KORU Medical Systems, Inc. (NASDAQ: KRMD) ("KORU Medical" or
the "Company"), a leading medical technology company focused on
the development, manufacturing, and commercialization of innovative
and easy-to-use subcutaneous drug delivery systems that improve
quality of life for patients, today reported financial results for
the fourth quarter and full year ended December 31, 2022. The
Company also issued guidance for the full year 2023.
Recent Highlights:
- Fourth quarter net revenue growth of 13% to $7.3 million,
marking the fifth consecutive quarter of double-digit growth, and
full year net revenue growth of 19% to $27.9 million
- Novel Therapies business finished the year with 14 total
collaborations to date – growing pre-commercial revenue from $0.5
million in 2021 to $2.5 million for full year 2022
- 11% Core business growth (U.S. and International) for the year
driven by overall SCIg market growth and market share gains through
prefilled syringe adoptions
- Improved cash position to $17.4 million ending the fourth
quarter via strong working capital management
- 2023 net revenues expected to be between $32.5 and $33.5
million, representing growth in the range of 17-20%
"2022 was a very impactful year for KORU Medical, as we executed
on the first year of our Vision 2026 strategy and strengthened our
position as a leading provider of drug delivery in the home," said
Linda Tharby, KORU Medical's President and CEO. "We grew revenue by
19%, more than doubled our novel therapies revenues and pipeline,
and delivered double-digit revenue growth in our Core business. We
continued to build a strong team, and we are excited by the
momentum we carry into 2023. We anticipate another strong year of
growth across both our Novel Therapies and Core businesses, as well
as completion of our operational improvements to drive our gross
margin profile. We look forward to continuing to build value for
our patients, customers and shareholders."
2022 Fourth Quarter Financial Results
Three Months Ended December
31,
Change from Prior Year
2022
2021
$
%
Net Revenues
Domestic Core
$
5,314,836
$
5,004,192
$
310,644
6.2
%
International Core
1,221,540
1,261,731
(40,191
)
(3.2
)
Novel Therapies
808,305
224,584
583,721
259.9
%
Total
$
7,344,681
$
6,490,507
$
854,174
13.2
%
Total net revenues increased $0.9 million, or 13.2%, for the
three months ended December 31, 2022 compared to the same period in
2021. Novel Therapies net revenues grew by 259.9% in the fourth
quarter of 2022 driven by significant progress related to a
non-recurring engineering (NRE) innovation services agreement and
revenues in support of ongoing clinical trials. Domestic Core
growth of 6.2% was driven by growth in Freedom Edge pumps to
support prefilled syringe adoption and increases in average selling
prices, offset by store consolidations in a large specialty
pharmacy account and the impact of lower SCIg script volumes in the
third quarter of 2022. International Core net revenues were lower
by 3.2% driven by prior year timing of orders from two
distributors, partially offset by new distributor revenue growth in
Germany and growth in other markets related to new label
indications.
Gross profit increased $0.2 million or 6.4% in the three months
ended December 31, 2022, compared to the same period in 2021. This
increase in gross profit was primarily driven by the increase in
net revenues of $0.9 million, as described above. Gross profit as a
percentage of net revenues decreased to 55.5% compared to 59.0%
from the fourth quarter of 2021. The decline in the gross profit as
a percentage of revenues was primarily due to higher year on year
manufacturing costs associated with labor and materials, and
expenses related to our manufacturing transition as we prepare to
exit our Chester facility and complete the transition to our Mahwah
facility and outsourced manufacturing organization. Offsetting
these increases was a higher margin for Novel Therapies NRE service
revenue mix and an increase in Core average selling price and
product mix.
Total operating expenses for the fourth quarter of 2022 were
$6.6 million, compared to $5.9 million for the same period in 2021.
The increase in operating expenses was primarily due to innovation
investments in research and development.
Net loss for the fourth quarter of 2022 was $2.0 million, or
$(0.04) per diluted share, compared to a net loss of $1.1 million,
or ($0.02) per diluted share for the same period of 2021. Net loss
included a tax benefit of $0.5 million for the fourth quarter of
2022.
