IRadimed Corp (IRMD) 2015 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the IRadimed Corporation fourth-quarter 2015 financial results conference call. (Operator Instructions) As a reminder, this call is being recorded, February 5, 2016 and contains time-sensitive information that is accurate as of only today.

Earlier today, IRadimed released financial results for the fourth quarter 2015. A copy of this press release announcing the Company's earnings is available under the heading news on their website at Iradimed.com. A copy of the press release was also furnished to the Securities and Exchange Commission on Form 8-K. A copy of the Form 8-K can be found at SEC.gov. This call is being broadcast live over the Internet on the Company's website at Iradimed.com, and a replay of this call will be available on the website for the next 90 days.

The agenda for today's call is as follows. Roger Susi, President and Chief Executive Officer of IRadimed, will be -- present opening comments. Then Chris Scott, IRadimed's Chief Financial Officer, will summarize the Company's financial results before opening the call up to questions.

Some of the information to be furnished in today's session will constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those focused on future performance, results, plans and events, and include the Company's expected results for 2015. IRadimed reminds you that future results may differ materially from these forward-looking statements due to a number of risk factors. For a description of the relevant risks and uncertainties that may affect the Company's business, please see the risk factors section of the Company's most recent reports filed with the Securities and Exchange Commission, which may be obtained for free from the SEC's website, SEC.gov.

I would now like to turn the call over to Roger Susi, President and Chief Executive Officer of IRadimed Corporation. Mr. Susi?

Thank you. Good morning, and thank you, everyone, for joining us this morning. Our fourth-quarter results released earlier this morning reported revenue of $8.8 million, compared to $3.6 million last year, and we also reported non-GAAP diluted earnings of $0.22 per share, as compared to $0.03 in the fourth quarter of last year.

Our current-quarter financial results show significant growth period over period, even after considering the impact of the 2014 domestic stock shift. I am pleased with these results and very satisfied with how our team performed throughout the year. Later, I will discuss and elaborate more on IRadimed's long-term growth prospects as well as how that 2014 stock shift may play into understanding our growth trends.

Demand for our pump systems remained strong, though, throughout the year, and we look forward to building on this momentum in 2016. To facilitate that end, we plan to -- significant growth in our sales force in 2016 once again. We exited the year with 14 sales territories and two area directors. We plan to increase the size of our sales force by adding up to another seven sales managers in 2016 and additional clinical and customer service staff to support their efforts.

On the production front, we made significant gains during 2015, increasing our capacity to reduce customer lead times and accommodate the growing demand for our products. As we stated at the beginning of 2015, reducing customer lead times is a very important goal for us, and we established that goal to do just that. I am happy to report that we made great progress towards this goal during the year with lead times now approximately five months and within striking distance of our three- to four-month goal.

Now for the regulatory front. To review IRadimed's -- to review again, IRadimed submitted a 510(k) in Q4 of 2014, as was requested in a warning letter we received in Q3 of that year. As we discussed during our last call in this most recent quarter, we received a second AI -- additional information -- letter from the FDA with five additional items to address. Since then, in addition to working diligently to address each of these items, we had a face-to-face meeting with the agency on December 10. This meeting, we feel, went well, and we have had follow-up correspondence with them with the aim of clearing any other concerns. At this point, we are now preparing our written response to be submitted later this month.

To clear -- of the warning letter, as previously advised, we will need to undergo a facility inspection. And our local FDA office has recently called to set up a time for just that -- such an inspection and indicated they shall wait until we send off the AI responses that we just mentioned. We believe that within weeks of submitting that response to the AI letter, we will be contacted by the local FDA office to schedule this inspection to clear that warning letter. Now I would like to review new product development efforts, specifically the patient monitoring system.

After having shown our monitor as a works in progress at two trade shows late in 2015, we walked away with excitement and confidence that we are truly developing an innovative device that has strong indications of becoming a successful product for our customers and ourselves. Patient monitor, along with our new-product pipeline, will solidify our long-term prospects here at IRadimed.

Since those trade shows, we have made significant progress towards completion on the monitor development plan of 510(k) pre-sub later this month. The pre-submission will assist us with the formal 510(k) and is expected to shorten the amount of time needed to receive FDA clearance. In parallel, we are also accumulating data necessary for CE market as well as Japanese approval. And we are scheduling materials, tooling, fixturing and so forth, anticipating initial product production during the first half of 2016 with initial distribution in the second half of 2016.

