IRadimed 's (IRMD) CEO Roger Susi on Q4 2015 Results - Earnings Call Transcript

| About: iRadimed Corp. (IRMD)

IRadimed Corporation (NASDAQ:IRMD)

Q4 2015 Earnings Conference Call

February 5, 2016 11:00 am EST

Executives

Roger Susi - President and Chief Executive Officer

Chris Scott - Chief Financial Officer

Analysts

Chris Lewis - ROTH Capital Partners

Larry Haimovitch - HMTC

Scott Hogan - Thai Capital

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the IRadimed Corporation Fourth Quarter 2015 Financial Results Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this call is being recorded, February 5, 2016 and contains time-sensitive information that is accurate only 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 present opening comments; then Chris Scott IRadimed’s Chief Financial Officer will summarize the company’s financial results before opening the call up to your questions.

Some of the information to be furnished in today’s session that 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 risk 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 at sec.gov.

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

Roger 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 stop ship. I am pleased with these results and very satisfied with how our team performs throughout the year. Later, I will discuss and elaborate more on IRadimed long term growth prospects, as well as how that 2014 stop ship may play into understanding our growth trend.

Demand for our pump systems remain strong though throughout the year and we look forward to building on this momentum in 2016. If you still would take 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 a 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 in 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 or three to four months goal.

Now for the regulatory front, to review again, IRadimed submitted the 510(k) in Q4 2014 as was requested in a warning letter we had received in Q3 of that year. As we discussed during our last call and then 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 concern. At this point we are not preparing our written response to be submitted later this month.

To clear other 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 such an inspection and indicated that they shall wait until we send of 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 work in progress at two trade shows late in 2015, we were off to a way 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 terms prospects here at IRadimed.

Since those trade shows we have made significant progress towards completion of the monitoring development and plan a 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 marking], 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 revisit our guidance for 2016 and provide additional color. Throughout this past year, we had focused on communicating that an investor should not expect growth in 2016 similar to that in 2015. We had 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 it was primarily related to two factors.

First the four month domestic stop ship 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 hold of 2014. We believe that 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 competitors exit.

As for the 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 that customers that plan to quickly – to quickly 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 this has been satiated by mid-2105.

Accordingly, we do not view the remaining users of our former competitors 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’s why we are aggressively growing our sales force.

Again, it is for these two reason that we’ve enjoyed growth well above our long-term goals. As we are now moving beyond these factors and more able to focus on the two state of our business, we turn 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 will start by saying when we develop our guidance, we are conservative and we have had a very high level of confidence in our ability to achieve the revenue and earnings that we disclosed with 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 have 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’s prudent to maintain our guidance at this time.

With that said, I reiterate our guidance and we will still add a bit more background color. For the full year 2016, we expect revenue of $39 million to $40 million non-GAAP diluted earnings also attached to that of $0.838 to $0.85 per share. We believe that normalizing our 2015 revenue, as mentioned prior, is fitting and equates to between 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 the first quarter of 2016, we expect revenue of $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 cost 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 compared with the first quarter of last year. Overall, I’m highly confident in our ability to achieve the first quarter and full year guidance and optimistic about being able to make positive guidance adjustments as we did in the past.

Now, I’d 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 towards successful conclusion. Our meeting with the FDA was open [ph] 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 that come in response to [indiscernible] 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 customer.

And five, the response to our new MRI compatible patient 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 same call points, same sales techniques come to play that we currently employee 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 in with our pump product as well. It’s these five highlights that give great confidence in our ability to achieve our growth goal in 2016 and well beyond.

Now, I’d like to turn the call over to Chris for a summary of our fourth quarter financial results. Chris?

Chris Scott

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 excludes 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, an additional consideration this quarter for purposes of comparison is the impact of the domestic stop ship 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, 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 of 2014. Revenue from devices was 82% and 77% of total revenue for 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.

The composition of revenue between devices and sets and services is in line with our historical averages on a per pump basis reflects a growing use pattern of our pump systems and that each installed pump generated approximately $1,960 of sets and 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 of 2015 was 83% compared to 74.4% in the same quarter last year. The increase in gross margin percentage is due to higher domestic sales, greater sales leverage of our fixed cost and favorable inventory cost change.

Operating expenses for the fourth quarter of 2015 decreased to approximately 45% 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 form 510(k) and development of the patient monitor, higher commissions, admin fees paid to our GPOs and medical device excise tax and 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. Higher effective tax rate is primarily due to higher pre-tax 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 of 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’ll turn the call over for questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Chris Lewis of ROTH Capital Partners. Your line is open.

