NEW PRAGUE, Minn.--(BUSINESS WIRE)--Electromed, Inc. (“Electromed” or the “Company”) (NYSE American:ELMD), a leader in innovative airway clearance technologies, today announced financial results for the three months ended September 30, 2019 (“Q1 FY 2020”).
Q1 FY 2020 Highlights
- Net revenue increased 14.1% to $8.3 million from $7.3 million for the three months ended September 30, 2018 (“Q1 FY 2019”).
- Operating margin improved to 16.2% from 2.8% in Q1 FY 2019.
- Operating income grew to $1.3 million from $0.2 million in Q1 FY 2019.
- Net income increased to $1.0 million, or $0.12 per diluted share, from $0.2 million, or $0.02 per diluted share, in Q1 FY 2019.
- Cash flow from operating activities increased to $0.6 million from $0.3 million in Q1 FY 2019.
Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We delivered strong revenue and net income, driven by top-line growth of 14.1% and significant operating margin improvement compared to the prior year period. Home care revenue grew by 11.4% compared to our prior first quarter as we executed on our strategy to drive growth organically and achieved our second consecutive quarter of improved sales team productivity. This quarter we produced approximately $879,000 of annualized home care revenue per direct field sales employee, slightly exceeding our target productivity range of between $750,000 and $850,000. Our institutional sales also performed well, with first quarter revenue up 49.2% year-over-year. We believe the sales restructuring, new sales leadership appointments, enhanced sales training programs and targeting approaches we initiated in the prior fiscal year, combined with our focus on cost containment, contributed to improved financial results for what is typically a seasonally light first quarter for Electromed.”
Ms. Skarvan continued, “We are very pleased with the start to our fiscal year and believe we are well positioned to further penetrate the large and growing bronchiectasis market with our SmartVest® Airway Clearance device, which makes life’s important moments possible, one breath at a time. For the remainder of the fiscal year, we will continue to prudently invest in growing our business while targeting improved operating margins. These investments will include expanding our direct sales staff to 38 as previously disclosed from 32 at the end of the quarter and some focused investments in R&D.”
Q1 FY 2020 Review
Net revenue increased 14.1% to $8.3 million, from $7.3 million in Q1 FY 2019, primarily driven by higher home care revenue. Home care revenue rose 11.4% to $7.5. million from $6.7 million in Q1 FY 2019, primarily due to a higher average allowable based on payer mix, a greater referral to approval percentage and improved productivity from the Company’s field sales staff. Field sales employees totaled 38, of which 32 were direct sales, at the end of Q1 FY 2020, compared to 40 at the end of our fiscal year ended June 30, 2019, of which 34 were direct sales, and 49 at the end of Q1 FY 2019 of which 41 were direct sales. Institutional revenue increased 49.2% to $650,000 from $206,000 in Q1 FY 2019. During Q1 FY 2020 the Company began selling to home medical equipment distributors who in turn sell our SmartVest System in the U.S. home care market. Revenue from home care distributors totaled $120,000 during Q1 FY 2020.
Gross profit increased 14.4% to $6.3 million, or 76.4% of net revenue, from $5.5 million, or 76.2% of net revenue, in Q1 FY 2019. The increase in gross profit resulted primarily from an increase in home care revenue. The increase in gross profit as a percentage of net revenue was driven by a higher average allowable based on payer mix compared to the same period of the prior year.
Operating expenses, which include selling, general and administrative (“SG&A”) as well as research and development (“R&D”) expenses, totaled $5.0 million, or 60.1% of net revenue, compared with $5.3 million, or 73.4% of net revenue, in Q1 FY 2019. SG&A expenses decreased by $378,000 to $4.9 million from $5.3 million in Q1 FY 2019, primarily reflecting lower payroll and compensation expenses due to a lower number of employees in sales and administrative roles, lower professional fees and lower expenses for travel, meals and entertainment. As a percentage of revenue, SG&A expenses improved to 59.0% compared to 72.5% in the same period in the prior year, reflecting open positions in sales and administrative rolls and ongoing cost-containment efforts. R&D expenses increased to $99,000, from $68,000 in Q1 FY 2019.
Operating income totaled $1.3 million, compared to $0.2 million in Q1 FY 2019.
Net income before income taxes totaled $1.4 million compared to $0.2 million in Q1 FY 2019.