Now, before I turn the call over to Chris to review our financial results, I would like to submit -- I would like to revisit our guidance for 2016 and provide additional color.

Throughout this past year, we had focused on communicating that investors should not expect growth in 2016 similar to that of 2015. We've long said that our goal to achieve long-term revenue growth that averages 30% to 35% year over year and that we are very comfortable with this goal. The 102% growth enjoyed in 2015 is not a long-term year-over-year possibility and was primarily related to two factors. First, the four-month domestic stock shift that was lifted in late 2014 which resulted in increased shipments during 2015. Secondly, withdrawal from the marketplace of our former competitor. Let me address each of these factors separately, starting with the domestic shipping goal of 2014.

We believe the 2015 revenue was favorably impacted by some $2.5 million from the ship hold period carrying into 2015. So, normalizing 2015 by this amount, revenue growth would still have been 86% and still well above our long-term growth goals and still showing that boost provided by the competitor's exit.

As for that second factor related to the exodus of our former competitor, though we do not have definitive amounts related to our growth associated with this event, we do believe the customers that plan to -- planned, in past tense, to quickly convert to our pump systems have done so. This demand began in mid-2012 and we feel that mostly has -- this has been satiated by mid-2015. Accordingly, we do not view the remaining users of our former competitor's pump any differently than the entire untapped market, which we believe stands at near 18,000 pump systems remaining. To date, we have delivered approximately 3,300 systems, so the present available market is vast by comparison. And that is why we are aggressively growing our sales force.

Again, it is for these two reasons that we've enjoyed growth well above our long-term goals. As we are now moving beyond factors and more able to focus on the true state of our business, we turned to the large untapped, unpenetrated market and a promising product pipeline to support our long-term growth goal, which brings us to 2016 guidance released here in January.

I'll start by saying that when we develop our guidance, we are conservative. And we have had a very high level of confidence in our ability to achieve revenue and earnings that we disclose as guidance. As an example of this, our initial revenue guidance for 2015 was $28 million to $29 million. And just as reported recently, our actual full-year 2015 revenue was $31.6 million, or even 9% above the high end of that initial guidance. We hope to be in a similar position this year and raise guidance as we've done in the past. Our goal is to beat guidance, as we did consistently last year. However, with all the factors that could potentially affect the worldwide economy, we feel it prudent to maintain our guidance at this time. With that said, I reiterate our guidance and will still add a bit more background color.

For the full year 2016, we expect revenue of $39 million to $40 million as a non-GAAP diluted earnings also attached to that of $0.83 to $0.85 per share. We believe that normalizing our 2015 revenue, as mentioned prior, is fitting and equates to between a 34% to 37% growth rate right in line with our long-term growth goals. Additionally, we have included very little impact from our 2016 expectations related to the patient monitor, which, again, we are planning to launch in the second half of 2016.

With regard to first-quarter 2016, we expect revenue of $9 million to $9.1 million, with non-GAAP diluted earnings of $0.17, $0.18 per share. And we further add that during the first quarter, we typically run higher cost structure as we incur many costs related to year-end reporting activities and higher payroll taxes and related benefit expenses associated with the payout of bonuses. We also expect a higher tax rate during the first quarter of 2016 when compared to first quarter of last year.

Overall, I'm highly confident in our ability to achieve first-quarter and full-year guidance and optimistic about being able to make positive guidance adjustments as we did in the past. Now I would like to highlight several positives that give us great confidence in the long-term prospects of IRadimed.

One, we feel that our FDA issues are headed toward successful conclusion. The meeting with the FDA was open and cordial, with good constructive feedback. Two, the warning letter inspection for purposes of closure has been discussed with our local office, and we can see this happening within weeks of the coming response that we will be providing to the FDA later this month, as mentioned before. Three, the market for our pump systems remains vast and very accepting. Four, our sales force is growing, focused and well-suited to address the needs of our target customers. And five, the response to our new MRI-compatible patient monitors, as showed at recent trade shows, was beyond our expectations. The market for this device is well-established now and indicating very positively towards our design approach.

