KORU Medical Systems(KRMD) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales increased by 27% to $6.3 million in Q1 2020 from $5 million in Q1 2019, driven by higher utilization of products by PIDD patients and expansion of HIZENTRA into CIDP [25] - Gross profit rose by 24% to $3.8 million in Q1 2020 from $3.1 million in Q1 2019, primarily due to increased sales volume [26] - Net income for Q1 2020 was $449,000, a turnaround of over $500,000 from a net loss of $85,000 in Q1 2019 [28] - Adjusted EBITDA improved by 38% to $1.3 million in Q1 2020 from $900,000 in Q1 2019 [28] Business Line Data and Key Metrics Changes - The increase in net sales for Q1 2020 reflected growth across infusion product lines and increased clinical trial sales compared to Q1 2019 [25][26] - The decline in gross margin was attributed to a noncash $100,000 charge related to the discontinuation of the Rescue VAC product line [26][18] Market Data and Key Metrics Changes - The company experienced higher demand for its products due to reactive purchasing associated with COVID-19, with minimal impact on production, inventory, supply chain, or distribution [11][12] - Plasma collection efforts are continuing despite COVID-19, with expectations of a ramp-up in collection activities as guidelines permit [15] Company Strategy and Development Direction - The company aims for a $50 million run rate by year-end 2022, improving operating efficiencies to achieve a gross margin of over 70% and generating over 20% organic revenue growth annually [20] - The focus remains on penetrating primary end markets, increasing clinical trial revenue, and solidifying contractual positions with key customers [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the economic uncertainty due to COVID-19 but expressed confidence in the strong underlying demand for products [50] - The company believes that COVID-19 has highlighted the benefits of home healthcare, which may lead to increased conversations surrounding at-home infusion therapies [16] Other Important Information - The company ended Q1 2020 with $7.4 million in cash, a $1.6 million increase from the previous quarter, primarily due to a drawdown on the line of credit [29] - The company has not experienced significant slowdowns in customer payments to date, maintaining good liquidity and financial flexibility [31] Q&A Session Summary Question: Is the shift from IV to subcutaneous therapy a temporary benefit due to COVID-19 or a longer-term trend? - Management confirmed that the movement from IV to subcutaneous therapy is real, active, and sustainable, with COVID-19 amplifying this trend [37] Question: How did the business perform in April and what are the expectations for Q2? - Management noted increased demand in April attributed to COVID-19 and anticipated a strong tailwind from the shift to subcutaneous therapy [40] Question: How is the launch of Xembify progressing compared to HIZENTRA? - Management indicated that the launch of Xembify has been relatively slow but is starting to gain momentum [42] Question: Should there be more announcements or data releases from pharma companies throughout 2020? - Management expects commercialization of a successful hematology trial within the next 12 months and will share updates as they become available [44] Question: What is driving the decline in gross margins and when should this pressure moderate? - Management attributed the decline to increased production pressures and investments in manufacturing efficiency, with a focus on cost reduction going forward [45]