Electromed, Inc. Announces Fiscal 2017 First Quarter Financial Results
-- Boosts R&D Investment to Develop Wireless Connectivity for the SmartVest® SQL® AirWay Clearance System
--
Electromed, Inc. (“Electromed” or “the Company”) (NYSE MKT: ELMD), a leader in innovative airway clearance technologies, today
announced financial results for its fiscal 2017 first quarter (“Q1 FY 2017”) ended September 30, 2016.
Q1 FY 2017 Highlights
- Net revenues increased 10.9% to $5.5 million from $5.0 million in Q1 FY 2016.
- Gross profit rose 12.1% to $4.3 million from $3.9 million in Q1 FY 2016.
- Investment in research and development increased to $351,000 from $42,000 in Q1 FY 2016.
- Operating income declined to $289,000 from $585,000 in Q1 FY 2016, primarily reflecting higher
investment in R&D and increased SG&A expense to support the growth of the business, partially offset by higher home care
revenues and lower cost of sales.
- Net income totaled $191,000, or $0.02 per diluted share, compared to $341,000, or $0.04 per diluted
share, in Q1 FY 2016.
- Commenced development of an innovative wireless connectivity and reporting solution to improve
therapy adherence; beta testing expected to begin in January 2017.
- Increased field sales staff to 31 at the end of Q1 FY 2017 from 29 at the end of Q1 FY 2016 to
further enhance growth.
Subsequent Events
- Introduced new color options for SmartVest® garments and SmartVest SQL® generators.
Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We are pleased to follow up a record FY 2016
revenue year with 10.9% growth in Q1 FY 2017 revenue, profitable operations, and a commitment to investing in our future growth in
the areas of personnel, product evolution, marketing, and efficiency improvements. Both revenue and referrals accelerated on a
month-to-month basis throughout Q1 FY 2017 and we ended September 2016 with the highest level of referrals in our history. While
quarterly revenue may fluctuate based on the referral mix of payers, among other factors, we believe that our ongoing efforts will
translate into continuing growth during FY 2017.”
Ms. Skarvan continued, “In Q1 FY 2017, we boosted investment in product innovation and personnel, reflecting our strong optimism
about the significant market opportunity for our SmartVest® Airway Clearance System in high frequency chest wall oscillation
(“HFCWO”) therapy. In late FY 2016, we commenced development of an exciting new wireless connectivity feature that we believe will
strengthen our patient and clinician partnerships, leading to greater therapy adherence and improved quality of life for
individuals with compromised pulmonary function. We expect to launch this solution prior to the end of FY 2017. In response to
patient feedback, in October 2016 we introduced new color options for our SmartVest garments and SmartVest SQL generators. We
believe that these advancements, combined with SmartVest’s light weight, quiet operation and ease-of-use, will promote greater
patient acceptance and satisfaction. We also continued to recruit, hire and train additional sales staff to increase awareness of
SmartVest’s advantages and further penetrate domestic regions, particularly in higher populated metropolitan areas.”
Development of Wireless Connectivity for the SmartVest SQL AirWay Clearance System
Electromed is developing the SmartVest SQL Airway Clearance System to include wireless connectivity for integration with
interactive dashboard applications to encourage patient engagement with HFCWO therapy and promote adherence to prescribed
treatment. The SmartVest System with wireless connectivity will allow data connection between physicians and patients with impaired
airway clearance, offering real-time visibility to HFCWO treatment information to better collaborate in making patient-centered
care decisions. Electromed will pilot the integrated SmartVest System the second half of fiscal year 2017, with planned expansion
prior to the end of the fiscal year.
Q1 FY 2017 Review
Net revenues in Q1 FY 2017 increased 10.9% to $5.5 million from $5.0 million in Q1 FY 2016, driven by strong results in the home
care market where revenue increased by 14.4%, or $0.6 million, compared to Q1 FY 2016. Home care sales increased primarily due to a
higher average rate of reimbursement per approval, an increase in referrals and an increase in approvals from third-party payers as
a result of continued improvements in our reimbursement operations.
Gross profit in Q1 FY 2017 rose 12.1% to $4.3 million from $3.9 million in Q1 FY 2016, driven by an increase in domestic home
care revenue, higher average selling price per unit, and a decrease in the Company’s manufacturing costs of the SmartVest SQL.
Gross margin in Q1 FY 2017 increased to 78.1% from 77.2% in Q1 FY 2016, primarily reflecting higher average selling price per unit
and a decrease in our manufacturing costs of the SmartVest SQL as compared to the prior fiscal year.