This market has the same call points, same sales techniques are come to play that we currently employ and continue to expand. This existing market presently consumes about 1,100 such systems a year, and we see the opportunity of over $100 million, of which we plan to compete for our majority over time while expanding this market with our strategy of multiple monitors for MR systems, as we have done with our pump products as well. It's these five highlights that give me great confidence in our ability to achieve our growth goal in 2016 and well beyond.

Now I would like to turn the call over to Chris for summary of our fourth-quarter financial results. Chris?

Thank you, Roger. Today I'll be discussing our results on a GAAP basis as well as on a non-GAAP basis. Our non-GAAP operating results exclude stock-based compensation expense and the related tax effects. Our free cash flow measure is cash flow from operations less cash used for purchases of property and equipment. And frequent tax items are considered based on their nature and included in our non-GAAP analysis, as they are not indicative of our normal or future provision for income taxes. We believe that the presentation of these non-GAAP measures along with our GAAP financial statements provide a more thorough analysis of our ongoing financial performance. You can find a reconciliation of these non-GAAP measures to the nearest GAAP measure on the last page of today's press release.

As mentioned, additional consideration this quarter for purposes of comparison is the impact of the domestic stock shift just discussed, which began in September of 2014 and lasted through the end of December 2014. So, as stated, we reported fourth-quarter revenue of $8.8 million, a 146% increase from the fourth quarter last year.

Revenue from domestic sales increased to 87% of total revenue for the current quarter compared to 32% in the same quarter 2014. Revenue from devices was 82% and 77% of total revenue for the respective periods. Revenue from IV sets and services was approximately 18% of total revenue for the current quarter compared to 23% for the same period last year.

Composition of revenue between devices and sets in service is in line with our historical averages and on a per-pump basis reflects a growing use pattern of our pump systems in that each installed pump generated approximately $1,960 of sets in service revenue during 2015, which compares to approximately $1,425 during 2014.

We sold 271 IV pumps this quarter, compared to 132 pumps in the fourth quarter last year. Our average selling price for the 2015 quarter was approximately $27,000, compared to approximately $20,000 for the fourth quarter last year.

Gross margin for the fourth quarter 2015 was 83%, compared to 74.4% in the same quarter last year. The increase in gross margin percent is due to higher domestic sales, greater sales leverage of our fixed costs and favorable inventory cost change. Operating expenses for the fourth quarter 2015 decreased to approximately 45% of revenue, compared to 68% in the prior-year quarter. This decrease primarily relates to sales leverage partially offset by higher consulting and engineering costs related to the pump 510(k) and development of the patient monitor, higher commissions, admin fees paid to our GPOs and medical device excise tax expense, all from higher sales, higher payroll and employee benefits related to the increase in the number of employees, and higher legal and professional fees.

Our effective tax rate for the current quarter was 27.5%, compared to a benefit of approximately 59% for the 2014 quarter. The higher effective tax rate is primarily due to higher pretax income resulting from higher sales.

On a GAAP basis, net income for the current quarter was $0.19 per diluted share, compared to $0.02 per diluted share in the 2014 period. On a non-GAAP basis, net income was $0.22 per diluted share for the fourth quarter, compared to $0.03 for the prior-year quarter. Weighted average diluted shares outstanding increased by approximately 900,000 shares over the 2014 quarter.

Now taking a look at our cash flow and balance sheet -- for the full year 2015, cash provided by operations increased to $7.6 million, compared to $2.6 million for the full year 2014. Our free cash flow, a non-GAAP measure, was $2.5 million for the fourth quarter of 2015, compared to $7.4 million for the full year of 2015. As of the end of 2015, we had $27 million of cash and investments. Backlog at the end of the year totaled $13.9 million.

With that, I will turn the call over for questions. Operator?

(Operator Instructions) Chris Lewis, ROTH Capital Partners.

I wanted to start just on the commentary, Roger, you provided around the growth for this year. Appreciate the color. Obviously, guidance is 25%. You talked about the long-term growth plan of 30% to 35%. It sounds like you've taken a conservative approach, I guess, as you did last year. But perhaps you can just elaborate on what the key upside drivers are that gets you more to that 30% to 35% range for this year versus the current guidance outlook.

