Full Press Release Details
MEDICAL SYSTEMS, INC. ANNOUNCES 2023 THIRD QUARTER FINANCIAL RESULTS and updates full year 2023 outlook
MAHWAH, NJ - November 8, 2023 - 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 third quarter ended September 30, 2023 and updates full year 2023 outlook.
| Third quarter net revenue of $7.0 million, a 10% decline versus prior year | |
| Novel Therapies net revenue decline of $0.6 million was impacted primarily by a large clinical trial order in the prior year and timing of collaborations | |
| Domestic Core net revenue of $5.8 million, a 2% decline, reflected a prior year backorder clearance of $0.3 million | |
| Improved gross margin to 62.0%, an increase of 630 BPS versus prior year, driven by increased manufacturing efficiencies | |
| Continued strategic, operational expense discipline, ending the quarter with $10.8 million in cash and cash equivalents | |
| Revised full year 2023 net revenue guidance to $28.0 to $28.5 million, reaffirmed gross margin guidance between 58%-60% for full-year and a planned Q4 exit between 60%-62%, and increased year-end cash balance guidance to greater than $10.5 million | |
| Announced a new Novel Therapies innovation collaboration and brought the total closed collaborations to 15 | |
| Received a 510(k) clearance for FREEDOM60 Infusion System as the first and only FDA-cleared device for use with Hizentra 50 mL prefilled syringes | |
| Named Ken Miller, a 30-year healthcare and pharmaceutical executive, as Chief Commercial Officer |
"Our third quarter revenues were impacted
by our Novel Therapies business due to the timing of collaborations and by our Domestic Core business, which saw lower than
anticipated growth in the underlying market. We progressed several initiatives in the quarter aimed at growing our top-line,
including expanding our Novel Therapies collaborations, outperforming the U.S. subcutaneous immunoglobulin market, advancing our
geographic expansion efforts, and gaining a new 510(k) clearance for a prefilled syringe indication," said Linda Tharby, KORU
Medical's President and CEO. "We simultaneously advanced our efforts towards profitability and delivered on our gross margin
goals despite revenue headwinds by exercising strategic operational expense discipline in light of our current environment. We are
confident we have the right plan in place to capitalize on upcoming catalysts, grow our position in our subcutaneous immunoglobulin
business, and expand into the larger addressable Novel Therapies market."
2023 Third Quarter Financial Results
| Three Months Ended September 30, | Change from Prior Year | ||||||||||
| 2023 | 2022 | $ | % | ||||||||
| Net Revenues | |||||||||||
| Domestic Core | $ | 5,773,863 | $ | 5,900,042 | $ | (126,179) | (2.1%) | ||||
| International Core | 1,066,567 | 1,096,746 | (30,179) | (2.8%) | |||||||
| Novel Therapies | 162,768 | 763,610 | (600,842) | (78.7%) | |||||||
| Total | $ | 7,003,198 | $ | 7,760,398 | $ | (757,200) | (9.8%) |
Total net revenues decreased $0.8 million, or 9.8%,
for the three months ended September 30, 2023, as compared with the same period last year. Novel Therapies net revenues declined by 78.7%,
primarily driven by a large clinical trial order of $0.5 million in the prior period and the timing of collaboration revenue. Domestic
Core net revenues declined by 2.1% driven by lower consumable volumes as compared to the prior year period, which included a clearing
of a $0.3 million consumable backorder. Partially offsetting this decline, was an increase in pump units sold. International Core net
revenues declined by 2.8%, driven largely by a tender order in the prior year period, partially offset by growth in several countries.
Gross profit was mostly flat compared to the prior
year, with revenue declines offset by a decrease in manufacturing costs. Gross margin increased to 62.0% compared to 55.7% in the third
quarter of 2022. The increase was primarily driven by production efficiencies from the outsourced manufacturing initiative and Chester
site exit when compared to the prior year.
Operating expenses for the three months ended September
30, 2023, were $6.1 million, up from $5.9 million for the same period last year, driven primarily by an increase of $0.4 million in research
and development expense mostly offset by a reduction of $0.2 million in selling, general and administrative expenses.
Net loss for the third quarter of 2023 was $1.4
million, or $(0.03) per diluted share, compared to a net loss of $1.2 million, or ($0.03) per diluted share for the same period of 2022.
