Q1 2020 Summary
- Net sales rose 27% to $6.3 million
- Gross margin of 60% (62% excluding inventory obsolescence
charge)
- Net income improved to $0.4 million, or $0.01 per share
- Adjusted EBITDA increased 38% to $1.3 million
- COVID-19 Update
Repro Med Systems, Inc. dba KORU Medical Systems (NASDAQ:
KRMD) (“KORU Medical” or the “Company”) today announced
financial results for the first quarter ended March 31, 2020 (“Q1
2020”).
“We reported a strong Q1 2020 with net sales, net income, and
Adjusted EBITDA rising from Q1 2019,” said Don Pettigrew, President
and CEO. “We are an essential business under current New York state
guidelines, and experienced minimal operational disruptions from
the impact of COVID-19 in the quarter. I am very proud of how our
team has responded to the COVID-19 crisis with their commitment,
resiliency, and continuing support of our patients and healthcare
partners. Our products allow high-risk patients with immune
diseases and other chronic conditions to receive treatment at-home
and keep them out of institutional settings – important advantages
during these challenging times.”
Q1 2020 Overview
The Company continued in Q1 2020 to capitalize on the growth of
its primary end markets of Primary Immune Deficiency Diseases
(“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy
(“CIDP”) while pursuing longer-term growth initiatives, including
broadening pharmaceutical relationships with an emphasis on the
numerous new subcutaneous drugs coming to market, expanding
indications beyond its primary disease states, and pursuing
customers in new geographies.
Net sales rose 27% to $6.3 million in Q1 2020 from $5.0 million
in Q1 2019, with growth in all product categories (pumps, needle
sets, and tubing). We believe this growth was primarily driven by
an increased utilization of our products by PIDD patients and
ongoing expansion of Hizentra® into CIDP. Net sales for Q1 2020
also reflected higher clinical trial sales compared to Q1 2019.
Gross profit in Q1 2020 rose 24% to $3.8 million from $3.1
million in Q1 2019, primarily due to increased sales volume. Gross
margin of 60% declined from 61% in Q1 2019, reflecting a non-cash
$0.1 million obsolescence reserve related to a discontinued legacy
product and an increase in overtime, partially offset by price
increases; excluding the charge, gross margin in Q1 2020 was
62%.
Total operating expenses for Q1 2020 were stable at $3.2 million
when compared to Q1 2019. Selling, general & administrative
expenses were $2.8 million, or 44% of net sales, compared to $2.5
million, or 50% of net sales in Q1 2019. Litigation costs declined
to $0.1 million from $0.5 million in Q1 2019, reflecting a
decreased level of activity with respect to ongoing legal activity
with our competitor. Research and development expenses increased to
$0.3 million from $0.1 million in Q1 2019, mostly due to increased
salary and related benefits due to higher headcount as we continue
our commitment to development initiatives.
Net income for Q1 2020 was $0.4 million, or $0.01 per share, as
compared to a net loss of $0.1 million, or $0.00 per diluted share,
in the prior year period.
Q1 2020 Adjusted EBITDA rose 38% to $1.3 million from Adjusted
EBITDA of $0.9 million in Q1 2019. Adjusted EBITDA excludes from
net income: tax expense, depreciation and amortization, interest
income, net, operating expenses associated with the Company's
organizational changes prior to March 31, 2019, discontinued
product expense, litigation costs, manufacturing initiative
expenses, and stock option expense.
COVID-19 Update
The COVID-19 pandemic has spread to the countries in which the
Company, its customers and suppliers conduct business. The Company
currently qualifies as an “essential business” under New York state
guidelines and its operations remain active. We serve patients that
are managing chronic medical conditions and remain committed to
doing all we can so that these vulnerable individuals have access
to our Freedom Integrated Infusion System, which allows them to
utilize home-based drug therapy.
The Company has responded to this crisis by developing and
deploying a multi-faceted set of operational and financial
initiatives designed to minimize disruptions to its normal business
activities and preserve its ability to execute its long-term growth
objectives.
To protect the safety, health and well-being of employees,
customers, suppliers and communities, we are following federal,
state, and local guidelines to ensure safety in all facilities,
including: increased frequency of cleaning and disinfecting, social
distancing practices, requiring most non-production related team
members to work remotely where possible, business travel
restrictions, cancellation of certain events, and limitations on
visitor access to facilities.
The Company is currently
continuing to manufacture and ship products on schedule and
is managing its inventory and supply chain to minimize disruptions.
That said, there can be no assurance that this will continue in the
face of COVID-19 uncertainty.
“We are confident that KORU Medical will successfully navigate
the challenges of COVID-19 and remain focused on achieving our
long-term growth objectives,” continued Mr. Pettigrew. “We have not
experienced any material disruption to our business thus far,
continue to execute on our Strategic Plan, and are prudently
managing working capital and cash flow. Longer term, we believe
that the COVID-19 experience may accelerate the shift of drug
infusion therapy to an at-home model and further advance the
adoption of subcutaneous immunoglobulin drugs.”