Operating expenses, which include selling, general and administrative (“SG&A”) as well as research and development
(“R&D”) expenses, totaled $4.0 million, or 72.8% of revenue, in Q1 FY 2017 compared with $3.3 million, or 65.5% of revenue, in
the same period of the prior year. SG&A expenses increased 14.1% to $3.7 million in Q1 FY 2017 from $3.2 million in Q1 FY 2016,
primarily due to higher payroll and compensation-related expenses, higher professional fees, and increased travel, meals and
entertainment expenses. R&D expenses increased to $351,000 in Q1 FY 2017 from $42,000 in Q1 FY 2016, primarily driven by
incremental investment in the Company’s wireless connectivity project.
Operating income in Q1 FY 2017 declined to $289,000 from $585,000 in Q1 FY 2016, reflecting higher operating expenses, which
were partially offset by higher revenue and gross profit.
Net income before income tax expense in Q1 FY 2017 was $272,000, compared to $565,000 in Q1 FY 2016. In Q1 FY 2017, the Company
reported income tax expense of $81,000, compared to $224,000 in the same period of the prior year.
The Company reported net income of $191,000, or $0.02 per basic and diluted share, in Q1 FY 2017, compared to $341,000, or $0.04
per basic and diluted share, in Q1 FY 2016.
Financial Condition
Electromed’s balance sheet at September 30, 2016 included cash and cash equivalents of $3.8 million, long-term debt of $1.1
million, working capital of $13.2 million, and stockholders’ equity of $16.7 million.
Conference Call
Management will host a conference call tomorrow at 8:00 am CT (9:00 am ET) to discuss Q1 FY 2017 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: http://www.investorcalendar.com/IC/CEPage.asp?ID=175358.
For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section
of Electromed’s web site at: http://www.smartvest.com/electromed/investor-relations/.
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 Electromed can be found at www.smartvest.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 and our sales force, product and service
innovations, 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 the Company’s industry and business, the effectiveness of the Company’s
sales and marketing and cost control initiatives, changes to reimbursement programs, as well as other factors described from time
to time in the Company’s reports to 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 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.
Financial Tables Follow:
| |
|
Electromed, Inc.
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
June 30,
2016
|
|
|
|
|
(Unaudited) |
|
|
| Assets |
|
|
|
|
|
|
| Current Assets |
|
|
|
|
|
|
| Cash |
|
|
|
$ |
3,824,012 |
|
$ |
|
|
5,123,355 |
| Accounts receivable (net of allowances for doubtful accounts of $45,000) |
|
|
|
|
8,043,565 |
|
|
|
|
7,611,437 |
| Inventories |
|
|
|
|
2,606,134 |
|
|
|
|
2,480,443 |
| Prepaid expenses and other current assets |
|
|
|
|
497,412 |
|
|
|
|
412,856 |
| Income tax receivable |
|
|
|
|
134,396 |
|
|
|
|
192,685 |
| Total current assets |
|
|
|
|
15,105,519 |
|
|
|
|
15,820,776 |
| Property and equipment, net |
|
|
|
|
3,243,775 |
|
|
|
|
3,375,189 |
| Finite-life intangible assets, net |
|
|
|
|
894,853 |
|
|
|
|
904,033 |
| Other assets |
|
|
|
|
117,372 |
|
|
|
|
134,519 |
| Deferred income taxes |
|
|
|
|
343,000 |
|
|
|
|
343,000 |
| Total assets |
|
|
|
$ |
19,704,519 |
|
$ |
|
|
20,577,517 |
|
|
|
|
|
|
|
| Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
| Current maturities of long-term debt |
|
|
|
$ |
44,961 |
|
$ |
|
|
46,309 |
| Accounts payable |
|
|
|
|
425,015 |
|
|
|
|
589,225 |
| Accrued compensation |
|
|
|
|
523,876 |
|
|
|
|
1,489,798 |
| Warranty reserve |
|
|
|
|
660,000 |
|
|
|
|
660,000 |
| Other accrued liabilities |
|
|
|
|
255,502 |
|
|
|
|
287,194 |
| Total current liabilities |
|
|
|
|
1,909,354 |
|
|
|
|
3,072,526 |
| Long-term debt, less current maturities and net of debt issuance costs |
|
|
|
|
1,136,189 |
|
|
|
|
1,146,395 |
| Total liabilities |
|
|
|
|
3,045,543 |
|
|
|
|
4,218,921 |
|
|
|
|
|
|
|
| Commitments and Contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Equity |
|
|
|
|
|
|
| Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,217,112 and 8,187,112
issued and outstanding at September 30, 2016 and June 30, 2016, respectively |
|
|
|
|
82,171 |
|
|
|
|
81,871 |
| Additional paid-in capital |
|
|
|
|
13,658,459 |
|
|
|
|
13,549,551 |
| Retained earnings |
|
|
|
|
2,918,346 |
|
|
|
|
2,727,174 |
| Total shareholders’ equity |
|
|
|
|
16,658,976 |
|
|
|
|
16,358,596 |
| Total liabilities and shareholders’ equity |
|
|
|
$ |
19,704,519 |
|
$ |
|
|
20,577,517 |
|
|
|
|
|
|
|
|
|
|
|
| |
|
Electromed, Inc.
