Inari Medical, Inc. (NARI) Q3 2024 Earnings Call Transcript
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Overview
The earnings call presents mixed signals. Financial performance shows strong revenue growth but also increased operating losses, which is concerning. The Q&A section reveals stable market health and growth potential, but management's vague responses on certain topics may raise investor concerns. The lack of a shareholder return plan and declining gross margins also contribute to a neutral outlook. However, the raised annual revenue guidance and robust growth in emerging therapies offer positive aspects, balancing the negative elements. Given the company's market cap, the stock price is likely to remain stable over the next two weeks.
Key Financial Performance
Revenue $153.4 million, up 21.4% year-over-year due to strong adoption of therapies and commercial expansion.
Global VTE Revenue $145.3 million, up 19.7% year-over-year, driven by commercial expansion and market development efforts.
Global Emerging Therapies Revenue $8 million, up 64% year-over-year, reflecting strong growth in the emerging therapies portfolio.
International Revenue $11.5 million, up 76.4% year-over-year, primarily driven by adoption in Europe.
Gross Margin 87.1%, down from 88.5% year-over-year, due to product mix, ramp-up costs for new products, and increasing internationalization.
Operating Expenses $147.1 million, up from $109.8 million year-over-year, primarily due to increased personnel-related expenses and commissions.
R&D Expense $29.4 million, up from $21.5 million year-over-year, due to a one-time noncash impairment charge and increases in personnel-related expenses.
SG&A Expense $108.3 million, up from $85.6 million year-over-year, primarily due to increased headcount and commissions.
GAAP Operating Loss $13.6 million, compared to a GAAP operating income of $2.1 million year-over-year, reflecting increased operating expenses.
Net Loss $18.4 million, compared to a net income of $3.2 million year-over-year, driven by increased operating losses.
Cash Flows from Operating Activities $1.9 million, indicating a modest cash generation.
Cash and Investments Balance $111.6 million, indicating a healthy balance sheet.
Operating Highlights
Emerging Therapies Revenue: In Q3, we delivered over $8 million in Emerging Therapies revenue, up 64% versus the prior year.
Artix System: We received 510(k) clearance for our next-gen Artix system and have commenced a limited market release.
LimFlow: We have received approvals in over 50 of the approximately 200 high-volume Limb Salvage Centers of Excellence.
VenaCore: We continue to advance the adoption of VenaCore following our full market release earlier this year.
International Revenue: Revenue of $11.5 million was up 76.4% versus the prior year, driven by adoption of our solutions in Europe.
Regulatory Approvals in Brazil: We recently received regulatory approval for FlowTriever in Brazil and are in the early stages of our launch in that market.
Expansion in China and Japan: We are finalizing our go-to-market strategy in China and have obtained PMDA regulatory approval for our ClotTriever device in Japan.
Operating Expenses: Operating expenses were $147.1 million in Q3 2024 compared with $109.8 million for the same period in the prior year.
Gross Margin: Our best-in-class gross margin was 87.1% for Q3 2024 compared to 88.5% in the prior year period.
Full Year Revenue Guidance: We are raising our full year 2024 revenue guidance to $601.5 million to $604.5 million, reflecting growth of 22% to 22.5% over 2023.
Path to Profitability: We remain fully committed to achieving sustained GAAP operating profitability in the first half of 2025.
Risk or Challenges
Forward-looking statements: The company acknowledges that forward-looking statements are subject to inherent uncertainties and risks that could lead to actual outcomes differing materially from expectations.
Regulatory issues: Inari is awaiting the final ruling from CMS regarding outpatient reimbursement for LimFlow procedures, which could impact financial performance.
Supply chain challenges: The company has been working to strengthen its supply chain, particularly for LimFlow, which is crucial for its commercial ramp.
Competitive pressures: Inari faces competition in the VTE market, particularly from catheter-directed thrombolysis, which they aim to convert to their mechanical thrombectomy solutions.