Yes, that's the five points, Chris. Thanks for the question. So let's go back over. I reviewed that we feel that the FDA issues we're going to be able to announce not next quarter but certainly within this year, that those are behind us. That's coming to a head and fruition. And with the discussions we've had with them and the indications coming, and the local office coming in here and doing their warning letter closeout inspection is very positive. So I look forward to that happening. It won't happen in the first quarter, maybe late second quarter, sometime in there just because of the speed at which these sorts of things get done. But I see that being very positive news, I would have to say. It's been a -- I guess it's no secret that probably a lot of people consider that a cloud over the business, and I see that cloud lifting.

And the market, as I mentioned, for our pump is still huge. It's just huge. This was an execution play a year ago. It's still an execution play. With the number of systems we've got in the field versus how many remain, it's -- the upside is tremendous just from that point alone. And our sales force is growing rapidly and becoming very strong and well-equipped to deal with the challenges of selling a product to this hospital environment.

And the icing on the cake is the new product. And though we don't have it in this year for much revenue, we are -- as I discussed, we've got some great positive feedback on that thing, and we're very pumped that that's going to do well. And I think we will be able to even show some -- we will definitely show some revenue from that product in this year, but it's a back-half story.

So with those five things -- the reason I highlighted those five things, I hoped to leave the impression with everyone on the call that those are, to answer your question, the things that will put us in that sweet pocket of the year-over-year growth goals that we have set for ourselves.

Thanks. Appreciate the color there. And when you talk about sales force expansion, I think maybe that's accelerating a little bit higher than your expectations you laid out on the previous call. Maybe just talk about the need to expand that sales force, when those additional reps will be added and how long it typically takes for those reps to become fully productive.

Okay. Well, that's a mouthful. But in the past, with the -- we enjoyed in the past probably an exceptionally high, let's call it, efficiency of the sales force due to competitor exit. That's sales per man. Some of our salespeople had very, very, very high sales results -- 2.5, 3 times what an individual rep in the device sales category would generally be considered to do.

So that efficiency, of course, is dwindling because of -- as I mentioned, the effect of that low-hanging fruit from our competitor exit pretty much was back to normal mid-last year. And so the sales force is now doing the job of going out and selling to new customers, which is the typical challenge for any company without a windfall of a competitor leaving their market. And that's why we need more. So we need more for that.

There is more -- they spend more time on a sales call now than they had to. And when that portion of their sales call involved the customers that exited the market, you don't spend as much time maybe on those kind of sales calls as you do on a -- let's say on a colder call, which I think is obvious. And we need more people to do that. So that's why we are growing a sales force, as I mentioned, to capture that remaining vast market on the one hand.

On the other hand, you're right. We are accelerating that a little bit in preparation of handing them the monitor. We -- that will be more things in their bag. And though the call point is the same, the buyer's the same, which makes it nice, it's still more stuff to talk about. And so -- and we will see more demand, and there will be more time involved in selling that new product, and so more feet on the street to meet that demand as well.

So that's the reason that we are accelerating -- that we're growing the sales force in the first place. And the acceleration, I guess, is a little bit spurred by the great showing -- great response we've got at these trade shows. We think our -- we have a potential, at any rate, for our uptake in this market with this new product that's maybe a little faster than we at one time believed. And so we want to accelerate the sales force to meet that as well.

And then regarding the backlog, it seems like the reduction in 2015 is generally in line with your strategy as you've increased manufacturing output to lower the customer lead times and waiting times there. I guess just a few questions. Has that backlog come down generally in line with your expectations from a timing perspective? And then, two, how should we think about that backlog trend going forward as you target that 90- to 120-days lead time goal that you have talked about in the past?

I will let Chris take that one.

Yes, so it did. It came down, as we have mentioned. We had this goal; we set the goal for ourselves early this year. I think in the beginning of the year, we were quoting customers nine or 10 months lead time, and we said that's just too long. And we wanted to bring that down to our 90- to 120-day mark -- the backlog. We increased production to do just that, and it came down as we anticipated. As we mentioned, we are at the five-month mark now, and we are within the three- or four-month timing that we think about as our sweet spot. So there's -- I don't think if there was any -- there weren't any surprises that came out at it. It just came down the way that we thought we could manage it on the way down.

Okay. And just one more for me, and I will hop back in queue. You announced a $10 million buyback last week. Can you just walk us through the rationale for that capital deployment strategy and then your appetite for M&A going forward? Thanks.

Okay. Yes, so our rationale is we don't really understand why we have such a strong -- we don't understand fully why we have such a strong downdraft in the price of stock. And the bottom line is it's to us -- I guess lack of a better word, it's too cheap. And so we think we should support it, and we want to own that stock. So that's the simple rationale.

