Electromed, Inc. Announces Fiscal 2019 Second Quarter Financial Results
Electromed, Inc. (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced financial results for the three months ended December 31, 2018 (Q2 FY 2019).
Electromed, Inc. (NYSE American: ELMD), a leader in innovative airway
clearance technologies, today announced financial results for the three
months ended December 31, 2018 (Q2 FY 2019).
Q2 FY 2019 Highlights
-
Net revenue increased 15.1% to $8.0 million from $7.0 million during
the three months ended December 31, 2017 (Q2 FY 2018). -
Gross profit rose 12.2% to $6.1 million from $5.4 million in Q2 FY
2018. -
Operating income declined to $672,000, from $771,000 in Q2 FY 2018,
reflecting a $181,000 increase in research and development (R&D)
spending to support a new product feature. -
Net income equaled $378,000, or $0.04 per diluted share, compared to
$420,000, or $0.05 per diluted share, in Q2 FY 2018. -
Cash flow from operating activities totaled $518,000, compared to $1.2
million in Q2 FY 2018. Cash flow from operating activities in Q2 FY
2018 included approximately $563,000 from Medicare related to a
settlement of older claims that were in appeals. -
Field sales employees grew to 52 at the end of Q2 FY 2019 from 43 at
the end of Q2 FY 2018.
Kathleen Skarvan, President and Chief Executive Officer of Electromed,
commented, “We achieved more referrals and approvals compared to the
same quarter in the prior year, reflecting our expanded sales force,
ongoing excellence in our reimbursement operations and continuing
efforts to advance physician awareness and education surrounding the
benefits of high frequency chest wall oscillation therapy (HFCWO) with
our SmartVest® device. In our institutional market, we achieved another
quarter of strong revenue growth, driven primarily by our strategic
focus on integrated delivery networks.”
Q2 FY 2019 Review
Net revenue increased 15.1% to $8.0 million, from $7.0 million in Q2 FY
2018, primarily driven by higher home care revenue. Home care revenue
rose 13.0% to $7.3 million from $6.5 million in Q2 FY 2018, primarily
due to growth in referrals and approvals driven by a larger field sales
staff and continued improvements in the company’s reimbursement
operations that led to a greater referral to approval percentage.
Gross profit increased 12.2% to $6.1 million, or 75.7% of net revenue,
from $5.4 million, or 77.6% of net revenue, in Q2 FY 2018. The increase
in gross profit resulted primarily from an increase in home care
revenue. The decrease in gross profit as a percentage of net revenue was
driven by a lower selling price per device in the company’s
institutional market.
Operating expenses, which include selling, general and administrative
(SG&A) as well as R&D expenses, totaled $5.4 million, or 67.3% of net
revenue, compared with $4.6 million, or 66.5% of net revenue, in the
same period of the prior year. SG&A expenses increased 12.6% to $5.2
million, from $4.6 million in Q2 FY 2018, primarily due to higher
payroll and compensation-related expenses and increased travel, meals
and entertainment expenses, which were driven by the expansion of our
sales team. As a percentage of revenue, SG&A expenses improved to 64.3%
compared to 65.7%, reflecting ongoing cost-containment efforts and
improvements in sales force productivity. R&D expenses increased to
$238,000, from $57,000 in Q2 FY 2018, due to work on an innovative
product feature designed to improve patients’ access to treatment
adherence data.
Operating income totaled $672,000, compared to $771,000 in Q2 FY 2018.
Net income before income tax expense totaled $689,000 compared to
$766,000 in Q2 FY 2018.
Net income equaled $378,000, or $0.04 per diluted share, compared to
$420,000, or $0.05 per diluted share, in Q2 FY 2018. In Q2 FY 2019,
income tax expense totaled $311,000, compared to $346,000 in the same
period of the prior year.
“We remain dedicated to achieving double digit top-line growth and
expect improved bottom-line results over the next few years through
diligent execution of our growth strategy, enhanced sales force
productivity and tighter expense management,” Ms. Skarvan added. “Our
sales team is hyper-focused on strategic accounts and visit frequency
within each of our territories to drive further market share gains.
Moreover, we are intensifying our efforts to secure home care referrals
from hospitals, which have powerful economic incentives to prescribe
SmartVest at the time patients are discharged to avoid costly
readmission penalties under the Affordable Care Act. With continued
progress in these areas, we see a tremendous opportunity to gain share
in the large and growing bronchiectasis market.”
Year-to-Date FY 2019 Summary
For the six months ended December 31, 2018, revenue grew 15.2% to $15.3
million, from $13.3 million in the same period of fiscal 2018, driven by
a 13.3% increase in home care revenue. Gross margins were 75.9%,
compared to 76.1% in the prior fiscal year, while net income was
approximately $532,000, or $0.06 per diluted share, compared to
approximately $501,000, or $0.06 per diluted share, in the first six
months of fiscal 2018.
Financial Condition
The Company’s balance sheet at December 31, 2018 included cash of $7.2
million, compared to $6.8 million at the same time a year earlier,
working capital of $19.9 million, and shareholders’ equity of $23.8
million. During the quarter, the Company utilized cash to repay the
required balloon payment of approximately $1,085,000 to satisfy the
balance of our term debt. As a result of this payment, the Company now
has no long-term debt.
Conference Call
Management will host a conference call on February 13, 2019 at 8:00 am
CT (9:00 am ET) to discuss Q2 FY 2019 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/28686/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 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 “believe,” “estimate,” “expect,” “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; risks
associated with expansion into international markets; changes to
Medicare, Medicaid, or private insurance reimbursement policies; new
drug or pharmaceutical discoveries; changes to health care laws; changes
affecting the medical device industry; our need to maintain regulatory
compliance and to gain future regulatory approvals and clearances; our
ability to protect and expand our intellectual property portfolio; our
ability to renew our line of credit or obtain additional credit as
necessary; our ability to develop new sales channels for our product;
and general economic and business conditions, as well as other factors
described from time to time in our 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.
|
Electromed, Inc. Condensed Balance Sheets |
|||||||
| December 31, 2018 | June 30, 2018 | ||||||
| Assets | |||||||
| Current Assets | |||||||
| Cash | $ | 7,211,122 | $ | 7,455,844 | |||
|
Accounts receivable (net of allowances for doubtful accounts of $45,000) |
11,937,466 | 11,811,308 | |||||
| Contract assets | 781,806 | 776,338 | |||||
| Inventories | 2,735,934 | 2,486,848 | |||||
| Prepaid expenses and other current assets | 329,327 | 751,541 | |||||
| Income tax receivable | 24,860 | - | |||||
| Total current assets | 23,020,515 | 23,281,879 | |||||
| Property and equipment, net | 2,875,807 | 3,091,242 | |||||
| Finite-life intangible assets, net | 618,034 | 649,103 | |||||
| Other assets | 6,257 | 5,907 | |||||
| Deferred income taxes | 361,000 | 364,000 | |||||
| Total assets | $ | 26,881,613 | $ | 27,392,131 | |||
| Liabilities and Shareholders’ Equity | |||||||
| Current Liabilities | |||||||
| Current maturities of long-term debt | $ | - | $ | 1,101,043 | |||
| Accounts payable | 713,097 | 810,644 | |||||
| Accrued compensation | 1,195,479 | 1,269,849 | |||||
| Income taxes payable | - | 397,390 | |||||
| Warranty reserve | 790,000 | 760,000 | |||||
| Other accrued liabilities | 372,494 | 464,357 | |||||
| Total current liabilities | 3,071,070 | 4,803,283 | |||||
| Commitments and Contingencies | |||||||
| Shareholders' Equity | |||||||
|
Common stock, $0.01 par value; authorized: 13,000,000 shares;
issued and outstanding at December 31, 2018 and June 30, 2018, |
83,842 | 82,887 | |||||
| Additional paid-in capital | 15,641,714 | 14,953,103 | |||||
| Retained earnings | 8,084,987 | 7,552,858 | |||||
| Total shareholders’ equity | 23,810,543 | 22,588,848 | |||||
| Total liabilities and shareholders’ equity | $ | 26,881,613 | $ | 27,392,131 | |||
|
Electromed, Inc. Condensed Statements of Operations |
||||||||||||||
|
For the Three Months Ended December 31, |
For the Six Months Ended December 31, |
|||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||
| Net revenues | $ | 8,012,487 | $ | 6,963,044 | $ | 15,288,370 | $ | 13,267,366 | ||||||
| Cost of revenues | 1,950,040 | 1,560,427 | 3,683,039 | 3,174,032 | ||||||||||
| Gross profit | 6,062,447 | 5,402,617 | 11,605,331 | 10,093,334 | ||||||||||
| Operating expenses | ||||||||||||||
| Selling, general and administrative | 5,152,394 | 4,575,172 | 10,428,148 | 9,096,076 | ||||||||||
| Research and development | 237,838 | 56,794 | 306,028 | 127,458 | ||||||||||
| Total operating expenses | 5,390,232 | 4,631,966 | 10,734,176 | 9,223,534 | ||||||||||
| Operating income | 672,215 | 770,651 | 871,155 | 869,800 | ||||||||||
| Interest income (expense), net | 16,521 | (4,894 | ) | 29,974 | (9,093 | ) | ||||||||
| Net income before income taxes | 688,736 | 765,757 | 901,129 | 860,707 | ||||||||||
| Income tax expense | 311,000 | 346,000 | 369,000 | 360,000 | ||||||||||
| Net income | $ | 377,736 | $ | 419,757 | $ | 532,129 | $ | 500,707 | ||||||
| Income per share: | ||||||||||||||
| Basic | $ | 0.05 | $ | 0.05 | $ | 0.06 | $ | 0.06 | ||||||
| Diluted | $ | 0.04 | $ | 0.05 | $ | 0.06 | $ | 0.06 | ||||||
| Weighted-average common shares outstanding: | ||||||||||||||
| Basic | 8,298,961 | 8,200,167 | 8,279,493 | 8,200,167 | ||||||||||
| Diluted | 8,669,739 | 8,648,886 | 8,658,346 | 8,645,987 | ||||||||||
|
Electromed, Inc. Condensed Statements of Cash Flows |
|||||||
| Six Months Ended December 31, | |||||||
| 2018 | 2017 | ||||||
| Cash Flows From Operating Activities | |||||||
| Net income | $ | 532,129 | $ | 500,707 | |||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||
| Depreciation | $ | 329,947 | $ | 329,719 | |||
| Amortization of finite-life intangible assets | $ | 59,863 | $ | 56,610 | |||
| Amortization of debt issuance costs | $ | 1,958 | $ | 4,394 | |||
| Share-based compensation expense | $ | 500,745 | $ | 386,248 | |||
| Deferred taxes | $ | 3,000 | $ | (50,000 | ) | ||
| Loss on disposal of property and equipment | $ | 1,198 | $ | - | |||
| Changes in operating assets and liabilities: | |||||||
|
Accounts receivable |
$ | (126,158 | ) | $ | 347,190 | ||
| Contract assets | $ | (5,468 | ) | $ | 7,356 | ||
| Inventories | $ | (242,459 | ) | $ | 169,723 | ||
| Prepaid expenses and other assets | $ | 421,864 | $ | 4,074 | |||
| Income tax receivable | $ | (24,860 | ) | $ | - | ||
|
Income tax payable |
$ | (397,390 | ) | $ | (72,414 | ) | |
| Accounts payable and accrued liabilities | $ | (233,780 | ) | $ | (153,824 | ) | |
| Net cash provided by operating activities | $ | 820,589 | $ | 1,529,783 | |||
| Cash Flows From Investing Activities | |||||||
| Expenditures for property and equipment | $ | (122,337 | ) | $ | (228,176 | ) | |
| Expenditures for finite-life intangible assets | $ | (28,794 | ) | $ | (10,038 | ) | |
| Net cash used in investing activities | $ | (151,131 | ) | $ | (238,214 | ) | |
| Cash Flows From Financing Activities | |||||||
|
Principal payments on long-term debt including capital lease obligations |
$ | (1,103,001 | ) | $ | (25,041 | ) | |
| Issuance of common stock upon exercise of options | $ | 188,821 | $ | - | |||
| Net cash used in financing activities | $ | (914,180 | ) | $ | (25,041 | ) | |
| Net (decrease) increase in cash | $ | (244,722 | ) | $ | 1,266,528 | ||
| Cash | |||||||
| Beginning of period | $ | 7,455,844 | $ | 5,573,709 | |||
| End of period | $ | 7,211,122 | $ | 6,840,237 | |||
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