Electromed, Inc. Reports Higher Second Quarter Revenues and Profits

Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for the three-and six-month periods ended December 31, 2014. Net revenues for the second quarter of fiscal 2015 rose approximately 40% to $4.9 million, compared to $3.5 million in the same quarter of fiscal 2014. The Company reported net income of $423,000, or $0.05 cents per basic and diluted share, for the second quarter of fiscal 2015, compared to a net loss of $239,000, or ($0.03) per basic and diluted share, for the same period of fiscal 2014.

Growth in total net revenues was attributable to strong results in the home care market where revenue increased by approximately 53%, or $1.5 million, compared to the same period of fiscal 2014. Home care sales increased due to a greater number of approvals from third party payers, such as insurance companies, Medicare and Medicaid, for the Company’s SmartVest™ products. International sales decreased by 73%, or $107,000, due primarily to the timing of orders placed by international distributors in the first quarter of fiscal 2015 rather than the second quarter of fiscal 2015. Institutional and government sales decreased 12%, or $54,000, compared to the second quarter of fiscal 2014.

Gross margins in the second quarter of fiscal 2015 were 69.7%, down from 72.1% in the second quarter of fiscal 2014. The decline was primarily due to an impairment charge of $107,000, taken on tools that became obsolete during the second quarter of fiscal 2015 as we implemented certain lower cost manufacturing processes that reduce the cost of producing the SmartVest SQL™. Over time, the Company expects to bring manufacturing costs for the SQL product roughly in line with previous products. Operating expenses, which include selling, general and administrative (SG&A) and research and development (R&D), declined to 61% of revenue compared with 81% of revenue in the second quarter of fiscal 2014. The decline resulted from the higher level of net revenues in the second quarter of fiscal 2015. Operating expenses rose slightly as a result of higher sales commission and bonus expenses due to higher revenue and profitability.

The Company generated $328,000 of cash flow from operations in the second quarter and finished the quarter with over $2.4 million of cash on hand.

For the first six months ended December 31, 2014, revenue increased 40%, to $9.7 million, compared to the same period of fiscal 2014. Gross margins were 69.4%, down from 70.5% in the second quarter of fiscal 2014, while net income increased to $800,000 or $0.10 per basic and diluted share compared to a net loss of $575,000 in the same period of the prior year.

Kathleen Skarvan, Electromed’s chief executive officer, commented, “I am pleased with the progress the Company continues to make as we reported our third consecutive profitable quarter. Revenue growth, gross margin and expense management were all solid in the second quarter. The market’s acceptance of the SmartVest SQL, which we introduced in early calendar 2014, continues to be good. We have made notable progress on bringing manufacturing costs down for SQL and there is additional progress we believe we can make as fiscal 2015 continues.

“Our reimbursement team deserves a good deal of credit as they have focused on obtaining reimbursement from insurers for referrals we received in past quarters. This has been an important source of revenue for the Company in the last several quarters and we have cleared a significant number of referrals that were awaiting approval for reimbursement. In order to maintain our revenue momentum, we will need to generate higher sustained levels of new referrals in coming quarters. To that end, our sales team and its leadership have been focused on both improving penetration at existing accounts as well as adding new accounts.”

About Electromed, Inc.
Electromed, Inc. manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest^® Airway Clearance System and related products, to patients with compromised pulmonary function. Further information about the Company can be found at www.electromed.com.

Cautionary Statements
Certain statements found in this release may constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the speaker’s current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact. Forward-looking statements can generally be identified by the words “believe,” “expect,” “anticipate” or “intend” or similar words. Forward-looking statements made in this release include the Company’s beliefs regarding continued progress in its reimbursement, revenue growth and cost control strategies. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known and unknown, associated with such statements. Examples of risks and uncertainties for Electromed include, but are not limited to, the impact of emerging and existing competitors, the effect of new legislation on our industry and business, the effectiveness of our sales and marketing and cost control initiatives, changes to reimbursement programs, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including our Annual Report on Form 10-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.