We could discuss -- try to find root causes to what the pressure is on the stock because, from our standpoint, our news seems to be okay to me. And we are doing what we did and said we would do, right along with the exception of it's obviously thrown a huge factor out there that our guidance we came out with three weeks ago was outside of that long-term year-over-year goal. But I hope I addressed that through what we said earlier in the call.

So that's the rationale for putting in place the buyback. And, as Chris mentioned, we have some $27 million in cash, and growing cash at a very good clip here. And so we think we can do both. We think we can keep some dry powder for an acquisition and make that investment in our stock.

Yes, Chris, just add to that, the $10 million number, let's say if we were to use all of the $10 million that has been approved, I anticipate that we will generate close to $10 million from operations this year. So any potential impact would be completely offset by the growth in cash from operations.

Okay. Thanks. I will hop back in queue.

(Operator Instructions) Larry Haimovitch, HMTC.

Congrats on the progress this year. Just a follow-up on Chris's question on the buyback. Do you have any kind of tentative price point above which you would not want to buy the stock? Or any thoughts on that at all?

Well, we have thoughts on it, but it's a moving target. So we have been considering this for a couple of weeks, and we finally put it in place, as you saw recently. And even then, though, as fairly recent, yes, we thought we would come in strongly and support this stock when it's under $20. But how far up above that we go, I don't know.

Okay. That's helpful. Yes -- no, and certainly the stock has taken a particularly hard hit in the last few weeks. Worse than many despite the fact that you were reporting such strong results.

Chris, I don't think I heard any comments on the conference call regarding the medical device tax. How much benefit do you expect from that this year from it being repealed, and how do you look at the benefit you get from it? Are you going to spend it? Are you going to not spend it because it's a temporary reprieve, or how do you look at that?

In 2015, we have -- it was right at $400,000 of the device tax that hit us. And we anticipate that it will drive the benefit of close to $550,000 in 2016. There is a temporary reprieve on the tax, so it makes the reinvestment a little tricky. But I think that is looking at the acceleration of the sales -- growing the sales force and making the investments where we can get a higher return on the money. So we make the investment in our sales team, they ultimately pay for themselves. And should the device tax be reinstated two years from now, we're not -- we haven't backed ourselves into a program that we can't get out of.

Okay. And then with regard to adding to the sales force, how quickly do they get up to what you guys consider to be good productivity maybe as -- good productivity in my definition would be at least the average of your current sales force in terms of revenue that they generate.

I'm sorry. Average sales per man, is that what you're (multiple speakers) --

Yes. In other words, how long does it take for the new reps to get up to what the average rep is currently doing that you had on your sales force for a while and has, quote, matured?

Okay, well, I think, as I indicated, I should've done maybe a better job when Chris asked a similar line of questions. So it used to take a very, very short time with the updraft of the competitor leaving, which was not normal. But what we expect is normal is four to six months. That's (technical difficulty). We basically handle draws for these guys, and that's what we're seeing along that nature, and it is typical. That's typical. So we expect typical.

And where are these sales reps going to come from, Roger? Are they coming from competitors? Or there aren't really too many competitors; maybe that's not a good point. But you are hiring them from other capital equipment hospital sales forces? Or is there any typical place you find them?

Well, we like to find -- we like to find a really -- sales -- the personality who has demonstrated the ability to sell some sort of capital equipment that required a lot of the hunter mentality and skill. But that doesn't necessarily mean that they sold medical devices. We even find -- we find great gems in younger fellows, for example, that had done very, very well selling office equipment. Very competitive environment; get a lot of doors slammed in your face, and you have to know a lot of the nuances of your device versus the competitors.

And so we generally find -- I suppose that's why I mentioned it. It's a little bit outside of the conventional way your question went. Of course, if we find an exceptional candidate who has direct experience in selling IV pumps, let's say, or calling on the MRI market, we'll -- we have those guys in our sales force, too. But this -- as such was just why I highlighted this other approach. We have a blend of both of those kinds of personalities that we will consider strongly.

Okay. And then one more question, and I will jump back in queue, and that is when you look at 2016, Chris -- Roger, rather; I guess Chris, too. What would you say is your biggest concern or challenge?