2022 Full Year Financial Results
Twelve Months Ended December
31,
Change from Prior Year
2022
2021
$
%
Net Revenues
Domestic Core
$
21,205,204
$
19,045,512
$
2,159,692
$
11.3
%
International Core
4,164,714
3,856,972
307,742
8.0
%
Novel Therapies
2,526,119
587,691
1,938,428
329.8
%
Total
$
27,896,037
$
23,490,175
$
4,405,862
$
18.8
%
Total net revenues increased $4.4 million, or 18.8%, for the
year ended December 31, 2022, as compared with the same period last
year. Double-digit revenue growth was achieved in our Domestic Core
and Novel Therapies businesses. Domestic Core growth was primarily
driven by increased volume attributed to SCIg market growth and new
label indications, including prefilled syringes, and increases in
average selling prices. Novel Therapies revenues grew by 329.8% for
the year ended 2022 related to services performed on an NRE
innovation development agreement for a pharmaceutical customer and
increases in clinical trial product sales for several
pharmaceutical customers. Revenues growth in our International Core
business was driven by volume growth in several EU markets compared
with prior year.
Gross profit increased $1.6 million or 11.6% for the year ended
December 31, 2022, compared to the same period in 2021. Gross
profit as a percent of revenues decreased to 55.1% compared to
58.6% from the prior year. The decline in the gross profit as a
percentage of revenues was primarily due to higher manufacturing
costs associated with labor and materials, and expenses related to
our manufacturing transition as we prepare to exit our Chester
facility to complete the transition to our Mahwah facility and
outsourced manufacturing organization, and a lower Novel Therapies
service revenue margin. Partially offsetting these declines was an
increase in core average selling price and product mix.
Selling, general and administrative expenses increased $2.7
million, or 15.4%, during the year ended December 31, 2022 compared
to the same period last year, primarily due to $2.5 million in
investments for new hires in commercial for Domestic Core and Novel
Therapies businesses, as well as quality and regulatory to support
our strategic growth initiatives.
Research and development expenses increased $2.5 million, or
100.4%, during the year ended December 31, 2022 compared with the
same period last year primarily due to new product development
initiatives.
Net loss for the full year 2022 was $8.6 million, or $(0.19) per
diluted share, compared to a net loss of $4.6 million, or ($0.10)
per diluted share for the same period of 2021. Net loss included a
tax benefit of $2.0 million for the full year 2022.
Cash and cash equivalents were $17.4 million as of December 31,
2022.
Assumptions and Guidance for Full Year 2023
KORU Medical's guidance for full year 2023 reflects numerous
assumptions that could affect its business, based on the
information management has as of this date, which includes, SCIg
market growth rate of ~10%, prefilled syringe penetration of
15-20%, plasma supply, clinical trial activity and expansion of the
novel therapies pipeline, inflationary impact (including labor and
supply price increases), third party contractor execution, supply
chain and labor shortage impacts, and timely receipt of other
receivable credits. Management will discuss its outlook and several
of its assumptions on its fourth quarter 2022 earnings call.
KORU Medical expects:
- Full year 2023 net revenue between $32.5 and $33.5 million,
representing growth in the range of 17%-20%
- To sign 6 new Novel Therapies collaborations
- Two 510(k) filings submitted in second half
- Gross margins between 58% and 60% on a full year, with first
half margins expected between 55% to 57% and a planned exit between
60% and 62%
- Chester, NY site closure Q1; completion of manufacturing
outsourcing transition Q2
- Cash balance at year-end 2023 greater than $10.0 million
- Operating expenses of approximately $30.0 million, inclusive of
stock compensation expense
- Working capital improvements in inventory of approximately $2.0
million
- Breakeven in second half of 2024 based on current strategic
outlook
Conference Call and Webcast Details
The Company will host a live conference call and webcast to
discuss these results and provide a corporate update on Wednesday,
March 8, 2023, at 4:30 PM ET.
To participate in the call, please dial (877)-407-0784
(domestic) or (201)-689-8560 (international) and provide conference
ID: 13736062. The live webcast will be available on the IR Calendar
on the News/Events page of the Investors section of KORU Medical's
website.
Non-GAAP Measures
This press release includes the non-GAAP financial measures
"Adjusted EBITDA" and "Adjusted Diluted earnings per share" that
are not in accordance with, nor an alternate to, generally accepted
accounting principles and may be different from non-GAAP measures
used by other companies. These non-GAAP measures are 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 KORU Medical's
reported results and, therefore, should not be relied upon as the
sole financial measures to evaluate the Company's financial
results. Non-GAAP financial measures are meant to supplement, and
to be viewed in conjunction with, GAAP financial results.
Reconciliations of the Company's non-GAAP measures are included at
the end of this press release.
About KORU Medical Systems
KORU Medical Systems develops, manufactures, and commercializes
innovative and easy-to-use subcutaneous drug delivery systems 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 within
the meaning of the Private Securities Litigation Reform Act of 1995
that involve risks and uncertainties. All statements that are not
historical fact are forward-looking statements, including, but not
limited to, expected financial outlook and operating performance
for fiscal 2023. Forward-looking statements discuss the Company's
current expectations and projections relating to its financial
position, results of operations, plans, objectives, future
performance and business. Forward-looking statements can be
identified by words such as “guidance,” "outlook", "expect",
"plan", "believe" and "will". 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 referenced
under “Assumptions and Outlook for Full Year 2023” in this press
release, uncertainties associated with the shift to increased
healthcare delivery in the home, new patient diagnoses, customer
ordering patterns, innovation and competition, labor and supply
price increases, inflationary impacts, labor supply, and those
risks and uncertainties included under the captions "Risk Factors"
in our Annual Report on Form 10-K for the year ended December 31,
2022 which is on file with the SEC and available on our website at
www.korumedical.com/investors and on the SEC website at
www.sec.gov. All information provided in this release and in the
attachments is as of March 8, 2023. 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.
KORU MEDICAL SYSTEMS,
INC.
STATEMENTS OF
OPERATIONS
Three Months Ended
Twelve Months Ended
December 31,
December 31,
2022
2021
2022
2021
NET REVENUES
$
7,344,681
$
6,490,507
$
27,896,037
23,490,175
Cost of goods sold
3,266,535
2,658,718
12,527,051
9,720,597
Gross Profit
4,078,146
3,831,789
15,368,986
13,769,578
OPERATING EXPENSES
Selling, general and administrative
4,761,173
4,881,709
20,606,507
17,862,314
Research and development
1,640,732
949,930
4,956,215
2,473,669
Depreciation and amortization
187,658
113,308
587,137
463,130
Total Operating Expenses
6,589,563
5,944,947
26,149,859
20,799,113
Net Operating Loss
(2,511,417
)
(2,113,158
)
(10,780,873
)
(7,029,535
)
Non-Operating Income
Loss on foreign currency exchange
(977
)
(7,144
)
(39,874
)
(28,905
)
Gain on disposal of fixed assets, net
—
—
—
1009
Other Income
—
679,907
—
679,907
Interest (expense)/income, net
101,008
(3,800
)
145,587
13,083
TOTAL OTHER INCOME
100,031
668,963
105,713
665,094
LOSS BEFORE TAXES
(2,411,386
)
(1,444,195
)
(10,675,160
)
(6,364,441
)
Income Tax Benefit
434,659
375,837
2,014,018
1,801,618
NET LOSS
$
(1,976,727
)
$
(1,068,358
)
$
(8,661,142
)
(4,562,823
)
NET LOSS PER SHARE
Basic
$
(0.04
)
$
(0.02
)
$
(0.19
)
(0.10
)
Diluted
$
(0.04
)
$
(0.02
)
$
(0.19
)
(0.10
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING
Basic
45,372,132
44,571,079
45,002,074
44,385,032
Diluted
45,372,132
44,571,079
45,002,074
44,385,032
KORU MEDICAL SYSTEMS,
INC.
BALANCE SHEETS
December 31,
December 31,
2022
2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
17,408,257
$
25,334,889
Accounts receivable less allowance for
doubtful accounts of $21,459 and $24,271 for December 31, 2022, and
December 31, 2021, respectively
3,558,884
3,592,886
Inventory
6,404,867
6,106,338
Other receivables
972,396
718,220
Prepaid expenses and other
1,457,232
1,568,821
TOTAL CURRENT ASSETS
29,801,636
37,321,154
Property and equipment, net
3,886,975
1,106,445
Intangible assets, net of accumulated
amortization of $325,872 and $263,729 at December 31, 2022 and
December 31, 2021, respectively
787,182
808,813
Operating lease right-of-use assets
3,786,545
95,553
Deferred income tax assets, net
3,967,480
1,941,254
Other assets
102,625
19,812
TOTAL ASSETS
$
42,332,443
$
41,293,031
LIABILITIES AND STOCKHOLDERS’
EQUITY
CURRENT LIABILITIES
Accounts payable
$
2,391,799
$
1,227,533
Accrued expenses
2,889,941
2,709,704
Note Payable
433,295
508,583
Other liabilities
257,337
90,000
Accrued payroll and related taxes
542,399
160,603
Finance lease liability – current
98,335
—
Operating lease liability – current
345,834
95,553
TOTAL CURRENT LIABILITIES
6,958,940
4,791,976
Finance lease liability, net current
portion
394,283
—
Operating lease liability, net of current
portion
3,653,257
—
TOTAL LIABILITIES
11,006,480
4,791,976
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 75,000,000
shares authorized, 48,861,891 and 48,044,162 shares issued;
45,441,389 and 44,623,660 shares outstanding at December 31, 2022,
and December 31, 2021, respectively
488,619
480,441
Additional paid-in capital
44,252,117
40,774,245
Treasury stock, 3,420,502 shares at
December 31, 2022 and December 31, 2021, at cost
(3,843,562
)
(3,843,562
)
Retained deficit
(9,571,211
)
(910,069
)
TOTAL STOCKHOLDERS’ EQUITY
31,325,963
36,501,055
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$
42,332,443
$
41,293,031
KORU MEDICAL SYSTEMS,
INC.
STATEMENTS OF CASH
FLOWS
For the Years Ended December
31,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss
$
(8,661,142
)
$
(4,562,823
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation expense
3,079,427
2,707,554
Depreciation and amortization
587,137
463,130
Loss on disposal of fixed assets
—
(1,009
)
Deferred income taxes
(2,026,226)
(1,815,980
)
ROU landlord credit
212,546
—
Changes in operating assets and
liabilities:
Decrease/(Increase) in accounts
receivable
34,002
(1,019,932
)
(Increase)/Decrease in inventory
(298,529)
723,434
Increase in other receivables
(254,176)
(718,220
)
Decrease/(Increase) in prepaid expenses
and other assets
28,776
(761,041
)
Increase in accounts payable
1,164,266
602,613
Increase/(Decrease) in accrued payroll and
related taxes
381,796
(126,527
)
Increase in other liabilities
167,337
90,000
Increase in accrued expenses
180,237
99,291
NET CASH USED IN OPERATING ACTIVITIES
(5,404,549
)
(4,319,510
)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment
(2,761,056
)
(346,178
)
Purchases of intangible assets
(40,512
)
(29,056
)
Proceeds from disposal of property and
equipment
—
9,065
NET CASH USED IN INVESTING ACTIVITIES
(2,801,568
)
(366,169
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of equity
406,623
1,261,251
Common stock issuance settlement of
litigation
—
938,094
Borrowings from indebtedness
783,799
924,389
Payments on indebtedness
(859,087
)
(415,806
)
Payments on finance lease liability
(51,850
)
(2,646
)
NET CASH PROVIDED BY FINANCING
ACTIVITIES
279,485
2,705,282
NET DECREASE IN CASH AND CASH
EQUIVALENTS
(7,926,632)
(1,980,397
)
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR
25,334,889
27,315,286
CASH AND CASH EQUIVALENTS, END OF YEAR
$
17,408,257
$
25,334,889
Supplemental Information
Cash paid during the years for:
Interest
$
28,490
$
13,241
Income taxes
$
—
$
1,903
Schedule of Non-Cash Operating, Investing
and Financing Activities:
Issuance of common stock as
compensation
$
513,082
$
433,654
Issuance of common stock as settlement for
litigation
$
—
$
938,094
KORU MEDICAL SYSTEMS,
INC.
SUPPLEMENTAL
INFORMATION
(UNAUDITED)
A reconciliation of our non-GAAP
measures is below:
Three Months Ended
Twelve Months Ended
Reconciliation of GAAP Net
(Loss)
December 31,
December 31,
to Non-GAAP Adjusted EBITDA:
2022
2021
2022
2021
GAAP Net Loss
$
(1,976,728
)
(1,068,358
)
$
(8,661,142
)
$
(4,562,823
)
Tax (Benefit)
(434,659
)
(375,837
)
(2,014,018
)
(1,801,618
)
Depreciation and Amortization
187,658
113,308
587,137
463,130
Interest (Income)/Expense, Net
(101,009
)
3,800
(145,587
)
(13,083
)
Reorganization Charges
—
—
765,433
1,192,618
Manufacturing Initiative Expenses
184,343
1,883
293,229
239,216
Stock-based Compensation Expense
588,654
739,922
3,079,426
2,707,544
Non-GAAP Adjusted EBITDA
$
(1,551,741
)
$
(585,282
)
$
(6,095,522
)
$
(1,775,016
)
Three Months Ended
Twelve Months Ended
Reconciliation of Reported Diluted
EPS
December 31,
December 31,
to Non-GAAP Adjusted Diluted
EPS:
2022
2021
2022
2021
Reported Diluted Earnings Per Share
$
(0.04
)
$
(0.02
)
$
(0.19
)
$
(0.10
)
Reorganization Charges
—
—
0.02
0.03
Manufacturing Initiative Expenses
—
—
0.01
0.01
Stock-based Compensation Expense
—
—
—
0.01
Tax (Expense) Adjustment
—
—
—
(0.01
)
Non-GAAP Adjusted Diluted Earnings Per
Share
$
(0.04
)
$
(0.02
)
$
(0.16
)
$
(0.06
)
*Numbers presented are rounded to the nearest whole cent
Reorganization Charges. We have excluded the effect of
reorganization charges in calculating our non-GAAP measures. In
2021 we incurred significant expenses in connection with the
departure and replacement of our chief executive officer and the
recruiting of two new board members, which we would not have
otherwise incurred in periods presented as part of our continuing
operations. In 2022 we incurred further severance expense related
to the reorganization of the leadership team and the departure of
our chief financial officer, which we would not have otherwise
incurred in periods presented as part of continuing operations.
Manufacturing Initiative Expenses. We have excluded the effect
of expenses related to creating manufacturing efficiencies, in
calculating our non-GAAP measures. We incurred expenses in
connection with these initiatives which we would not have otherwise
incurred in periods presented as part of our continuing operations.
We expect to incur related expenses for the next three to six
months.
Stock-based Compensation Expense. We have excluded the effect of
stock-based compensation expense in calculating our non-GAAP
measures. We record non-cash compensation expense related to grants
of options and restricted shares for executives, employees and
consultants, and grants of shares to our board of directors.
Depending upon the size, timing and the terms of the grants, the
non-cash compensation expense may vary significantly but will recur
in future periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230308005735/en/
Investor Contact: Greg Chodaczek
347-620-7010 investor@korumedical.com
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