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KORU Medical Systems Announces 2022 Third Quarter Financial Results

MAHWAH, N.J., November 09, 2022--(BUSINESS WIRE)--KORU Medical Systems, Inc. (NASDAQ: KRMD) ("KORU Medical" or the "Company"), a leading medical technology company focused on the development, manufacturing, and commercialization of innovative and easy-to-use subcutaneous drug delivery systems that improve quality of life for patients, today reported financial results for the third quarter ended September 30, 2022.

Highlights:

  • Year-over-year net sales growth of 28.5% to $7.8 million (inclusive of $0.3 million backorder clearance), marking the fourth consecutive quarter of double-digit growth

  • Expanded Novel Therapies to 14 total collaborations, including four new Phase II clinical drug trials, and one drug progressed to Phase III

  • Improved sequential gross margin profile to 55.7% in Q3 2022 from 51.1% in Q2 2022

  • Raising 2022 full year revenue guidance to $27.5 to $28.0 million

"The third quarter marks another successful quarter for the Company with strong revenue growth across each of our businesses," said Linda Tharby, KORU Medical's President and CEO. "Delivering on our strategic objectives remains a primary focus, and the progress made this quarter is representative of continued solid execution by the team. We are excited by the momentum in our novel therapies business with multiple new collaborations this quarter and by the double digit growth performance in both our domestic and international core business."

2022 Third Quarter Financial Results

Three Months
Ended September 30,

Change from Prior Year

2022

2021

$

%

Net Sales

Domestic Core

$

5,900,042

$

5,076,294

$

823,748

$

16.2%

International Core

1,096,746

747,281

349,465

46.8%

Novel Therapies

763,610

216,969

546,641

251.9%

Total

$

7,760,398

$

6,040,544

$

1,719,854

$

28.5%

Total net sales increased $1.7 million, or 28.5%, for the three months ended September 30, 2022, as compared with the same period last year as we saw double digit growth across all businesses. Domestic core growth was primarily driven by increased volume attributed to SCIg market growth and label expansions including prefill syringes. Domestic core included the clearing of $0.3 million in backorders from the second quarter of 2022. Novel therapies sales grew by 251.9% in the third quarter of 2022 related to services performed for a non-recurring engineering (NRE) innovation development agreement for a pharmaceutical customer and increases in clinical trial product sales to several pharmaceutical customers. Sales growth in our international core business was driven by volume growth in several EU markets compared with prior year.

Gross profit increased $0.8 million or 23.7% in the three months ended September 30, 2022, compared to the same period in 2021. This increase in gross profit was driven by volume increase in net sales of $1.7 million as described above. Gross profit as a percentage of net sales decreased to 55.7% compared to 57.9% from the third quarter of 2021. The decline in the gross profit percent was primarily due to higher manufacturing costs associated with labor and materials. The growth of the novel therapies business, and associated NRE service revenue also contributed to the lower gross margin. Unfavorable product mix was offset by a nominal increase in average selling prices.

Total operating expenses for the third quarter of 2022 were $5.9 million, compared to $4.8 million for the same period in 2021. The increase in operating expenses is due to strategic investments in research and development, and new hires to support business development, commercialization, quality and regulatory capabilities.

Net loss for the third quarter of 2022 was $1.2 million, or $(0.03) per diluted share, compared to a net loss of $1.1 million, or ($0.02) per diluted share for the same period of 2021. Net loss included a tax benefit of $0.3 million for the third quarter of 2022.

Cash and cash equivalents were $16.4 million as of September 30, 2022.

Assumptions and Outlook for Full Year 2022

KORU Medical's outlook for full year 2022 reflects numerous assumptions that could affect its business, based on the information management has as of this date, which includes assumptions regarding the continued recovery from the COVID-19 pandemic related to new SCIg patient starts, SCIg market growth rate in the high single digits, plasma supply, clinical trial activity and expansion of the novel therapies pipeline, inflationary impact (including labor and supply price increases), supply chain and labor shortage impacts, timely receipt of other receivable credits and planned inventory reductions by year end 2022. Management will discuss its outlook and several of its assumptions on its third quarter 2022 earnings call.

KORU Medical now expects full year 2022 revenue to be in the range of $27.5 to $28.0 million (previously $27.0 to $27.5 million).

The Company is confirming to exit the year with a 55.0% to 60.0% gross margin.

The Company is lowering its operating expenses guidance to $26.5 to $27.0 million (previously $27.0 to $28.0 million).

The Company is confirming its guidance to include a minimum cash balance of $16.0 million for year end 2022.

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 9, 2022, at 4:30 PM ET.

To participate in the call, please dial (877)-407-0784 (domestic) or (201)-689-8560 (international) and provide conference ID: 13732861. The live webcast will be available on the IR Calendar on the News/Events page of the Investors section of KORU Medical's website.

Non-GAAP Measures

This press release includes the non-GAAP financial measures "Adjusted EBITDA" and "Adjusted Diluted earnings per share" that are not in accordance with, nor an alternate to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on KORU Medical's reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company's financial results. Non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results. Reconciliations of the Company's non-GAAP measures are included at the end of this press release.

About KORU Medical Systems

KORU Medical Systems develops, manufactures, and commercializes innovative and easy-to-use subcutaneous drug delivery systems that improve quality of life for patients around the world. The FREEDOM Syringe Infusion System currently includes the FREEDOM60® and FreedomEdge® Syringe Infusion Drivers, Precision Flow Rate Tubing™ and HIgH-Flo Subcutaneous Safety Needle Sets™. These devices are used for infusions administered in the home and alternate care settings. For more information, please visit www.korumedical.com.

Forward-looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. All statements that are not historical fact are forward-looking statements, including, but not limited to, expected financial outlook and operating performance for fiscal 2022. Forward-looking statements discuss the Company's current expectations and projections relating to its financial position, results of operations, plans, objectives, future performance and business. Forward-looking statements can be identified by words such as "outlook", "expect", "plan", "believe" and "will". Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, uncertainties associated with the shift to increased healthcare delivery in the home, new patient diagnoses, customer ordering patterns, COVID-19, 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, 2021 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, 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 9. 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.

BALANCE SHEETS

(UNAUDITED)

September 30,

December 31,

2022

2021

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

16,441,268

$

25,334,889

Accounts receivable less allowance for doubtful accounts of $24,471 for September 30, 2022, and December 31, 2021

5,070,077

3,592,886

Inventory

6,884,156

6,106,338

Other Receivables

686,108

718,220

Prepaid expenses

1,660,655

1,568,821

TOTAL CURRENT ASSETS

30,742,264

37,321,154

Property and equipment, net

3,318,612

1,106,445

Intangible assets, net of accumulated amortization of $310,011 and $263,729 at September 30, 2022 and December 31, 2021, respectively

798,534

808,813

Operating lease right-of-use assets

3,865,370

95,553

Finance lease right-of-use, net of accumulated depreciation of $23,671 at September 30, 2022

331,400

Deferred income tax assets, net

3,520,823

1,941,254

Other assets

88,772

19,812

TOTAL ASSETS

$

42,665,775

$

41,293,031

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable

$

1,365,610

$

1,227,533

Accrued expenses

2,568,746

2,709,704

Notes Payable

644,733

508,583

Other Liabilities

357,491

90,000

Accrued payroll and related taxes

824,047

160,603

Finance lease liability - current

64,467

Operating lease liability – current

342,399

95,553

TOTAL CURRENT LIABILITIES

6,167,493

4,791,976

Finance lease liability, net of current portion

265,542

Operating lease liability, net of current portion

3,741,015

TOTAL LIABILITIES

10,174,050

4,791,976

Commitments and contingencies (Refer to Note 3)

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, 75,000,000 shares authorized, 48,657,023 and 48,044,162 shares issued 45,236,521 and 44,623,660 shares outstanding at September 30, 2022, and December 31, 2021, respectively

486,570

480,441

Additional paid-in capital

43,443,201

40,774,245

Treasury stock, 3,420,502 shares at September 30, 2022 and December 31, 2021, respectively, at cost

(3,843,562

)

(3,843,562

)

Retained deficit

(7,594,484

)

(910,069

)

TOTAL STOCKHOLDERS' EQUITY

32,491,725

36,501,055

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

42,665,775

$

41,293,031

KORU MEDICAL SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2022

2021

2022

2021

NET SALES

$

7,760,398

$

6,040,544

$

20,551,356

$

16,999,669

Cost of goods sold

3,438,036

2,544,794

9,260,516

7,061,881

Gross Profit

4,322,362

3,495,750

11,290,840

9,937,788

OPERATING EXPENSES

Selling, general and administrative

4,825,349

3,901,830

15,846,584

12,980,604

Research and development

862,148

800,020

3,314,233

1,523,739

Depreciation and amortization

164,344

115,934

399,479

349,822

Total Operating Expenses

5,851,841

4,817,784

19,560,296

14,854,165

Net Operating Loss

(1,529,479

)

(1,322,034

)

(8,269,456

)

(4,916,377

)

Non-Operating Income/(Expense)

Loss on currency exchange

(10,057

)

(7,283

)

(38,897

)

(21,761

)

Gain on disposal of fixed assets, net

273

1,009

Interest income (expense), net

42,476

(2,838

)

44,579

16,883

TOTAL OTHER INCOME/(EXPENSE)

32,419

(9,848

)

5,682

(3,869

)

LOSS BEFORE INCOME TAXES

(1,497,060

)

(1,331,882

)

(8,263,774

)

(4,920,246

)

Income Tax Benefit

271,500

238,104

1,579,359

1,425,781

NET LOSS

$

(1,225,559

)

$

(1,093,778

)

$

(6,684,415

)

$

(3,494,465

)

NET LOSS PER SHARE

Basic

$

(0.03

)

$

(0.02

)

$

(0.15

)

$

(0.08

)

Diluted

$

(0.03

)

$

(0.02

)

$

(0.15

)

$

(0.08

)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic

45,038,181

44,322,335

44,877,366

44,510,021

Diluted

45,038,181

44,322,335

44,877,366

44,510,021

KORU MEDICAL SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the
Nine Months Ended

September 30,

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss

$

(6,684,415

)

$

(3,494,465

)

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation expense

2,361,085

1,967,632

Depreciation and amortization

399,479

349,822

Deferred income taxes

(1,579,569

)

(1,440,060

)

Loss on disposal of fixed assets

(1,009

)

ROU landlord credit

218,044

Changes in operating assets and liabilities:

Increase in accounts receivable

(1,445,079

)

(549,711

)

Increase in inventory

(777,818

)

(138,160

)

Increase in prepaid expenses and other assets

(160,794

)

(529,039

)

Increase in other liabilities

267,491

Increase in accounts payable

138,077

760,493

Increase in accrued payroll and related taxes

663,444

45,684

Decrease in accrued expenses

(140,958

)

(573,565

)

NET CASH USED IN OPERATING ACTIVITIES

(6,741,012

)

(3,602,378

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(2,541,693

)

(301,720

)

Proceeds from disposal of property and equipment

9,065

Purchases of intangible assets

(36,003

)

(25,838

)

NET CASH USED IN INVESTING ACTIVITIES

(2,577,696

)

(318,493

)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from indebtedness

644,733

924,389

Payment on indebtedness

(508,583)

(251,255)

Proceeds from issuance of equity

314,000

1,230,000

Common stock issuance as settlement for litigation

938,094

Payments on finance lease liability

(25,062

)

(2,232

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

425,087

2,838,996

NET DECREASE IN CASH AND CASH EQUIVALENTS

(8,893,621

)

(1,081,875

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

25,334,889

27,315,286

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

16,441,268

$

26,233,411

Supplemental Information

Cash paid during the periods for:

Interest

$

15,700

$

6,194

Income Taxes

$

$

850

Schedule of Non-Cash Operating, Investing and Financing Activities:

Issuance of common stock as compensation

$

355,505

$

295,947

Issuance of common stock as settlement for litigation

$

$

938,094

KORU MEDICAL SYSTEMS, INC.

SUPPLEMENTAL INFORMATION

(UNAUDITED)

The following table summarizes our net sales for the three and nine months ended September 30, 2022 and 2021:

Three Months

Ended September 30,

Nine Months

Ended September 30,

2022

2021

2022

2021

Net Sales

Domestic

$

5,900,042

$

5,076,294

$

15,890,369

$

14,084,552

International

1,096,746

747,281

2,943,173

2,585,881

Novel Therapies

763,610

216,969

1,717,814

329,236

Total

$

7,760,398

$

6,040,544

$

20,551,356

$

16,999,669

KORU MEDICAL SYSTEMS, INC.

SUPPLEMENTAL INFORMATION

(UNAUDITED)

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:

2022

2021

2022

2021

GAAP Net Loss

$

(1,225,559

)

(1,093,778)

$

(6,684,415

)

$

(3,494,465

)

Tax (Benefit)/Expense

(271,500

)

(238,104)

(1,579,359

)

(1,425,781

)

Depreciation and Amortization

164,344

115,934

399,479

349,822

Interest (Income)/Expense, Net

(42,476)

2,838

(44,579)

(16,883

)

Reorganization Charges

200,000

(1,262)

765,433

1,192,618

Manufacturing Initiative Expenses

20,537

35,892

108,886

237,333

Stock-based Compensation Expense

779,510

628,276

2,429,999

1,967,632

Non-GAAP Adjusted EBITDA

$

(375,144

)

$

(556,204)

$

(4,604,556

)

$

(1,189,724)

Three Months Ended

Nine Months Ended

Reconciliation of Reported Diluted EPS

September 30,

September 30,

to Non-GAAP Adjusted Diluted EPS:

2022

2021

2022

2021

Reported Diluted Earnings Per Share

$

(0.03

)

$

(0.02

)

$

(0.15

)

$

(0.08

)

Reorganization Charges

0.02

0.03

Manufacturing Initiative Expenses

0.01

Stock-based Compensation Expense

0.01

Tax (Expense) Adjustment

(0.01

)

Non-GAAP Adjusted Diluted Earnings Per Share

$

(0.03

)

$

(0.02)

$

(0.13

)

$

(0.04

)

Reorganization Charges. We have excluded the effect of reorganization charges in calculating our non-GAAP measures. In 2021 we incurred significant expenses in connection with the departure and replacement of our chief executive officer and the recruiting of two new board members, which we would not have otherwise incurred in periods presented as part of our continuing operations. In 2022 we incurred further severance expense related to the reorganization of the leadership team and the departure of our chief financial officer, which we would not have otherwise incurred in periods presented as part of continuing operations.

Manufacturing Initiative Expenses. We have excluded the effect of expenses related to creating manufacturing efficiencies, in calculating our non-GAAP measures. We incurred expenses in connection with these initiatives which we would not have otherwise incurred in periods presented as part of our continuing operations. We expect to incur related expenses for the next three to six months.

Stock-based Compensation Expense. We have excluded the effect of stock-based compensation expense in calculating our non-GAAP measures. We record non-cash compensation expense related to grants of options and restricted shares for executives, employees and consultants, and grants of shares to our board of directors. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221109005855/en/

Contacts

Greg Chodaczek
347-620-7010
investor@korumedical.com