I think we are pretty confident. We're pretty confident. We are very confident that these FDA issues are going to be behind us. And we're very confident that we're going to be able to grow the sales force and get a more in effective guys, as we've done in the past.

And, boy, what's our biggest challenge? We've been doing well on the manufacturing area. The engineering is moving along very nicely. We have things to do. Okay? We have these things to do, but we are very confident they're going to get done, they're going to get done well and they are going to positively impact this business.

Okay, great. Thank you very much.

Scott Billeadeau, Walrus Partners.

Just another follow-up on the sales force. I think I wrote down you are planning -- you have, is it, seven -- hang on, let me just get to my note here. I think you had seven managers. You're going to double that to 14. And you've got two area -- I think you said something like area managers. Maybe you could just briefly go over what that sales force looks like now. And what are the numbers we can expect to see in terms of expanding it?

It's -- we left the year. So we exited the year. We have 14 sales managers, and we had two area directors. So this year in 2016, we're going to grow the sales managers by up to seven at this point.

50% increase potential for there. Okay.

That's right. Now, as our sales managers are assisted -- or their efforts are supplemented by a number of clinical staff and customer service staff. So as our -- as the number of our sales managers grow, we also increase the number of those support staff. And those will grow. That's not a one-to-one relationship, but they will grow also. So I think our total sales team this year -- when we look at our hiring plan, our sales team, I think, is in the lead by far of any department in the areas of our growth.

Yes, okay. And then on that front, as you look out with the potential for the new patient monitoring system, is there a different look -- is it -- are you thinking of that as you look at expanding the sales force? Can your current guys comfortable -- is there much of a difference? Are you talking to the same people, or is there -- just trying to figure out if there is an eye towards someone who has either done a monitoring system. Or is there anything different that -- skill set you need from that perspective?

Oh, to sell it? About the selling? Well, yes, it's a monitor. But the people that we call on it, they said before that the call point is the very same. (multiple speakers) same and --. But is it a different box? Yes, it's different. It's a monitor, and it's another medical device. To some extent, it's -- I would have to say it's easier to sell a monitor. There is not as much to it, essentially, as there can be to these pumps that we sell on the one hand. But on the other hand, don't forget we have a competitor there. So this is why we think we need the strength. There is more to come up to speed to go against a competitor.

Okay. Well, good. And just to reiterate, I think everyone -- there's been plenty of talk about the guidance, but I think you laid it out that you thought there were a little over roughly [$2 million] (inaudible) pushed into 2015 that would've been 2014. When you look at what your guidance is, you kind of take that out of 2015 to do the comparison into 2016. And don't understand why people are focused on the 25% when, in your head, you're thinking it's already 34%-ish. Am I getting that right?

Yes, you got it. You got it. We thought we were telling people all throughout the year don't expect another year like 2015 for various reasons. And one of which is that -- is clearly the holdover of all that revenue that we got from the shipping hold for almost 4 months in (multiple speakers) 2014.

So, yes, we look at it -- we thought we were covering that fairly well, but obviously we did not and that's definitely my fault. I hope (technical difficulty) come through a little better at least today with this call and it helps everyone.

Great. I appreciate it, guys. Thanks.

Chris Lewis, ROTH Capital Partners.

Just a couple quick ones. Gross margins came in above where we were, and a sequential increase there. Can you talk about what drove gross margin upside in the quarter and how we should think about gross margins for 2016?

Yes. So, as I have said in the past, the gross margin is really impacted by couple of things, one of which is that -- the geographical sales mix. And when compared to fourth quarter last year, with the shipping hold, obviously we had very muted domestic sales. And I gave the number, it shows that this quarter -- the fourth quarter 2015 was maybe 7% domestic versus 32% in the fourth quarter of 2014. I think that had a significant impact on margins for the quarter. And if I look at Q4 2015 over Q3 2015, we saw some increases. And I think some of that relates to the continued sales leverage that we experienced as volumes continue to grow and, again, the movement between our geographical sales mix.

There's several pieces moving along there. As for -- you asked about how you should think about 2016, I think we've modeled in the high 70%s and touching into the 80 -- 80% range as we move throughout the year. I see us maintaining kind of our current high gross margins up in the low --

Right. And maybe let me add a little bit to that. The worldwide -- so the bottom line is that the gross margin is affected by, to simplify the mix of domestic sales to all our international business. So far, in spite of a lot that's going on in the rest of the world and with potentially the earnings of a lot of the companies. We don't see too -- we don't see really a significant hit yet from the world's problems with growth.