Condensed Statements of Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
2016 |
|
2015 |
| Net revenues |
|
|
|
|
$ |
5,545,363 |
|
|
$ |
5,001,188 |
|
| Cost of revenues |
|
|
|
|
|
1,217,736 |
|
|
|
1,141,758 |
|
| Gross profit |
|
|
|
|
|
4,327,627 |
|
|
|
3,859,430 |
|
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
| Selling, general and administrative |
|
|
|
|
|
3,687,908 |
|
|
|
3,232,719 |
|
| Research and development |
|
|
|
|
|
350,840 |
|
|
|
41,543 |
|
| Total operating expenses |
|
|
|
|
|
4,038,748 |
|
|
|
3,274,262 |
|
| Operating income |
|
|
|
|
|
288,879 |
|
|
|
585,168 |
|
|
|
|
|
|
|
|
|
| Interest expense, net of interest income of $3,366 and $624 respectively |
|
|
|
|
|
16,707 |
|
|
|
20,206 |
|
| Net income before income taxes |
|
|
|
|
|
272,172 |
|
|
|
564,962 |
|
|
|
|
|
|
|
|
|
| Income tax expense |
|
|
|
|
|
(81,000 |
) |
|
|
(224,000 |
) |
| Net income |
|
|
|
|
$ |
191,172 |
|
|
$ |
340,962 |
|
|
|
|
|
|
|
|
|
| Income per share: |
|
|
|
|
|
|
|
| Basic |
|
|
|
|
$ |
0.02 |
|
|
$ |
0.04 |
|
| Diluted |
|
|
|
|
$ |
0.02 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
| Basic |
|
|
|
|
|
8,167,112 |
|
|
|
8,133,857 |
|
| Diluted |
|
|
|
|
|
8,452,780 |
|
|
|
8,173,684 |
|
|
|
|
|
|
|
|
|
| |
|
Electromed, Inc.
Condensed Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
2016 |
|
2015 |
| Cash Flows From Operating Activities |
|
|
|
|
|
|
| Net income |
|
|
|
$ |
191,172 |
|
|
$ |
340,962 |
|
| Adjustments to reconcile net income to net cash provided (used) by operating
activities: |
|
|
|
|
|
|
| Depreciation |
|
|
|
|
155,781 |
|
|
|
154,849 |
|
| Amortization of finite-life intangible assets |
|
|
|
|
30,674 |
|
|
|
30,674 |
|
| Amortization of debt issuance costs |
|
|
|
|
4,344 |
|
|
|
4,664 |
|
| Share-based compensation expense |
|
|
|
|
109,208 |
|
|
|
39,149 |
|
| Loss on disposal of property and equipment and intangible assets |
|
|
|
|
- |
|
|
|
24,965 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
| Accounts receivable |
|
|
|
|
(432,128 |
) |
|
|
61,514 |
|
| Inventories |
|
|
|
|
(100,596 |
) |
|
|
(67,144 |
) |
| Prepaid expenses and other assets |
|
|
|
|
(12,500 |
) |
|
|
(106,930 |
) |
| Accounts payable and accrued liabilities |
|
|
|
|
(1,161,824 |
) |
|
|
(171,273 |
) |
| Net cash provided (used) by operating activities |
|
|
|
|
(1,215,869 |
) |
|
|
311,430 |
|
|
|
|
|
|
|
|
| Cash Flows From Investing Activities |
|
|
|
|
|
|
| Expenditures for property and equipment |
|
|
|
|
(49,462 |
) |
|
|
(101,006 |
) |
| Expenditures for finite-life intangible assets |
|
|
|
|
(21,494 |
) |
|
|
(13,829 |
) |
| Net cash used in investing activities |
|
|
|
|
(70,956 |
) |
|
|
(114,835 |
) |
|
|
|
|
|
|
|
| Cash Flows From Financing Activities |
|
|
|
|
|
|
| Principal payments on long-term debt including capital lease obligations |
|
|
|
|
(12,518 |
) |
|
|
(11,858 |
) |
|
Net increase (decrease) in cash
|
|
|
|
|
(1,299,343 |
) |
|
|
184,737 |
|
| Cash |
|
|
|
|
|
|
| Beginning of period |
|
|
|
|
5,123,355 |
|
|
|
3,598,240 |
|
| End of period |
|
|
|
$ |
3,824,012 |
|
|
$ |
3,782,977 |
|
|
|
|
|
|
|
|
Electromed, Inc.
Jeremy Brock, 952-758-9299
Chief Financial Officer
investorrelations@electromed.com
or
The Equity Group Inc.
Kalle Ahl, CFA, 212-836-9614
kahl@equityny.com
or
Devin Sullivan, 212-836-9608
dsullivan@equityny.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20161108006010/en/