Chris Lewis

Hi good morning guys and thanks for taking the questions. 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 kind of the long-term growth plan of 30% to 35%, sounds like you’ve taken a conservative approach I guess as you did last year, but perhaps you can just elaborate on kind of what the key upside drivers are that gets you more to that 30% to 35% range for this year versus the current guidance outlook?

Roger Susi

Yeah, it was the 5 points Chris, thanks for the question. So, let’s go back over, I mean, I reviewed that we feel that the FDA issues we are going to be able to announce not next quarter, but certainly within this year that those are behind it. That’s coming to a head and fruition and with the discussions we’ve had with them and the indications from the local office coming in here and doing their warning letter close out inspections, 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 as being very positive news I’d have to say and it’s been a, I guess there is 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 comp is still huge, it’s just huge. This was an execution play a year ago, it is still an execution play with the number of systems we’ve got in the field versus how many remain is, 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 then, to add icing on the cake is the new product, you know and though we don’t have it in this year for much revenue or as I discussed we’ve got some great positive feedback on that thing and we are very pumped that that is going to do well and I think we will be able to even show some, I mean we will definitely show some revenue from that product in this year, but it is a back half story. So, with those five things, the reason I’ve highlighted those five things, I hope to leave the impression with everyone on the call that those are to answer your questions, the things that will put us in the sweet pocket of the year-over-year growth goals that we have set for ourselves.

Chris Lewis

Thanks and I appreciate the color there and when you talk about sales force expansion, I think maybe that is accelerating a little bit higher than your expectations you laid out in 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?

Roger Susi

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 a competitor exit right, that sales per man some of our sales people had very, very, very high sales results, 2.5, 3 times what a individual rep in the device sales category would generally be considered to do so. So that efficiency of course is dwindling because of as what I mentioned the effect of that will have improved 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 on and selling to new customers and which is the typical challenge for any company without a win fall 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 the sales call now then they had to and when that portion of their sales call involve that 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 a more colder call, which I think is obvious and we need more people to do that. So, that’s why we are growing sales force as I mentioned. To capture that remaining vast market on the one hand.

On the other hand you are 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 is 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 is the reason that we are growing the sales force in the first place and the acceleration I guess is a little bit spread by the great showing, great response we go 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 was maybe little faster than we one-time believed. And so we want to accelerate the sales force to meet that as well.

Chris Lewis

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

Roger Susi

I will let Chris take that one.

Chris Scott

So it did, it came down as we’ve 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 months or ten months lead time and we said that is just too long and we wanted to bring that down to kind of our 90 day to 120 day mark, the backlog, we increased production to do just that and it came down as we had anticipated, as we mentioned we are at the five month mark now and we’re within the three to four month timing that we think about that is our sweet spot. So, there is, I don’t think that there is any, there weren’t any surprises that came out of that and it just came down the way that we thought we could manage it on the way down.

Chris Lewis

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

Roger Susi

Okay. Yeah, so our rationality is we don’t really understand why we have such a strong, we don’t understand fully why we have such a strong down graph in the price of the stock and the bottom line is it is to us, it is best lack of a better word, it is too cheap and so we think we should support it and we want to own that stock. So that is the simple rationale. We can 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’re doing what we did and said we would do right along with the exception of, it’s obviously thrown a huge factor after that our guidance we came out with here three weeks ago was outside of that long term year-over-year goal, but I hope I would address that throughout what we said earlier in the call. So, I mean at the rationale for putting in place the buyback and as Chris mentioned we have some 27 million in cash and we’re growing cash at a very 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.

Chris Scott

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

Chris Lewis

Okay, thanks a lot. I will hop back in queue.

Roger Susi

Thanks.

Operator

[Operator Instructions] Our next question is from Larry Haimovitch of HMTC. Your line is now open.

Larry Haimovitch

Good morning, gentlemen. Congrats on all the progresses.

Roger Susi

Thanks, Larry.

Chris Scott

Thanks, Larry.

Larry Haimovitch

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 if any thoughts on that at all?

Roger Susi

We have thoughts on it, but it’s a moving target. So we’ve been considering this for a couple of weeks, and we finally put it in place as we saw recently. And even then though was fairly recent – yeah, we’d come in strong in support to the stock when it’s under $20, but how far up above that we go, I don’t know.

Larry Haimovitch

Okay, that’s helpful. Yeah, and certainly the stock has taken a particularly hard hit in the last few weeks worse than many despite the fact that you are reporting such strong results. And 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, or you going to spend it? Or are you going to not spend it because it’s a temporary reprieve or how do you look at that?

