or 41.4 percent, to $15.1 million for the year ended December 31, 2023, from $10.7 million for the same period last year.

This increase is primarily due to higher expenses for legal and professional costs, regulatory approval and certification costs, and payroll and employee benefits costs.

These increases are a direct result of the continuous growth of the company and need for additional resources.

This increase is primarily due to higher expenses for legal and professional costs, regulatory approval and consulting costs, and payroll and employee benefits costs.

These increases are a direct result of the continuous growth of the Company and need for additional support resources.

Sales and Marketing

Sales and marketing expense increased approximately $2.1 million, or 19.8 percent, to $12.7 million for the year ended December 31, 2022, from $10.6 million for the same period in 2021.

This increase is primarily the result of higher expenses for sales commissions, sales activities and software costs, partially offset by lower expenses for payroll and benefits.

These increases are a direct result of the continuous growth of the Company.

Commissions and sales activity expenses increases in line with revenue growth.

Sales and marketing expenses decreased approximately $0.6 million, or 4.3 percent, to $12.1 million for the year ended December 31, 2023, from $12.7 million for the same period in 2022.

This decrease is primarily the result of lower expenses for sales commissions, partially offset by higher expenses for payroll and benefits.

Lower commissions are related to the sales cycle, and not necessarily in line with revenue growth.

The increases are a direct result of the continuing growth of the Company.

Research and Development

Research and development expense increased approximately $0.6 million, or 25.5 percent, to $2.9 million for the year ended December 31, 2023, from $2.3 million for the same period in 2022.

This is primarily due to higher expenses for prototype and consulting costs, offset by lower allocated payroll and benefits costs.

This is primarily due to higher payroll and benefits costs, offset by lower prototype design and consulting expenses.

Other Income, Net

Other income, net consists of interest income, foreign currency transactional gains and losses, and other miscellaneous income.

We reported other income of approximately $550 thousand and $19 thousand for the years ended December 31, 2022 and 2021, respectively.

We reported other income of approximately $1.7 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively.

This increase is primarily the result of higher interest income during the year ended December 31, 2023 compared to the same period in 2022.

1 unchanged sentence

Our effective tax rate for the year ended December 31, 2023 was 20.8 percent compared to 20.7 percent for the same period in 2022.

The increase in our effective tax rate is primarily the result of higher book income before the provision for income taxes and tax benefits associated with the exercise and sale of employee options and vesting of restricted stock units that materially reduced the effective tax rate in 2021 but did not recur to the same extent in 2022.

The increase in our effective tax rate is primarily the result of higher book income before the provision for income taxes.

Liquidity and Capital Resources

2 unchanged sentences

As of December 31, 2023, we had cash and investments of $49.8 million, stockholders’ equity of $71.4 million, and working capital of $59.7 million, compared to cash and cash equivalents and investments of $58.0 million, stockholders’ equity of $73.7 million, and working capital of $68.9 million as of December 31, 2022.

For the Years Ended December 31,

(In millions)

Net cash provided by operating activities

Net cash (used in) provided by investing activities

Net cash (used in) provided by financing activities

Net cash used in investing activities

Net cash used in financing activities

Comparison of the Years Ended December 31, 2023 and 2022

Operating Activities

For the year ended December 31, 2022, cash provided by operations decreased $1.2 million to $10.1 million, from $11.3 million in 2021.

During 2022, cash provided by operations was positively impacted by higher net income, prepaid expenses, accounts payable, and prepaid income taxes.

Cash provided by operations was negatively impacted by net accounts receivable and accrued payroll and benefits.

For the year ended December 31, 2023, cash provided by operations increased $3.5 million to $13.5 million, from $10.0 million in 2022.

During 2023, cash provided by operations was positively impacted by higher net income, accounts receivable, stock compensation, and deferred revenue.

Cash provided by operations was negatively impacted by inventory, accounts payable, and deferred income taxes.

Investing Activities

For the year ended December 31, 2022, cash related to investing activities decreased $2.0 million to a use of $1.4 million, from $0.6 million provided in 2021.

For the year ended December 31, 2023, cash related to investing activities decreased $6.6 million to a use of $8.0 million, from $1.4 million used in 2022.

During 2023, cash related to investing activities was impacted by purchases of property and equipment, specifically the purchase of land.

During 2022, cash related to investing activities was impacted by maturities of investments, purchases of property and equipment, and capitalized intangible assets.

During 2021, cash provided by investing activities was impacted by maturities of investments, partially offset by impacts from purchases of property and equipment, and capitalized intangible assets.

Financing Activities

For the year ended December 31, 2022, cash related to financing activities decreased $(12.7) million to a use of $(12.7) million, from $24 thousand provided in 2021.

During 2022, cash provided by financing activities was related to a cash payment for a dividend, proceeds from the exercise of stock options, offset by taxes paid for the net share settlement of restricted stock units.

For the year ended December 31, 2023, cash related to financing activities decreased $1.0 million to a use of $13.7 million, from $12.7 million used in 2022.

During 2023, cash used in financing activities was related to a cash payment for a dividend and taxes paid for the net share settlement of restricted stock units.

Sales to end users in the United States are generally made on open credit terms.

3 unchanged sentences

Pursuant to the terms of our lease, the monthly base rent is $34,133, adjusted annually for changes in the consumer price index.

We believe our sources of liquidity, including cash flow from operations, existing cash, investments, and available financing sources will be sufficient to meet our projected cash requirements for at least the next 12 months from the date the financial statements are issued.

We believe our sources of liquidity, including cash flow from operations, existing cash, and available financing sources will be sufficient to meet our projected cash requirements for at least the next 12 months from the date the financial statements are issued.

Any equity financing may be dilutive to stockholders, and debt financing, if available, may involve restrictive covenants that increase our costs.

1 unchanged sentence

From time to time, we may explore additional financing sources to meet our working capital requirements, make continued investment in research and development, expand our business and acquire products or businesses that complement our current business.

These actions would likely affect our future capital requirements and the adequacy of our available funds.

These actions would likely affect our future capital

requirements and the adequacy of our available funds.

Our future liquidity and capital requirements will depend on numerous factors, including the:

● Amount and timing of revenue and expenses;

● Dividend policy;

● Extent to which our existing and new products gain market acceptance;

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis