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 specialty infusion solutions that improve quality of life for patients, today reported financial results for the second quarter ended June 30, 2023 and updates full year 2023 outlook.
Highlights:
- Second quarter net revenue growth versus prior year of 6% to $6.9 million
- Domestic Core business growth of 8%, outperforming a second quarter U.S. script decline in subcutaneous immunoglobulin (SCIg) market, driven by strong volumes in consumables and pumps
- International Core business growth of 17%, driven by growth in several markets and increases in SCIg global drug availability
- Announced a new Novel Therapies collaboration for a Phase III study
- Submitted a 510(k) for FREEDOM60® Infusion System with Hizentra® 50 mL prefilled syringes
- Reduced 2023 net revenues guidance to $31.0 - $32.5 million, representing growth in the range of 11-17% from prior guidance of $32.5 - $33.5 million representing growth in the range of 17-20%
- Named Tom Adams as Chief Financial Officer
"I am pleased with our second quarter progress, as our growth exceeded the overall SCIg market in both the U.S. and Internationally," said Linda Tharby, KORU Medical's President and CEO. "The foundation of our business remains sound, and we are diligently focused on delivering above-market revenue performance, advancing our portfolio with our innovation efforts, and increasing the number of drugs on our Freedom Infusion System. We are excited to welcome Tom Adams as our Chief Financial Officer and look forward to his continued leadership contributions. We remain committed and on track to attain our Vision 2026 strategic goals, and deliver added value to patients, customers and shareholders."
2023 Second Quarter Financial Results
Three Months Ended June 30, | Change from Prior Year | |||||||||||
2023 | 2022 | $ | % | |||||||||
Net Revenues | ||||||||||||
Domestic Core | $ | 5,388,172 | $ | 4,996,791 | $ | 391,381 | 7.8 | % | ||||
International Core | 1,117,004 | 951,485 | 165,519 | 17.4 | % | |||||||
Novel Therapies | 430,754 | 598,352 | (167,598 | ) | (28.0 | )% | ||||||
Total | $ | 6,935,930 | $ | 6,546,628 | $ | 389,302 | 5.9 | % | ||||
Total net revenue increased $0.4 million, or 6%, for the three months ending June 30, 2023, compared to last year. Domestic Core growth of 8% was primarily driven by increased growth in consumables and pumps, new accounts, and increased prefilled syringe adoption. International Core growth of 17% was driven by strength across several EU markets, and growing global immunoglobulin drug volume availability. Novel Therapies net revenue declined by 28% in primarily related to strong non-recurring engineering revenues in the comparable quarter last year as well as the timing of 2023 pipeline wins.
Gross profit increased $0.5 million or 16% in the three months ended June 30, 2023, compared to the same period in 2022. The gross profit increase was driven by the rise in net revenue of $0.4 million, as described above. Gross profit as a percentage of revenue increased to 56.1% compared to 51.1% in the second quarter of 2022. The increase in the gross profit as a percentage of revenue was primarily driven by increased production efficiencies compared to the prior year.
Total operating expenses for the second quarter of 2023 were $7.1 million, compared to $7.0 million for the same period in 2022. The increase in operating expenses was primarily due to the impact of research and development costs in support of our innovation efforts.
Net loss for the second quarter of 2023 was $2.5 million, or $(0.05) per diluted share, compared to a net loss of $2.9 million, or ($0.07) per diluted share for the same period of 2022. Net loss included a tax benefit of $0.6 million for the second quarter of 2023.
Assumptions and Outlook for Full Year 2023
KORU Medical updates prior guidance for 2023. The Company's guidance for full year 2023 has been updated to reflect a contraction in the underlying U.S. subcutaneous immunoglobulin market. KORU Medical is updating its 2023 growth outlook on the underlying U.S. subcutaneous immunoglobulin market to 5% from 10%. In addition, the Company’s guidance reflects a change in the timing of 2023 Novel Therapy deal signings.
KORU Medical Outlook:
- Reducing full year 2023 net revenue guidance to $31.0 - $32.5 million, representing growth in the range of 11%-17% from prior guidance of $32.5 - $33.5 million, representing growth in the range of 17-20%
- Reaffirming 2023 gross margin between 58%-60% and a planned 2023 exit between 60%-62%
- Reaffirming cash balance at year-end 2023 greater than $10.0 million
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, August 9, 2023, at 4:30 PM ET.