Net income equaled $1.0 million, or $0.12 per diluted share, compared to $0.2 million, or $0.02 per diluted share, in Q1 FY 2019. In Q1 FY 2020, income tax expense totaled $374,000, compared to $58,000 in the same period of the prior year.
Financial Condition
The Company’s balance sheet at September 30, 2019 included cash of $8.0 million, no debt, working capital of $21.8 million, and shareholders’ equity of $27.0 million.
Conference Call
Management will host a conference call on November 13, 2019 at 8:00 am CT (9:00 am ET) to discuss Q1 FY 2020 financial results and other matters.
Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic)
- (201) 493-6739 (International)
The conference call will also be accessible via the following link:
https://78449.themediaframe.com/dataconf/productusers/elctr/mediaframe/33229/indexl.html
For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of the Company’s web site at: http://investors.smartvest.com/
About Electromed, Inc.
Electromed, Inc. manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest® Airway Clearance System, to patients with compromised pulmonary function. The Company is headquartered in New Prague, Minnesota and was founded in 1992. Further information about the Company can be found at www.smartvest.com.
Cautionary Statements
Certain statements in this press release constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan” “potential,” “should,” “will,” and similar expressions, including the negative of these terms, but they are not the exclusive means of identifying such statements. Forward-looking statements cannot be guaranteed, and actual results may vary materially due to the uncertainties and risks, known or unknown associated with such statements. Examples of risks and uncertainties for the Company include, but are not limited to the competitive nature of our market; changes to Medicare, Medicaid, or private insurance reimbursement policies; changes to state and federal health care laws; changes affecting the medical device industry; our ability to develop new sales channels for our products such as the homecare distributor channel; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; new drug or pharmaceutical discoveries; general economic and business conditions; our ability to renew our line of credit or obtain additional credit as necessary; our ability to protect and expand our intellectual property portfolio; the risks associated with expansion into international markets, as well as other factors described from time to time in the Company’s reports filed with the Securities and Exchange Commission (including the Company’s most recent Annual Report on Form 10-K, as amended from time to time, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K). Investors should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making investment decisions. Shareholders and other readers should not place undue reliance on “forward-looking statements,” as such statements speak only as of the date of this release.
Electromed, Inc. Condensed Balance Sheets |
|||||
September 30, 2019 |
June 30, 2019 |
||||
(Unaudited) |
|||||
| Assets | |||||
| Current Assets | |||||
| Cash | $ |
8,034,530 |
$ |
7,807,928 |
|
| Accounts receivable (net of allowances for doubtful accounts of $45,000) |
|
12,718,743 |
|
12,760,042 |
|
| Contract assets |
|
1,007,813 |
|
995,847 |
|
| Inventories |
|
2,745,557 |
|
2,622,000 |
|
| Prepaid expenses and other current assets |
|
476,137 |
|
353,214 |
|
| Income taxes receivable |
|
50,489 |
|
- |
|
| Total current assets |
|
25,033,269 |
|
24,539,031 |
|
| Property and equipment, net |
|
3,944,164 |
|
3,604,744 |
|
| Finite-life intangible assets, net |
|
562,157 |
|
581,413 |
|
| Other assets |
|
137,716 |
|
45,044 |
|
| Deferred income taxes |
|
626,000 |
|
629,000 |
|
| Total assets | $ |
30,303,306 |
$ |
29,399,232 |
|
| Liabilities and Shareholders’ Equity | |||||
| Current Liabilities | |||||