Balance Sheet, Liquidity Initiatives
and Credit
Cash and equivalents as of March 31, 2020 totaled $7.4 million,
a $1.6 million increase from December 31, 2019. Substantially all
of the increase was due to a March 2020 draw down of $1.5 million
on the Company’s line of credit, the full amount available at that
time.
On April 14, 2020, the Company signed a new $3.5 million
revolving line of credit with its lender that extended the
above-referenced $1.5 million line of credit, and subsequently drew
down on the full amount available out of concern about the
potential impact of COVID-19.
On April 20, 2020, the Company entered into an agreement with
its lender pursuant to the Paycheck Protection Program under the
Coronavirus Aid, Relief, and Economic Security Act, providing for a
loan in the principal amount of approximately $1.5 million. The
loan was funded on April 27, 2020.
On April 27, 2020, the Company entered into an agreement with a
division of its lender, to provide up to $2.5 million in financing
for equipment purchases from third party vendors.
Additional information regarding these agreements is available
in the Company’s public filings.
To date, the Company has not experienced any significant
slowdown in customer payments, and the Company believes that cash
on hand and cash expected to be generated from future operating
activities will be sufficient to fund its operations for the
foreseeable future. That said, there can be no assurance that this
will continue in the face of COVID-19 uncertainty.
Non-GAAP Measures
This press release includes the non-GAAP financial measure of
“Adjusted EBITDA” that is not in accordance with, nor an alternate
to, generally accepted accounting principles and may be different
from non-GAAP measures used by other companies. In addition, this
non-GAAP measure is not based on any comprehensive set of
accounting rules or principles. Non-GAAP financial measures should
not be considered a substitute for, or superior to, measures of
financial performance prepared in accordance with GAAP. They are
limited in value because they exclude charges that have a material
effect on our reported results and, therefore, should not be relied
upon as the sole financial measures to evaluate our financial
results. The non-GAAP financial measure is meant to supplement, and
to be viewed in conjunction with, GAAP financial results. A
reconciliation of our non-GAAP measure is included in an attachment
to this press release.
Conference Call
Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic) or
- (201) 493-6739 (International)
Webcast registration: Click Here
Following the live call, a replay will be available for six
months on the Company's website, www.korumedical.com under
"Investor Relations."
About KORU Medical Systems
KORU Medical Systems develops, manufactures, and commercializes
innovative and easy-to-use specialty infusion solutions that
improve quality of life for patients around the world. The FREEDOM
Syringe Infusion System currently includes the FREEDOM60® and
FreedomEdge® Syringe Infusion Drivers, Precision Flow Rate Tubing™
and HIgH-Flo Subcutaneous Safety Needle Sets™. These devices are
used for infusions administered in the home and alternate care
settings. For more information, please visit
www.korumedical.com.
Forward-looking
Statements
This press release contains forward-looking statements that
involve risks and uncertainties. Forward-looking statements can be
identified by words such as “will” and “believe.” Actual results
may differ materially from the results predicted and reported
results should not be considered as an indication of future
performance. The potential risks and uncertainties that could cause
actual results to differ from the results predicted include, among
others, those risks and uncertainties included under the captions
“Risk Factors” in our Annual Report on Form 10-K for the year ended
December 31, 2019, as amended, and our most recent Quarterly Report
on Form 10-Q for the quarter ended September 30, 2019, which are on
file with the SEC and are available on our website at
www.korumedical.com/investors and on the SEC website at
www.sec.gov. In addition, there are risks and uncertainties with
respect to the impact of COVID-19 on our supply chain, operations
and financial condition. All information provided in this release
and in the attachments is as of May 4, 2020. Undue reliance should
not be placed on the forward-looking statements in this press
release, which are based on information available to us on the date
hereof. We undertake no duty to update this information unless
required by law.
REPRO MED SYSTEMS,
INC.
BALANCE SHEETS
March 31, 2020
December 31,
(Unaudited)
2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
7,427,679
$
5,870,929
Accounts receivable less allowance for
doubtful accounts of $32,645 at March 31, 2020 and December 31,
2019
3,419,681
3,234,521
Inventory
3,089,016
2,388,477
Prepaid expenses
543,454
387,396
TOTAL CURRENT ASSETS
14,479,830
11,881,323
Property and equipment, net
638,670
611,846
Patents, net of accumulated amortization
of $303,425 and $288,967 at March 31, 2020 and December 31, 2019,
respectively
873,225
807,135
Right of use assets, net
340,118
373,734
Deferred tax asset
251,444
188,241
Other assets
19,812
19,582
TOTAL ASSETS
$
16,603,099
$
13,881,861
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES
Line of credit payable
$
1,500,000
$
—
Accounts payable
1,097,054
572,656
Accrued expenses
888,318
1,296,612
Accrued payroll and related taxes
229,836
190,265
Accrued tax liability
409,703
204,572
Finance lease liability - current
4,252
5,296
Operating lease liability - current
138,520
136,888
TOTAL CURRENT LIABILITIES
4,267,683
2,406,289
Finance lease liability, net of current
portion
1,842
2,646
Operating lease liability, net of current
portion
201,598
236,846
TOTAL LIABILITIES
4,471,123
2,645,781
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 75,000,000
shares authorized, 42,423,977 and 42,239,788 shares issued,
39,686,746 and 39,502,557 shares outstanding at March 31, 2020 and
December 31, 2019, respectively
424,240
422,398
Additional paid-in capital
6,737,695
6,293,069
Retained earnings
5,314,245
4,864,817
12,476,180
11,580,284
Less: Treasury stock, 2,737,231 shares at
March 31, 2020 and December 31, 2019, respectively, at cost
(344,204
)
(344,204
)
TOTAL STOCKHOLDERS’ EQUITY
12,131,976
11,236,080
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
16,603,099
$
13,881,861
REPRO MED SYSTEMS,
INC.