Chris Scott

So, as we’ve been – in 2015 we have – it was right up $400,000 of the price tax that hit us and we anticipate that it will drive a benefit of close to $550,000 in 2016, but it’s a temporary reprieve on the tax, so it makes the reinvest of that a little tricky, but I think that looking at the acceleration of the growing sales force and making the investments where we can get a higher return on the money. So we make the investment in our sales teams, they ultimately pay for themselves and should the device tax be reinstated two years from now, we are not – we have in fact ourselves into a program that we can’t get out of.

Larry Haimovitch

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?

Roger Susi

Average sales per manager?

Larry Haimovitch

Yeah, 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’ve in your sales force for a while and it’s quote matures?

Roger Susi

Okay, well. I think, as I indicated, I should have done a – maybe a better job. When Chris asked the similar line of questions. So it used to take a very, very short time with the up draft of the competitor leaving, which was not normal, but we expect this normally four to six months.

Larry Haimovitch

Okay.

Roger Susi

We basically handle draws for these guys and that’s right [ph] thing along that nature and it’s typical, that’s typical. So we expect typical.

Larry Haimovitch

And where are these sales reps going to come from, Roger, are they coming from competitors or – really too many competitors, maybe that’s not a good point, you are hiring them from other capital equipment hospital sales force or is there any typical place you find them?

Roger Susi

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. It required a lot of the hunter sort of mentality and skill, but that doesn’t necessarily mean that they sold medical device. 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 nuance of your device versus the competitors. And so we generally find – I suppose that’s a lot to mention. It’s a little bit outside of the intentional 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 will – we have those guys in our sales force too. But this assessable that’s why highlighted this other approach. We have a blend of both of those kinds of personality that we will consider strongly.

Larry Haimovitch

Okay. And then one more question and I will jump in the queue and that is when you look at 2016, Roger rather, I guess, Chris too [ph], what would you say as your biggest concern or challenge?

Roger Susi

I think we are pretty confident. We are pretty confident that these FDA issues are going to be behind us. And we are very confident that we are going to be able to grow this sales force and get a more effective guidance as we’ve done in the past. And what’s our biggest challenge, we’ve been doing well on the manufacturing area, the engineering moving along very nicely. We have things to do, we have these things to do, but we are very confident, they are going to get done and they are going to get done well and they are going to positively impact this business.

Larry Haimovitch

Okay, great. Thank you very much.

Operator

Thank you. Our next question is from Scott [indiscernible] Partners. Your line is open.

Unidentified Analyst

Thanks for taking my question. Just another follow up on the sales force. I think I wrote down your planning, you have 7 – I think you had 7 manager, you are going to double that to 14, and you got two year, I think you said something like area managers or maybe you could just briefly kind of go over what that sales force looks like now and what are the number we can expect to see in terms of expanding it?

Roger Susi

So it’s – we excited the year, we have 14 sales managers and we had two area directors. Okay? So this year in 2016, we are going to grow the sales mangers up to 7 at this point.

Unidentified Analyst

50% increased potential over there. Okay.

Roger Susi

That’s right. Now our sales managers are – their efforts are supplemented by a number of clinical staff and customer service staff. So as the number of our sales manager grow, we also increased a 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 with any department in the areas of our growth.

Unidentified Analyst

Yeah, okay. And then on that front, as you look out with the potential for the new patient monitoring system, is there a different look, I mean does that – do you – are you thinking of that as you look at expanding the sales force and your current guys comfortable, I mean is there much of a difference, are you talking to the same people, or is there just trying to figure out there’s an eye towards someone who is either done a monitoring system or is there anything different that skill set that you from that perspective?

Roger Susi

[indiscernible] well, yeah, it’s a monitor show, but the people that we call on it, I said before the call points, [indiscernible] and but is it a different box, yeah, it’s different, it’s a monitor and it’s another medical device. To some extent I’d have to say it’s easier to sell a monitor, there is not as much to it essentially if there can to be these pumps that we sell on the one hand. But on the don’t forget we have a competitor there. So this why we think we need the strength as more to come up to speed to go against a competitor.

Unidentified Analyst

Yeah, okay. Well, good. And just to reiterate, I think everyone have been – plenty talk about the guidance, but I think you kind of laid it out that you thought they were a little over roughly 2 million kind of pushed into 2015 that would have been 2014 and 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 are thinking it is already 34-ish, is that - am I getting that right?

Roger Susi

Yeah, you got it. We thought we were telling people all throughout the year don’t expect another year like 2015 for various reasons and once of which is that it is clearly a holdover of all that revenue that we got from a shipping hold for almost four months in 2014. So, yes. We look at it. We thought we were covering that fairly well, but obviously it not and that is definitely my fault, I hope it to come through a little better at least today with this call and it helps everyone.

