Operating Income Increased 180%
Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for
the three- and six-month periods ended December 31, 2015.
Net revenues for the second quarter of fiscal 2016 were $6.26 million, a
28.3% or $1.38 million increase, compared to the second quarter of
fiscal 2015. Growth in total net revenues was attributable to strong
results in the home care market in which revenue increased by 21.5%, or
$0.97 million, compared to the same period of fiscal 2015. Home care
sales, which accounted for nearly 88% of revenues, increased due to a
higher number of approvals, a higher conversion rate of referrals to
approvals, and a higher average selling price from third party payers,
such as insurance companies, Medicare and Medicaid, for the Company’s
SmartVest® products.
The Company reported net income of $1.07 million, or $0.13 per basic and
diluted share, for the second quarter of fiscal 2016, compared to $0.42
million, or $0.05 per basic and diluted share, for the same period of
fiscal 2015. The increase in net income was the result of increased
revenue and reductions in manufacturing costs year over year. During the
second quarter, the Company also released the full valuation allowance
on its net deferred tax assets, which positively affected net income by
$288,000.
Gross margins in the second quarter of fiscal 2016 were 78.2%, up from
69.7% in the second quarter of fiscal 2015. The increase in gross profit
percentage and gross profit dollars from $3.40 to $4.90 million resulted
from the increases in domestic home care revenue along with lower
manufacturing costs. Operating expenses, which include selling, general
and administrative as well as research and development expenses, in the
second quarter of fiscal 2016, were $3.65 million or 58.3% of revenue,
compared with $2.96 million or 60.5% of revenue in the same period of
the prior year. The increase was due to a combination of additional
employees in the Company’s sales and sales support departments,
additional expenses related to sales incentives and bonuses based on
higher revenue, consulting fees associated with information technology
(IT) improvements and outsourcing certain IT services.
Operating income increased 179.3% to $1.25 million in the second quarter
of fiscal 2016, compared with $0.45 million in the same period of fiscal
2015. Net income increased 152.5%, to $1.07 million in the second
quarter of fiscal 2016 driven by higher net revenues, the improved gross
margin and a lower than normalized tax rate of 13.0% in the second
quarter.
For the six months ended December 31, 2015, revenue increased 16.7%, to
$11.26 million, compared to the same period of fiscal 2015. Gross
margins were 77.8%, up from 69.4% in the same period of the prior year,
while net income increased to $1.41 million, or $0.17 per basic and
diluted share, compared to $0.80 million or $0.10 per basic and diluted
share in the same period of the prior year.
Commenting on the second quarter results, Kathleen Skarvan, President
and Chief Executive Officer of the Company said, “We are extremely
pleased with our second quarter results as we reported record quarterly
net revenues and earnings before tax. Home care sales continue to be
positively affected by the combination of higher quality referrals
generated by our sales force and strong performance by our reimbursement
organization in obtaining reimbursement for both current and older
referrals. Our strategy to build stronger synergy between our sales and
reimbursement teams is resulting in higher levels of customer service,
higher quality referrals and increased proficiency in processing
referrals. Our higher sales also were impacted by expanded payer
contracting across the United States.
“Our engineering and manufacturing teams continued to make progress in
lowering the costs of our key product which helped us to produce record
gross margins. Going forward, we will realize a positive impact to
operating profit with the recent Consolidated Appropriations Act, 2016
that included a two-year moratorium on the medical device excise tax
starting January 1, 2016. Our annualized expense, based on the first two
quarters of fiscal 2016, was $264,000. We believe we have raised the
range on the level of net revenues we can generate quarterly. This
should, in turn, result in stronger operating income as we expect our
revenues will grow more quickly than our expense base. We are
increasingly confident that the market for our SmartVest will continue
to grow, driven by an aging population, improved diagnostic procedures
and growing confidence that HFCWO is an effective therapy for patients
with compromised airway clearance.”
About Electromed, Inc.
Electromed, Inc. develops,
manufactures, markets, and sells innovative products that provide airway
clearance therapy, including the SmartVest® Airway Clearance
System and related products, to patients with compromised pulmonary
function with a commitment to excellence and compassionate service.
Further information about the Company can be found at www.electromed.com.
Cautionary Statements
Certain statements in this
release constitute forward-looking statements as defined in the U.S.
Private Securities Litigation Reform Act of 1995. Forward-looking
statements reflect 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 “anticipate,” “believe,”
“estimate,” “expect,” “will” and similar words. Forward-looking
statements in this release include estimated revenue trends, changes in
sales opportunities, planned expenses, referral quality and processing,
financial performance, profitability and market trends. 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 the Company
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 most recent Annual Report on Form
10-K, as amended from time to time, and subsequent reports on Form 10-Q
and 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.