STATEMENTS OF
OPERATIONS
(UNAUDITED)
For the Three Months
Ended
March 31,
2020
2019
NET SALES
$
6,330,009
$
4,974,278
Cost of goods sold
2,541,799
1,926,324
Gross Profit
3,788,210
3,047,954
OPERATING EXPENSES
Selling, general and administrative
2,762,980
2,484,868
Litigation
99,158
492,515
Research and development
256,025
101,959
Depreciation and amortization
87,224
83,651
Total Operating Expenses
3,205,387
3,162,993
Net Operating Profit/(Loss)
582,823
(115,039
)
Non-Operating Income
Loss on currency exchange
(10,497
)
(9,690
)
Loss on sale of fixed asset
—
(240
)
Interest income, net
19,030
17,480
TOTAL OTHER INCOME
8,533
7,550
INCOME/(LOSS) BEFORE TAXES
591,356
(107,489
)
Income Tax (Expense)/Benefit
(141,928
)
22,099
NET INCOME/(LOSS)
$
449,428
$
(85,390
)
NET INCOME/(LOSS) PER SHARE
Basic
$
0.01
$
0.00
Diluted
$
0.01
$
0.00
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic
39,675,107
38,203,606
Diluted
39,874,989
39,033,623
REPRO MED SYSTEMS,
INC.
STATEMENTS OF CASH
FLOWS
(UNAUDITED)
For the Three Months
Ended
March 31,
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss)
$
449,428
$
(85,390
)
Adjustments to reconcile net income/(loss)
to net cash provided by/(used in) operating activities:
Stock based compensation expense
360,968
298,125
Depreciation and amortization
87,224
83,651
Deferred capital gain - building lease
—
(3,763
)
Deferred taxes
(63,203
)
25,594
Loss on disposal of fixed asset
—
240
Changes in operating assets and
liabilities:
Increase in accounts receivable
(185,160
)
(1,229,419
)
Increase in inventory
(700,539
)
(404,805
)
Increase in prepaid expense and other
assets
(156,288
)
(40,024
)
Increase in accounts payable
524,398
489,593
Increase/(Decrease) in accrued payroll and
related taxes
39,571
(173,665
)
(Decrease)/Increase in accrued expense
(408,294
)
11,238
Increase/(Decrease) in accrued tax
liability
205,131
(16,608
)
NET CASH PROVIDED BY/(USED IN) OPERATING
ACTIVITIES
153,236
(1,045,233
)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for capital expenditures
(99,591
)
(41,626
)
Purchase certificate of deposit
—
(6,489
)
Payments for patents
(80,547
)
(48,718
)
NET CASH USED IN INVESTING ACTIVITIES
(180,138
)
(96,833
)
CASH FLOWS FROM FINANCING ACTIVITIES
Line of credit advance
1,500,000
—
Share issuances
85,500
—
Payment for cancelled shares
—
(2,820
)
Finance lease
(1,848
)
(1,028
)
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES
1,583,652
(3,848
)
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS
1,556,750
(1,145,914
)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD
5,870,929
3,738,803
CASH AND CASH EQUIVALENTS, END OF
PERIOD
$
7,427,679
$
2,592,889
Supplemental Information
Cash paid during the periods for:
Interest
$
87
$
174
Taxes
$
—
$
—
NON-CASH FINANCING AND INVESTING
ACTIVITIES
Issuance of common stock as
compensation
$
60,002
$
176,250
Three Months Ended
Reconciliation of GAAP Net
Income/(Loss)
March 31,
to Non-GAAP Adjusted EBITDA:
2020
2019
GAAP Net Income/(Loss)
$
449,428
$
(85,390
)
Tax Expense/(Benefit)
141,928
(22,099
)
Depreciation/Amortization
87,224
83,651
Interest Income, Net
(19,030
)
(17,480
)
Reorganization Charges
—
354,926
Discontinued Product Expense
109,558
—
Litigation Expenses
99,158
492,515
Manufacturing Initiative Expenses
109,803
—
Stock Compensation Expense
300,966
121,875
Non-GAAP Adjusted EBITDA
$
1,279,035
$
927,998
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200504005746/en/
The Equity Group Inc. Devin Sullivan Senior Vice
President 212-836-9608 dsullivan@equityny.com
Kalle Ahl, CFA Vice President 212-836-9614 kahl@equityny.com
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