| Current maturities of other long-term liabilities | $ |
82,696 |
$ |
30,320 |
|
| Accounts payable |
|
1,046,149 |
|
586,575 |
|
| Accrued compensation |
|
1,100,594 |
|
1,404,662 |
|
| Income taxes payable |
|
- |
|
288,511 |
|
| Warranty reserve |
|
800,000 |
|
810,000 |
|
| Other accrued liabilities |
|
247,074 |
|
530,453 |
|
| Total current liabilities |
|
3,276,513 |
|
3,650,521 |
|
| Other long-term liabilities |
|
55,269 |
|
14,737 |
|
| Total liabilities |
|
3,331,782 |
|
3,665,258 |
|
| Commitments and Contingencies | |||||
| Shareholders' Equity | |||||
| Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,445,851 and 8,408,351 issued and outstanding at September 30, 2019 and June 30, 2019, respectively |
|
84,459 |
|
84,084 |
|
| Additional paid-in capital |
|
16,350,445 |
|
16,127,826 |
|
| Retained earnings |
|
10,536,620 |
|
9,522,064 |
|
| Total shareholders’ equity |
|
26,971,524 |
|
25,733,974 |
|
| Total liabilities and shareholders’ equity | $ |
30,303,306 |
$ |
29,399,232 |
|
Electromed, Inc. Condensed Statements of Operations (Unaudited) |
|||||
For the Three Months Ended
|
|||||
2019 |
2018 |
||||
| Net revenues | $ |
8,302,498 |
$ |
7,275,883 |
|
| Cost of revenues |
|
1,960,150 |
|
1,732,999 |
|
| Gross profit |
|
6,342,348 |
|
5,542,884 |
|
| Operating expenses | |||||
| Selling, general and administrative |
|
4,894,806 |
|
5,272,985 |
|
| Research and development |
|
98,937 |
|
68,190 |
|
| Total operating expenses |
|
4,993,743 |
|
5,341,175 |
|
| Operating income |
|
1,348,605 |
|
201,709 |
|
| Interest income, net |
|
39,951 |
|
13,452 |
|
| Net income before income taxes |
|
1,388,556 |
|
215,161 |
|
| Income tax expense |
|
374,000 |
|
58,000 |
|
| Net income | $ |
1,014,556 |
$ |
157,161 |
|
| Income per share: | |||||
| Basic | $ |
0.12 |
$ |
0.02 |
|
| Diluted | $ |
0.12 |
$ |
0.02 |
|
| Weighted-average common shares outstanding: | |||||
| Basic |
|
8,379,505 |
|
8,260,131 |
|
| Diluted |
|
8,651,891 |
|
8,637,990 |
|
Electromed, Inc. Condensed Statements of Cash Flows (Unaudited) |
|||||||
Three Months Ended
|
|||||||
2019 |
2018 |
||||||
| Cash Flows From Operating Activities | |||||||
| Net income | $ |
1,014,556 |
|
$ |
157,161 |
|
|
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation |
|
150,938 |
|
|
164,856 |
|
|
| Amortization of finite-life intangible assets |
|
29,963 |
|
|
29,850 |
|
|
| Amortization of debt issuance costs |
|
- |
|
|
979 |
|
|
| Share-based compensation expense |
|
209,954 |
|
|
257,234 |
|
|
| Deferred income taxes |
|
3,000 |
|
|
(153,000 |
) |
|
| Loss on disposal of property and equipment |
|
975 |
|
|
- |
|
|
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable |
|
41,299 |
|
|
265,393 |
|
|
| Contract assets |
|
(11,966 |
) |
|
(59,493 |
) |
|
| Inventories |
|
(118,519 |
) |
|
(349,439 |
) |
|
| Prepaid expenses and other assets |
|
(102,147 |
) |
|
381,357 |
|
|
| Income tax receivable |
|
(50,489 |
) |
|
- |
|
|
| Income tax payable |
|
(288,511 |
) |
|
(240,750 |
) |
|
| Accounts payable and accrued liabilities |
|
(250,011 |
) |
|
(151,314 |
) |
|
| Net cash provided by operating activities |
|
629,042 |
|
|
302,834 |
|
|
| Cash Flows From Investing Activities | |||||||
| Expenditures for property and equipment |
|
(404,773 |
) |
|
(10,429 |
) |
|
| Expenditures for finite-life intangible assets |
|
(10,707 |
) |
|
(21,786 |
) |
|
| Net cash used in investing activities |
|
(415,480 |
) |
|
(32,215 |
) |
|
| Cash Flows From Financing Activities | |||||||
| Principal payments on long-term debt including capital lease obligations |
|
- |
|
|
(12,902 |
) |
|
| Proceeds from sales of common stock and warrant exercises |
|
13,040 |
|
|
33,568 |
|
|
| Net cash provided by financing activities |
|
13,040 |
|
|
20,666 |
|
|
| Net increase in cash |
|
226,602 |
|
|
291,285 |
|
|
| Cash | |||||||
| Beginning of period |
|
7,807,928 |
|
|
7,455,844 |
|
|
| End of period | $ |
8,034,530 |
|
$ |
7,747,129 |
|
|