Net loss included a tax benefit of $0.3 million for the third quarter of 2023.
Assumptions and Outlook for Full Year 2023
For the full year 2023, the
Company's guidance has been revised to reflect the slower anticipated growth in the underlying U.S. subcutaneous immunoglobulin market
and the timing of Novel Therapies collaboration wins and expected milestone completion. KORU Medical is updating its 2023 growth outlook
on the underlying U.S. subcutaneous immunoglobulin drug market Q4 growth of 3-4% from a prior full year expectation of 5%.
KORU Medical Outlook:
| Reducing full year 2023 net revenue guidance to $28.0 - $28.5 million, from prior guidance of $31.0 - $32.5 million | |
| Reaffirming 2023 gross margin guidance between 58%-60% and a planned 2023 exit between 60%-62% | |
| Increasing cash balance guidance at year-end 2023 to greater than $10.5 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, November 8, 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:10182999. The live webcast will be available on the IR Calendar
on the News/Events page of the Investors section of KORU Medical's website.
This press release includes the non-GAAP financial
measures "Adjusted EBITDA" and "Adjusted Diluted Earnings Per Share" that are not in accordance with, nor an alternate
to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. These non-GAAP measures
are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures should not be considered a substitute
for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude
charges that have a material effect on KORU Medical's reported results and, therefore, should not be relied upon as the sole financial
measures to evaluate the Company's financial results. Non-GAAP financial measures are meant to supplement, and to be viewed in conjunction
with, GAAP financial results. Reconciliations of the Company's non-GAAP measures are included at the end of this press release.
About KORU Medical Systems
KORU Medical Systems develops, manufactures, and commercializes
innovative and easy-to-use subcutaneous drug delivery systems that improve quality of life for patients around the world. The FREEDOM
Syringe Infusion System currently includes the FREEDOM60 and FreedomEdge Syringe Infusion Drivers, Precision Flow Rate Tubing
and HIgH-Flo Subcutaneous Safety Needle Sets . These devices are used for infusions administered in the home and alternate care
settings. For more information, please visit www.korumedical.com.
Forward-looking Statements
This press release contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. All statements that are
not historical fact are forward-looking statements, including, but not limited to, expected financial outlook and operating performance
for fiscal 2023. Forward-looking statements discuss the Company's current expectations and projections relating to its financial position,
results of operations, plans, objectives, future performance and business. Forward-looking statements can be identified by words such
as "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 November 8, 2023. Undue
reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us
on the date hereof. We undertake no duty to update this information unless required by law.
KORU MEDICAL SYSTEMS, INC.
| September 30, | December 31, | ||||||
| 2023 | 2022 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash and cash equivalents | $ | 10,772,178 | $ | 17,408,257 | |||
| Accounts receivable less allowance for doubtful accounts of $24,777 as of September 30, 2023 and $21,459 as of December 31, 2022 | 4,050,756 | 3,558,884 | |||||
| Inventory | 4,676,913 | 6,404,867 | |||||
| Other receivables | 813,499 | 972,396 | |||||
| Prepaid expenses | 1,373,348 | 1,457,232 | |||||
| TOTAL CURRENT ASSETS | 21,686,694 | 29,801,636 | |||||
| Property and equipment, net | 3,820,087 | 3,886,975 | |||||
| Intangible assets, net of accumulated amortization of $373,943 and $325,872 as of September 30, 2023 and December 31, 2022, respectively | 758,423 | 787,182 | |||||
| Operating lease right-of-use assets | 3,544,959 | 3,786,545 | |||||
| Deferred income tax assets, net | 5,445,123 | 3,967,480 | |||||
| Other assets | 98,969 | 102,625 | |||||
| TOTAL ASSETS | $ | 35,354,255 | $ | 42,332,443 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| CURRENT LIABILITIES | |||||||
| Accounts payable | $ | 945,619 | $ | 2,391,799 | |||
| Accrued expenses | 1,458,529 | 2,889,941 | |||||
| Note payable | 466,026 | 433,295 | |||||
| Other liabilities | 500,620 | 257,337 | |||||
| Accrued payroll and related taxes | 392,527 | 542,399 | |||||
| Financing lease liability - current | 102,470 | 98,335 | |||||
| Operating lease liability - current | 356,349 | 345,834 | |||||
| TOTAL CURRENT LIABILITIES | 4,222,140 | 6,958,940 | |||||
| Financing lease liability, net of current portion | 316,906 | 394,283 | |||||
| Operating lease liability, net of current portion | 3,384,666 | 3,653,257 | |||||
| TOTAL LIABILITIES | 7,923,712 | 11,006,480 | |||||
| Commitments and Contingencies (Note 7) | |||||||
| STOCKHOLDERS' EQUITY | |||||||
| Common stock, $0.01 par value, 75,000,000 shares authorized, 49,059,583 and 48,861,891 shares issued 45,639,081 and 45,441,389 shares outstanding as of September 30, 2023, and December 31, 2022, respectively | 490,596 | 488,619 | |||||
| Additional paid-in capital | 46,629,753 | 44,252,117 | |||||
| Treasury stock, 3,420,502 shares as of September 30, 2023 and December 31, 2022, at cost | (3,843,562 | ) | (3,843,562 | ) | |||
| Accumulated deficit | (15,846,244 | ) | (9,571,211 | ) | |||
| TOTAL STOCKHOLDERS' EQUITY | 27,430,543 | 31,325,963 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 35,354,255 | $ | 42,332,443 |
The accompanying notes are an integral part of these
financial statements.
