IRadimed Corporation (IRMD) Earnings

Management highlights

- New 3870 MR IV Pump Launch and Production: The first general release production of the 3870 hit its target of 130 to 135 units in Q2 2026, achieving the planned ramp from zero production to full targeted volume in the quarter. Q2 bookings for the 3870 were more than double units shipped, indicating very strong customer demand. 70% of replacement orders for legacy 3860 systems are for 3870 quad (four-channel) pump systems, which doubles the number of units per replacement and delivers a more than 20% ASP lift, with quad system ASP exceeding $110,000. There is a large addressable replacement market: approximately 6,400 five-year-old-plus 3860 channels are eligible for replacement in the U.S., and management expects this replacement opportunity to be the company's key growth driver for the next several years, targeting 1,000 additional annual replacement channels beyond historical 3860 sales volumes. Q3 2026 plans call for more than doubling production to over 300 3870 units, with startup costs from Q2 expected to decline by more than 50%, and manufacturing efficiencies expected to approach historical levels by Q4 2026. Gross margin for Q2 2026 was 74%, down 400 bps YoY, due to elevated ramp-up labor and overhead costs for the new 3870. This margin is expected to improve through H2 2026 as volume increases and production learning curve efficiencies take hold. - Other Product Segment Performance: Domestic patient monitor sales hit a record high of 71 units in Q2 2026, maintaining high ASP, even as the sales team prioritized 3870 order acquisition. Disposables revenue grew 14% YoY, with further growth expected as 3870 quad systems increase per-site utilization. - Financial and Operational Highlights: GAAP net income was $5.2 million, or $0.41 per diluted share, compared to $5.8 million or $0.45 per diluted share in Q2 2025. Non-GAAP net income was $5.9 million, or $0.46 per diluted share, compared to $6.4 million or $0.49 per diluted share in Q2 2025. The company ended Q2 with $59.1 million in cash and cash equivalents, with operating cash flow of $5.9 million for the quarter and $14.2 million for the first half, up 18% YoY. The board of directors declared a $0.20 per share regular quarterly dividend, payable August 28, 2026.

Guidance

- Q3 2026 guidance is set at $23 million to $24.5 million in total revenue, GAAP diluted earnings per share of $0.49 to $0.54, and non-GAAP diluted earnings per share of $0.54 to $0.59. - Full year 2026 guidance is reaffirmed, with total revenue expected between $91 million and $96 million, GAAP diluted earnings per share between $1.90 and $2.05, and non-GAAP diluted earnings per share between $2.09 and $2.24. Full year non-GAAP guidance excludes $2.5 million in net-of-tax stock-based compensation expense. - Management expects gross margins to return to and exceed historical levels by Q4 2026, after two quarters of 3870 launch-related ramp-up costs, with a $100 million annual run rate achievable by Q4 2026.

Segment performance

Total Q2 2026 revenue was $20.5 million, a 0.5% year-over-year (YoY) increase from $20.4 million in Q2 2025. Breakdown by segment: 1) Pump systems (primarily the new 3870 MR IV pump and legacy 3860): Pump revenue was in line with management expectations during the product transition, accounting for 35% of total revenue at $7.1 million. 2) MRI-compatible patient vital signs monitoring systems: Generated $6.7 million in revenue, up 12% YoY, representing 33% of total revenue. 3) Ferromagnetic detection (FMD) systems: Generated $0.8 million in revenue, up 57% YoY, accounting for 4% of total revenue. 4) Disposables: Grew 14% YoY to $4.8 million, representing 23% of total revenue, driven by increased device utilization. 5) Amortization of extended maintenance agreements: Grew 28% YoY to $0.8 million, accounting for 4% of total revenue. 6) Services and other: Grew 7% YoY to $1.1 million, representing 5% of total revenue. Geographically, domestic sales accounted for 82% of total Q2 2026 revenue, down from 89% in Q2 2025 due to exceptionally strong domestic 3860 revenue in the prior year quarter.

Risks & headwinds

- Forward-looking results (including production ramp, demand, and margin improvements) may differ materially from stated expectations due to unstated risk factors outlined in the company's recent SEC filings. - Strong unanticipated demand for 3870 quad systems has increased backlog and is expected to extend customer lead times beyond historical levels, which could create order fulfillment delays. - The full-year 2026 effective tax rate is now expected to land in the 24% range, higher than original projections, due to smaller-than-expected windfall deductions from equity grant vesting.

Analyst Q&A

• Q: The 3870 ramp is moving from 130+ units in Q2 to over 300 units in Q3. What operational changes are needed to hit this target, and will the pace of ramp-up continue into Q4? /

  A: All required staffing and production line preparation was completed in prior months in anticipation of the ramp, so no additional major hiring or line changes are needed. The primary barrier to faster, more efficient production now is the manufacturing learning curve, as teams build experience and muscle memory for the new product. Overtime is currently required to hit volume targets as teams gain this experience, but efficiency will improve over time as the learning curve progresses.

• Q: As the legacy 3860 installed base is phased out and replaced with 3870 quad systems, what impact will this have on recurring service and disposable revenue, and is any transition gap expected? /

  A: Disposable revenue already grew over 14% YoY this quarter, and the legacy 3860 installed base continues to maintain steady utilization. Quad systems (which replace two-channel legacy units) are expected to drive higher future disposable revenue growth, as they double the number of channels per replacement, leading to higher overall utilization at each customer site. No material transition gap is expected.

• Q: What is the current lead time for new 3870 orders placed today? Will shipments be pushed into future quarters? /

  A: Current lead times for new orders are approximately three months, with most current orders shipping within the next quarter. Bookings have outpaced shipments, so backlog is growing, and lead times are expected to extend back toward the company's historical range of 4 to 6 months (or slightly longer) due to stronger-than-expected demand and the high mix of quad systems that double unit volume per replacement.