But it could be -- it gives rise -- I mentioned the world makes me wonder a bit. That could apply some pressure to us, but we don't see it right now. But right now the way our model is, is we don't really expect international to take off like a rocket next year, but we also don't expect it to be a smoking crater. So international is more or less in our plan for this coming year at a little bit on the conservative side because of these pressures around the world already. It's already baked in that way. And so long as things don't deteriorate worse, it won't affect that gross margin.

Okay, great. Appreciate it.

I should've flipped that around the other way. Not if they don't get worse. But if, for example, all of a sudden our pressure is lifted, let's say, from Europe and the Europeans start buying like mad, well, then we would be shipping them whole. And so the gross margin would look a little bit lower. You follow? (multiple speakers) watch that one, but sorry about that.

Thanks.

Scott Haugan, Tygh Capital.

I have three or four questions. Just first, quickly, who's the competitor that left the market?

It was called Medrad, division of Bayer.

And what was their sales before they went out the market?

I don't know what their dollars were, but I can tell you we were pretty well aware that they had somewhat of a 4,000 something --

About 4,500 pumps --

4,500 pumps they had sold worldwide during their -- about an eight-year run that they were selling in.

And how many pumps do you think you took share from them over since 2012?

Well, that's what I mentioned earlier. We don't have clear numbers on how many of those we actually replaced. But if I had to make a guess, it was more advanced people that were using it heavily that started to pour into us as orders. Even back in the latter half of 2012 -- this problem with them started in the back half of 2012. So it became a factor for us over a number of years, and it's still a little bit of a factor. The biggest bubble of it, though, as I think I mentioned, has pretty much past. So how many have we converted? Oh, more than half of them, we think.

Okay.

About half of them, anyway, maybe. We are really unsure on that. Anyway, we're unsure on that. We got the big customers out of that pile, but since -- I'm talking about over the last three years.

Okay, just switching gears, in any given quarter, how much of your business is from just turns or daily business versus backlog and the linearity generally in the quarters?

(inaudible) I heard that the most recent -- if I understand the question properly, most recently, we've been working from backlog. That backlog has grown to nearly $20 million at the end of 2014. And, like I said, that was a nine- or 10-month clearing process for us. And any new orders are just being tagged onto the back of that backlog. So we're at about five months now. And so the turn, if you will, is -- if somebody submits an order today, the turn is at about five months.

Is that what you wanted to know?

Is that where you are going with that?

Yes, generally. I guess as you continue -- it sounds like your backlog will obviously be going down this year as you continue to shrink those delivery times. But as we get further into this year, you're going to be more heavily reliant on daily orders or monthly worse. So what's the cadence of those daily and monthly orders, and what kind of visibility do you have on inter-quarter Q1 orders and Q2 orders?

Well, we see -- when orders come in, we see them in -- we track our sales force very closely watching quotes -- the level of quotes, the ratio of quotes per guy versus how much he closes and all of those sorts of metrics. There are things that the -- our sales group watches, and that's how they manage the sales -- some of the tools they used to manage those guys. So at this point, if you're asking do we see is that positive. Yes. We believe that these -- this group is getting very accomplished at doing what they need to do. And that's -- and we're growing it to do more of that.

Okay, I might take that one off-line in a call. Just last question -- just specifically the visibility on Q1, what -- is it running generally in line with how Q1 ran last year relative to Q4? Is there any macro impact domestically from all the news we're seeing? I guess -- are the orders pretty solid from what you know now?

Orders are solid; customers are still buying. But it should be clear that first quarter of last year was still within that bubble of those units. So that's part of why we went through all that huge growth we had in 2015. So we don't -- we didn't expect that to be the case, and you shouldn't. I hope I made that clear. That was pretty heady order rate for reasons that I went through.

Okay. Thanks.

Thank you. And that does conclude our question-and-answer session for today. I would like to turn the call back to IRadimed for any further remarks.

All right. Well, it's Roger Susi again. I would like to wrap up the call by saying that 2015 was a great year for IRadimed, and I do look forward to an exciting 2016. Thank you for your support and participating in today's call.

Thank you. This does conclude the call. Please disconnect.