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | ||||||||||||
| September 30, | September 30, | ||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||
| NET REVENUES | $ | 7,003,198 | $ | 7,760,398 | $ | 21,331,734 | $ | 20,551,356 | |||||
| Cost of goods sold | 2,661,021 | 3,438,036 | 8,954,398 | 9,260,516 | |||||||||
| Gross Profit | 4,342,177 | 4,322,362 | 12,377,336 | 11,290,840 | |||||||||
| OPERATING EXPENSES | |||||||||||||
| Selling, general and administrative | 4,623,928 | 4,825,349 | 15,352,972 | 15,846,584 | |||||||||
| Research and development | 1,293,256 | 862,148 | 4,454,739 | 3,314,233 | |||||||||
| Depreciation and amortization | 216,014 | 164,344 | 642,050 | 399,479 | |||||||||
| Total Operating Expenses | 6,133,198 | 5,851,841 | 20,449,761 | 19,560,296 | |||||||||
| Net Operating Loss | (1,791,021 | ) | (1,529,479 | ) | (8,072,425 | ) | (8,269,456 | ) | |||||
| Non-Operating Income/(Expense) | |||||||||||||
| Loss on currency exchange | (9,390 | ) | (10,057 | ) | (12,542 | ) | (38,897 | ) | |||||
| Loss on disposal of fixed assets, net | (3,527 | ) | - | (59,806 | ) | - | |||||||
| Interest income, net | 135,429 | 42,476 | 392,098 | 44,579 | |||||||||
| TOTAL OTHER INCOME/(EXPENSE) | 122,512 | 32,419 | 319,750 | 5,682 | |||||||||
| LOSS BEFORE INCOME TAXES | (1,668,509 | ) | (1,497,060 | ) | (7,752,675 | ) | (8,263,774 | ) | |||||
| Income Tax Benefit | 300,247 | 271,500 | 1,477,642 | 1,579,359 | |||||||||
| NET LOSS | $ | (1,368,262 | ) | $ | (1,225,560 | ) | $ | (6,275,033 | ) | $ | (6,684,415 | ) | |
| NET LOSS PER SHARE | |||||||||||||
| Basic | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.14 | ) | $ | (0.15 | ) | |
| Diluted | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.14 | ) | $ | (0.15 | ) | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |||||||||||||
| Basic | 45,639,081 | 45,038,181 | 45,578,314 | 44,877,366 | |||||||||
| Diluted | 45,639,081 | 45,038,181 | 45,578,314 | 44,877,366 |
The accompanying notes are an integral part of these
financial statements.