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Electromed, Inc. Condensed Balance Sheets
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December 31, 2015
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June 30, 2015
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(Unaudited)
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Assets
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Current Assets
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Cash
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$
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4,528,580
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$
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3,598,240
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Accounts receivable (net of allowances for doubtful accounts of
$45,000)
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6,903,378
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6,518,816
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Inventories
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2,393,622
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2,072,108
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Prepaid expenses and other current assets
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341,507
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397,833
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Total current assets
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14,167,087
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12,586,997
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Property and equipment, net
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3,460,979
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3,635,516
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Finite-life intangible assets, net
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948,512
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999,842
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Other assets
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185,375
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182,699
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Deferred income taxes
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288,000
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-
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Total assets
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$
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19,049,953
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$
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17,405,054
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Liabilities and Shareholders’ Equity
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Current Liabilities
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Current maturities of long-term debt
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$
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48,774
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$
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48,749
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Accounts payable
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620,922
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538,518
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Accrued compensation
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836,322
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700,370
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Income tax payable
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77,124
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122,657
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Warranty reserve
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640,000
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660,000
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Other accrued liabilities
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207,287
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208,983
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Total current liabilities
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2,430,429
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2,279,277
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Long-term debt, less current maturities
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1,178,375
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1,202,446
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Total liabilities
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3,608,804
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3,481,723
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Commitments and Contingencies
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Equity
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Common stock, $0.01 par value; authorized: 13,000,000 shares;
8,187,112 and 8,133,857 issued and outstanding at December 31, 2015
and June 30, 2015, respectively
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81,871
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81,339
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Additional paid-in capital
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13,435,952
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13,327,320
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Retained earnings
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1,923,326
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514,672
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Total shareholders’ equity
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15,441,149
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13,923,331
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Total liabilities and shareholders’ equity
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$
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19,049,953
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$
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17,405,054
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Electromed, Inc. Condensed Statements of Operations
(Unaudited)
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For the Three Months Ended December 31,
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For the Six Months Ended December 31,
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2015
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2014
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2015
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2014
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Net revenues
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$
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6,262,106
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$
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4,881,723
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$
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11,263,295
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$
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9,652,262
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Cost of revenues
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1,363,509
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1,478,290
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2,505,268
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2,954,087
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Gross profit
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4,898,597
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3,403,433
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8,758,027
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6,698,175
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Operating expenses
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Selling, general and administrative
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3,591,934
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2,872,402
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6,824,653
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5,693,897
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Research and development
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|
57,090
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83,643
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|
98,634
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|
|
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158,909
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Total operating expenses
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3,649,024
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2,956,045
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6,923,287
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5,852,806
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Operating income
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1,249,573
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447,388
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1,834,740
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845,369
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Interest expense, net of interest income of $2,924, $461 $3,548 and
$1,673, respectively
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17,880
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24,677
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38,086
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45,129
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Net income before income taxes
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1,231,693
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422,711
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1,796,654
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800,240
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Income tax expense
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(164,000
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)
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-
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(388,000
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)
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-
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Net income
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$
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1,067,693
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$
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422,711
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$
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1,408,654
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$
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800,240
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Income per share:
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Basic
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$
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.13
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$
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.05
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$
|
.17
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$
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.10
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Diluted
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$
|
.13
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$
|
.05
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$
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.17
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$
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.10
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Weighted-average common shares outstanding:
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Basic
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8,133,857
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8,114,252
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8,133,857
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8,114,252
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Diluted
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8,195,389
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8,130,245
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|
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8,185,196
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|
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8,119,575
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Electromed, Inc. Condensed Statements of Cash Flows
(Unaudited)
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Six Months Ended December 31,
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2015
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2014
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Cash Flows From Operating Activities
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Net income
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$
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1,408,654
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$
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800,240
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation
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307,778
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308,525
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Amortization of finite-life intangible assets
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61,272
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61,654
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Amortization of debt issuance costs
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9,327
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|
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9,883
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Share-based compensation expense
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|
109,164
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|
|
|
38,511
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Deferred taxes
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|
(288,000
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)
|
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|
-
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Loss on disposal of property and equipment and intangibles assets
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24,965
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|
|
|
139,732
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Changes in operating assets and liabilities:
|
|
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|
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Accounts receivable
|
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(384,562
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)
|
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|
(141,593
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)
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Inventories
|
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|
(290,582
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)
|
|
|
1,004
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Prepaid expenses and other assets
|
|
|
57,843
|
|
|
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32,161
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Accounts payable and accrued liabilities
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|
151,127
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|
|
|
73,961
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Net cash provided by operating activities
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|
1,166,986
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|
|
1,324,078
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Cash Flows From Investing Activities
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Expenditures for property and equipment
|
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|
(181,290
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)
|
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|
(285,760
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)
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Expenditures for finite-life intangible assets
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|
(17,790
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)
|
|
|
(51,073
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)
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Net cash used in investing activities
|
|
|
(199,080
|
)
|
|
|
(336,833
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)
|
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Cash Flows From Financing Activities
|
|
|
|
|
Principal payments on long-term debt including capital lease
obligations
|
|
|
(24,046
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)
|
|
|
(22,789
|
)
|
Payment of deferred financing fees
|
|
|
(13,520
|
)
|
|
|
(14,797
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)
|
Net cash used in financing activities
|
|
|
(37,566
|
)
|
|
|
(37,586
|
)
|
Net increase in cash
|
|
|
930,340
|
|
|
|
949,659
|
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Cash
|
|
|
|
|
Beginning of period
|
|
|
3,598,240
|
|
|
|
1,502,702
|
|
End of period
|
|
$
|
4,528,580
|
|
|
$
|
2,452,361
|
|
|
|
|
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View source version on businesswire.com: http://www.businesswire.com/news/home/20160209006572/en/
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