Attached files

file filename
8-K - DATED 2-13-2018 - Electromed, Inc.elmd180330_8k.htm

 

Exhibit 99.1

 

(ELECTROMED.INC LOGO)

 

FOR IMMEDIATE RELEASE

 

Electromed, Inc. Announces Fiscal 2018 Second Quarter Financial Results

 

-- 18.2% year-over-year increase in home care revenue --

 

New Prague, Minnesota – February 13, 2018 – 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 December 31, 2017 (“Q2 FY 2018”).

 

Q2 FY 2018 Highlights

 

Net revenue increased 9.6% to $7.0 million from $6.4 million during the three months ended December 31, 2016 (“Q2 FY 2017”), driven by an 18.2% year-over-year increase in home care revenue.

 

Gross profit rose 13.4% to $5.6 million from $4.9 million in Q2 FY 2017.

 

Selling, general and administrative expenses increased 16.2% to $4.8 million, from $4.1 million in Q2 FY 2017, primarily reflecting the hiring of new employees to support revenue growth initiatives.

 

Operating income grew 5.6% to $770,000, from $729,000 in Q2 FY 2017.

 

Net income equaled $349,000, or $0.04 per diluted share, compared to $444,000, or $0.05 per diluted share, in Q2 FY 2017.

 

Net income for Q2 FY 2018 included a non-recurring discrete deferred tax expense of $160,000 related to the Tax Cuts and Jobs Act (“the Tax Act”). On a go-forward basis, the Tax Act reduces the statutory corporate federal tax rate from 34% to 21%, effective January 1, 2018, and is estimated to benefit the Company’s after-tax net income by approximately 13% beginning in fiscal 2018, as well as positively impact earnings per share and cash flow.

 

Cash flow from operations totaled $1.2 million, compared to $1.3 million in Q2 FY 2017.

 

Field sales employees grew to 43 at the end of Q2 FY 2018 from 35 at the end of Q2 FY 2017.

 

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We grew home care revenue by 18.2% year-over-year while increasing investments in marketing and sales initiatives to address the large and underpenetrated bronchiectasis market. We also significantly grew the footprint of clinics using our innovative SmartVest Connect™ wireless connectivity solution and continue to receive positive feedback from physicians and patients on its intuitive design. SmartVest’s® patient therapy monitoring, ease-of-use and comfort, combined with our dedication to customer service, underpin Electromed’s continued progress this quarter.”

 

Ms. Skarvan continued, “Having completed most of our direct sales expansion for the fiscal year, with the number of field sales employees up more than 20% compared to the end of Q2 FY 2017, our near-term growth strategies are focused on improving sales force productivity, amplifying our direct-to-patient marketing and expanding the body of clinical evidence supporting SmartVest® benefits for bronchiectasis patients. We continue to manage the business for long-term growth, while remaining focused on profitability and positive cash flow short term. Year-over-year revenue growth in the second half of fiscal 2018 is estimated to be in line with fiscal 2017 growth levels. We remain confident in the growth opportunity for SmartVest® and excited about our direction, as we strive to improve quality of life and outcomes for an expanding number of patients with compromised pulmonary function.”

 

 

 

 

Q2 FY 2018 Review

 

Net revenue increased 9.6% to $7.0 million in Q2 FY 2018 from $6.4 million in Q2 FY 2017, driven by higher home care revenue. Home care revenue rose 18.2% to $6.5 million in Q2 FY 2018 from $5.5 million in Q2 FY 2017. This increase was primarily due to growth in approvals as a result of continued improvements in the Company’s reimbursement operations, which led to a greater referral to approval percentage as compared to the prior year.

 

Gross profit increased 13.4% to $5.6 million, or 80.0% of net revenue, in Q2 FY 2018 from $4.9 million, or 77.3% of net revenue, in Q2 FY 2017. The increase in gross profit resulted primarily from an increase in home care revenue.