Unidentified Analyst

Great. I appreciate it guys, thanks.

Roger Susi

Thanks Scott.

Operator

Thank you. Our next question is a follow-up from Chris Lewis of ROTH Capital Partners. Your line is open.

Chris Lewis

Hi guys, just a couple of quick ones. Gross margins came in above where we were and a nice sequential there, can you talk about what drove gross margin upside in the quarter and how we should think about gross margins for 2016?

Roger Susi

Good question.

Chris Scott

So, as I said in the past, the gross is really impacted by a couple of things, one of which is that the geographic sales mix and when compared to the fourth quarter last year with the shipping hold obviously we had a very muted domestic sales and I gave the number shows that this quarter, the fourth quarter 2015 was 87% domestic versus 32% in the fourth quarter 2014. So I think that has a significant impact on margins for the quarter. Even 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 geographic sales mix. There is several pieces moving along there. As for, you asked about how you should think about 2016, I think we modeled in the high 70s and touching into the 80% range as we move throughout the year. I see us maintaining our current high gross margins up in the low 80s.

Roger Susi

Right. Maybe let me add a little bit to that. That the worldwide - so the bottom line is that the gross margin is affected by to simply the mix of domestic sales to all our international business. So far, in spite of a lot that is going on in the rest of the world and with potentially the earnings of a lot other companies, we don’t see two, we don’t see really a significant hit yet from the world’s problems with growth, but you know it could be, I mean it give rise I mentioned that they will, 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 will 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 of on the conservative side because of these pressures around the world already, it is already backed in that way and so long as things don’t deteriorate worse it won’t effect that gross margin.

Chris Lewis

Okay great, appreciate it.

Roger Susi

I should have 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, right, well then we would be shipping them more. And so the gross margin would look a little bit lower. Did you follow?

Chris Lewis

I do.

Roger Susi

I foxed that one, but sorry about that.

Chris Lewis

Thanks.

Operator

Thank you. Our next question is from Scott Hogan of Thai Capital. Your line is open.

Scott Hogan

Hi, can you guys hear me.

Chris Scott

Yes.

Roger Susi

Scott, how are you?

Scott Hogan

Good. I have three, four questions, just first quickly, who is the competitor that left the market?

Roger Susi

It was called MEDRAD, divisional buyer.

Scott Hogan

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

Roger Susi

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

Chris Scott

Or about 4,500 pumps.

Roger Susi

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

Scott Hogan

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

Roger Susi

Well that’s what I mentioned earlier, you know, we don’t have clear numbers on how many of those we actually replace, but if I had to make a guess it was the more people that were using it have a leverage started to [indiscernible] as orders even back in the latter half of 2012. This problem with them started in the back half of 2012 and so it became a factor for us over a number of years and it is still a little bit of factor. The biggest bubble of it though as I think mentioned is pretty past. So, how many have we converted? More than half of them we think.

Scott Hogan

Okay.

Roger Susi

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

Scott Hogan

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

Roger Susi

[Indiscernible]

Chris Scott

I mean most recently, if I understand the question properly, most recently we’ve been working from backlog and that backlog had grown to nearly $20 million at the end of 2014 and like I said that was a nine or ten month clearing process for us and any new orders are just being tacked on to the back of that one. So, we are at about five months now and the turn if you will is, so much so mention order today, the turn is about five months.

Roger Susi

Is that what you wanted to know?

Scott Hogan

Yeah, 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 are going to be more heavily reliant on daily orders or monthly orders. So, what’s the cadence of those daily and monthly orders and what kind of visibility do you have on intra-quarter Q1 orders and Q2 orders?

Roger Susi

Well we would see. I mean when orders come in, I mean we see them in. We track our sales force very closely watching quotes and the level of quotes the ratio of quotes per guy versus how much he closes and all those sorts of metrics or things that they, you know our sales group watches and that’s how they manage the sale for some of the tools they used to manage those guys. So, at this point, if you are asking them, do you see is that positive, yes. I mean that is we believed that this group is getting very accomplished at doing what they need to do and we are growing it to do more of that.

Scott Hogan

Okay, I might take that one offline 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 are seeing, I guess are the orders pretty solid from what you know now?

Roger Susi

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 is part of why we went through all that huge growth we had in 2015. So, we didn’t expect that to be the case and you shouldn’t, I hope I made that clear. That was pretty heavy order rate for reasons that they went through.

Scott Hogan

Okay, thanks.

Roger Susi

Yeah.

Operator

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.

Roger Susi

Alright. Well it is Roger Susi again and 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.

Operator

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

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