Economic factors: The company is focused on maintaining a healthy balance sheet and cash flow, with expectations to remain above $100 million in cash for the year.
Market dynamics: The U.S. VTE market is described as stable, but there are concerns about growth rates lagging behind expectations, particularly in the context of competitive pressures.
Clinical trial outcomes: The results of the PEERLESS trial are anticipated to significantly influence market dynamics and physician adoption of Inari's products.
Investment in R&D: Increased R&D expenses due to a one-time impairment charge and ongoing clinical studies may impact profitability in the short term.
International expansion risks: Inari is expanding into international markets like China and Japan, which involves regulatory hurdles and market entry challenges.
Guidance & Outlook
Full Year 2024 Revenue Guidance: Inari raised its full year revenue guidance to $601.5 million to $604.5 million, reflecting growth of 22% to 22.5% over 2023.
Sustained Operating Profitability: Inari expects to achieve sustained operating profitability in the first half of 2025.
Emerging Therapies Growth: In Q3, Emerging Therapies revenue was over $8 million, up 64% year-over-year, with expectations for strong growth in 2025.
International Revenue Growth: International revenue reached $11.5 million, up 76.4% year-over-year, with expectations for continued growth in 2025.
LimFlow Progress: LimFlow is expected to contribute significantly to growth in 2025, supported by NTAP and New Tech APC reimbursement.
PEERLESS Study Impact: Positive results from the PEERLESS study could lead to a significant conversion of catheter-directed thrombolysis procedures to mechanical thrombectomy.
Q4 2024 Guidance: Inari anticipates roughly breakeven GAAP operating income in Q4 2024.
R&D Expense Outlook: R&D expenses are expected to decrease sequentially in Q4 2024.
SG&A Expense Outlook: SG&A expenses as a percentage of revenue are expected to decrease in Q4 2024.
Cash Balance Outlook: Inari expects its cash balance to remain above $100 million for the duration of the year.
Shareholder Return Plan
Shareholder Return Plan: Inari Medical has not announced a specific share buyback program or dividend program during this earnings call. However, they have expressed a commitment to achieving sustained operating profitability in the first half of 2025, which may influence future shareholder return strategies.
Key Q&A
Earnings Word Cloud
NARI Transcript
The earnings call presents mixed signals. Financial performance shows strong revenue growth but also increased operating losses, which is concerning. The Q&A section reveals stable market health and growth potential, but management's vague responses on certain topics may raise investor concerns. The lack of a shareholder return plan and declining gross margins also contribute to a neutral outlook. However, the raised annual revenue guidance and robust growth in emerging therapies offer positive aspects, balancing the negative elements. Given the company's market cap, the stock price is likely to remain stable over the next two weeks.
The earnings call highlighted strong financial performance, including record revenue growth and international expansion. Despite increased operating losses and a DOJ inquiry, optimistic guidance and a raised revenue forecast signal confidence. The Q&A session reinforced positive sentiment, especially with the expected impact of PEERLESS data. The lack of a shareholder return plan is a minor downside, but overall, the market is likely to react positively, considering the company's small-cap nature.
The earnings call reflects a positive outlook with strong revenue growth, international expansion, and a raised guidance. Despite increased losses and expenses, management's confidence in market leadership, new product launches, and strategic acquisitions support a positive sentiment. The Q&A reinforced management's optimism with no significant competitive threats and robust growth across segments. The market cap indicates moderate sensitivity to news, suggesting a stock price increase between 2% to 8% over the next two weeks.
The earnings call presents a mixed picture: strong year-over-year revenue growth and promising international expansion, but lower-than-expected 2024 guidance and ongoing DOJ investigation create uncertainties. While the company's gross margins are stable, competitive pressures and conservative guidance may temper investor enthusiasm. The Q&A section reveals cautious optimism from management but also highlights some areas of concern, such as competition and the DOJ investigation. Given the market cap and these mixed signals, the stock price is likely to remain neutral in the short term.
NARI Report
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