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
| For the Nine Months Ended | |||||||
| September 30, | |||||||
| 2023 | 2022 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
| Net Loss | $ | (6,275,033 | ) | $ | (6,684,415 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Stock-based compensation expense | 2,379,613 | 2,361,085 | |||||
| Depreciation and amortization | 642,050 | 399,479 | |||||
| Deferred income taxes | (1,477,643 | ) | (1,579,569 | ) | |||
| Loss on disposal of fixed assets | 59,806 | - | |||||
| ROU landlord credit | (16,489 | ) | 218,044 | ||||
| Changes in operating assets and liabilities: | |||||||
| Increase in Accounts receivable | (332,975) | (1,445,079 | ) | ||||
| Decrease / (Increase) in Inventory | 1,727,954 | (777,818 | ) | ||||
| Increase in Prepaid expenses and other assets | 87,540 | (160,794 | ) | ||||
| Increase in Other liabilities | 243,282 | 267,491 | |||||
| (Decrease) / Increase in Accounts payable | (1,446,180 | ) | 138,077 | ||||
| (Decrease) / Increase in Accrued payroll and related taxes | (149,872 | ) | 663,444 | ||||
| Decrease in Accrued expenses | (1,431,412 | ) | (140,958 | ) | |||
| NET CASH USED IN OPERATING ACTIVITIES | (5,989,358 | ) | (6,741,013 | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
| Purchases of property and equipment | (586,897 | ) | (2,541,693 | ) | |||
| Purchases of intangible assets | (19,312 | ) | (36,003 | ) | |||
| NET CASH USED IN INVESTING ACTIVITIES | (606,209 | ) | (2,577,696 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
| Borrowings from indebtedness | 565,172 | 644,733 | |||||
| Payments on indebtedness | (532,441 | ) | (508,583 | ) | |||
| Proceeds from issuance of equity | - | 314,000 | |||||
| Payments on finance lease liability | (73,243 | ) | (25,062 | ) | |||
| NET CASH USED IN PROVIDED BY FINANCING ACTIVITIES | (40,512 | ) | 425,088 | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (6,636,079 | ) | (8,893,621 | ) | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 17,408,257 | 25,334,889 | |||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 10,772,178 | $ | 16,441,268 | |||
| Supplemental Information | |||||||
| Cash paid during the periods for: | |||||||
| Interest | $ | 34,773 | $ | 15,700 | |||
| Income taxes | $ | 3,160 | $ | - | |||
| Schedule of Non-Cash Operating, Investing and Financing Activities: | |||||||
| Issuance of common stock as compensation | $ | 348,849 | $ | 355,505 |
The accompanying notes are an integral part of these
financial statements.
KORU MEDICAL SYSTEMS, INC.
SUPPLEMENTAL INFORMATION
The following table summarizes our net sales for the
three and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||
| Net Sales | |||||||||||
| Domestic | $ | 5,773,863 | $ | 5,900,042 | $ | 16,881,170 | $ | 15,890,369 | |||
| International | 1,066,567 | 1,096,746 | 3,281,061 | 2,943,173 | |||||||
| Novel Therapies | 162,768 | 763,610 | 1,169,503 | 1,717,814 | |||||||
| Total | $ | 7,003,198 | $ | 7,760,398 | $ | 21,331,734 | $ | 20,551,356 |
KORU MEDICAL SYSTEMS, INC.
SUPPLEMENTAL INFORMATION
A reconciliation of our non-GAAP measures is below:
| Three Months Ended | Nine Months Ended | ||||||||||||
| Reconciliation of GAAP Net (Loss) | September 30, | September 30, | |||||||||||
| to Non-GAAP Adjusted EBITDA: | 2023 | 2022 | 2023 | 2022 | |||||||||
| GAAP Net Loss | $ | (1,368,262 | ) | $ | (1,225,559 | ) | $ | (6,275,033 | ) | $ | (6,684,415 | ) | |
| Tax (Benefit)/Expense | (300,247 | ) | (271,500 | ) | (1,477,642 | ) | (1,579,359 | ) | |||||
| Depreciation and Amortization | 216,014 | 164,344 | 642,050 | 399,479 | |||||||||
| Interest (Income)/Expense, Net | (135,429 | ) | (42,476 | ) | (392,098 | ) | (44,579 | ) | |||||
| Reorganization Charges | - | 200,000 | - | 765,433 | |||||||||
| Manufacturing Initiative Expenses | - | 20,537 | 55,361 | 108,886 | |||||||||
| Stock-based Compensation Expense | 697,658 | 779,510 | 2,379,613 | 2,429,999 | |||||||||
| Non-GAAP Adjusted EBITDA | $ | (890,266 | ) | $ | (375,144 | ) | $ | (5,067,749 | ) | $ | (4,604,556 | ) |