To participate in the call, please dial (844) 826-3035 (domestic) or (412) 317-5195 (international) and provide conference ID: 10180800. 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 2022. 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 "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, uncertainties associated with the shift to increased healthcare delivery in the home, new patient diagnoses, customer ordering patterns, global health crises, 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 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, which are 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 August 9, 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.
The accompanying notes are an integral part of these financial statements.
KORU MEDICAL SYSTEMS, INC.
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June 30, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 11,719,405 | $ | 17,408,257 | ||||
Accounts receivable less allowance for doubtful accounts of $21,459 as of June 30, 2023 and December 31, 2022 | 3,639,755 | 3,558,884 | ||||||
Inventory | 5,278,224 | 6,404,867 | ||||||
Other receivables | 1,131,115 | 972,396 | ||||||
Prepaid expenses | 772,893 | 1,457,232 | ||||||
TOTAL CURRENT ASSETS | 22,541,392 | 29,801,636 | ||||||
Property and equipment, net | 3,811,843 | 3,886,975 | ||||||
Intangible assets, net of accumulated amortization of $357,809 and $325,872 as of June 30, 2023 and December 31, 2022, respectively | 772,543 | 787,182 | ||||||
Operating lease right-of-use assets | 3,626,348 | 3,786,545 | ||||||
Deferred income tax assets, net | 5,144,876 | 3,967,480 | ||||||
Other assets | 98,970 | 102,625 | ||||||
TOTAL ASSETS | $ | 35,995,972 | $ | 42,332,443 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 1,574,630 | $ | 2,391,799 | ||||
Accrued expenses | 1,362,293 | 2,889,941 | ||||||
Note payable | — | 433,295 | ||||||
Other liabilities | 263,253 | 257,337 | ||||||
Accrued payroll and related taxes | 422,623 | 542,399 | ||||||
Financing lease liability – current | 101,072 | 98,335 | ||||||
Operating lease liability – current | 352,809 | 345,834 | ||||||
TOTAL CURRENT LIABILITIES | 4,076,680 | 6,958,940 | ||||||
Financing lease liability, net of current portion | 343,053 | 394,283 | ||||||
Operating lease liability, net of current portion | 3,475,092 | 3,653,257 | ||||||
TOTAL LIABILITIES | 7,894,825 | 11,006,480 | ||||||
Commitments and Contingencies (Note 7) | ||||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock, $0.01 par value, 75,000,000 shares authorized, 49,033,652 and 48,861,891 shares issued 45,613,150 and 45,441,389 shares outstanding as of June 30, 2023, and December 31, 2022, respectively | 490,337 | 488,619 | ||||||
Additional paid-in capital | 45,932,354 | 44,252,117 | ||||||
Treasury stock, 3,420,502 shares as of June 30, 2023 and December 31, 2022, at cost | (3,843,562 | ) | (3,843,562 | ) | ||||
Accumulated deficit | (14,477,982 | ) | (9,571,211 | ) | ||||
TOTAL STOCKHOLDERS’ EQUITY | 28,101,147 | 31,325,963 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 35,995,972 | $ | 42,332,443 | ||||
The accompanying notes are an integral part of these financial statements.
KORU MEDICAL SYSTEMS, INC.
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Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
NET REVENUES | $ | 6,935,931 | $ | 6,546,628 | $ | 14,328,536 | $ | 12,790,958 | ||||||
Cost of goods sold | 3,047,807 | 3,200,455 | 6,293,377 | 5,822,480 | ||||||||||
Gross Profit | 3,888,124 | 3,346,173 | 8,035,159 | 6,968,478 | ||||||||||
OPERATING EXPENSES | ||||||||||||||
Selling, general and administrative | 5,303,167 | 5,530,022 | 10,729,044 | 11,021,235 | ||||||||||
Research and development | 1,596,614 | 1,303,731 | 3,161,483 | 2,452,086 | ||||||||||
Depreciation and amortization | 212,919 | 125,882 | 426,036 | 235,134 | ||||||||||
Total Operating Expenses | 7,112,700 | 6,959,635 | 14,316,563 | 13,708,455 | ||||||||||
Net Operating Loss | (3,224,576 | ) | (3,613,462 | ) | (6,281,404 | ) | (6,739,977 | ) | ||||||
Non-Operating Income/(Expense) | ||||||||||||||
Loss on currency exchange | (2,472 | ) | (21,705 | ) | (3,152 | ) | (28,840 | ) | ||||||
Loss on disposal of fixed assets, net | — | — | (56,279 | ) | — | |||||||||
Interest income, net | 131,167 | 3,566 | 256,669 | 2,103 | ||||||||||