 

Operating expenses, which include selling, general and administrative (“SG&A”) expenses as well as research and development (“R&D”) expenses, totaled $4.8 million, or 69.0% of net revenue, in Q2 FY 2018 compared with $4.2 million, or 65.9% of net revenue, in the same period of the prior year. SG&A expenses increased 16.2% to $4.8 million in Q2 FY 2018 from $4.1 million in Q2 FY 2017, primarily due to additional employees in sales, annual salary increases, higher share-based equity compensation expense, and additional sales incentives on higher revenue accruals. R&D expenses totaled $57,000 in Q2 FY 2018 compared to $101,000 in Q2 FY 2017.

 

Operating income increased 5.6% to $770,000 in Q2 FY 2018, from $729,000 in Q2 FY 2017, reflecting higher gross profit partially offset by higher SG&A expense.

 

Net income before income tax expense totaled $765,000 in Q2 FY 2018, compared to $714,000 in Q2 FY 2017.

 

Net income equaled $349,000, or $0.04 per diluted share, in Q2 FY 2018, compared to $444,000, or $0.05 per diluted share, in Q2 FY 2017. In Q2 FY 2018, income tax expense totaled $416,000, compared to $270,000 in the same period of the prior year.

 

Income tax expense during Q2 FY 2018 included a discrete deferred tax expense of $160,000 as a result of re-measuring certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future under the Tax Act that was enacted by the U.S. Government on December 22, 2017. On a go forward basis, the Act reduces the statutory corporate federal tax rate from 34% to 21%, effective January 1, 2018, and is estimated to benefit the Company’s after-tax net income, earnings per share and cash flow by approximately 13% beginning in 2018.

 

Year-to-Date FY 2018 Summary

 

For the six months ended December 31, 2017, revenue grew 12.2% to $13.4 million from $11.9 million in the same period of fiscal 2017, driven by a 17.4% increase in home care revenue. Gross margins were 78.7%, compared to 77.7% in the prior fiscal year, while net income was approximately $470,000, or $0.05 per diluted share, compared to approximately $635,000, or $0.08 per diluted share in fiscal 2017.

 

Financial Condition

 

Electromed’s balance sheet at December 31, 2017 included cash of $6.8 million, current maturities of long-term debt of $1.1 million, working capital of $15.5 million, and shareholders’ equity of $19.9 million.

 

 

 

 

Conference Call

 

Management will host a conference call on February 14, 2018 at 8:00 am CT (9:00 am ET) to discuss Q2 FY 2018 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/event/23177.

 

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.

 

Contacts:    
     
Electromed, Inc.   The Equity Group Inc.
Jeremy Brock, Chief Financial Officer   Kalle Ahl, CFA
(952) 758-9299   (212) 836-9614
investorrelations@electromed.com   kahl@equityny.com
     
    Devin Sullivan
    (212) 836-9608
    dsullivan@equityny.com

 

Financial Tables Follow:

 

 

 

 

Electromed, Inc.

Condensed Balance Sheets

 

   December 31, 2017   June 30, 2017 
   (Unaudited)      
Assets          
Current Assets          
Cash   $6,840,237   $5,573,709 
Accounts receivable (net of allowances for doubtful accounts of $45,000)    9,680,369    9,949,759 
Inventories    2,393,639    2,559,485 
Prepaid expenses and other current assets    379,713    393,319 
Total current assets    19,293,958    18,476,272 
Property and equipment, net    3,215,369    3,303,233 
Finite-life intangible assets, net    674,704    721,276 
Other assets    102,577    99,868 
Deferred income taxes    417,000    460,000 
Total assets   $23,703,608   $23,060,649 
           
Liabilities and Shareholders’ Equity          
Current Liabilities          
Current maturities of long-term debt, net of debt issuance costs   $1,124,745   $50,703 
Accounts payable    704,105    663,376 
Accrued compensation    835,907    946,623 
Income tax payable    84,110    156,524 
Warranty reserve    670,000    640,000 
Other accrued liabilities    360,538    438,748 
Total current liabilities    3,779,405    2,895,974 
Long-term debt, less current maturities and net of debt issuance costs        1,097,125 
Total liabilities    3,779,405    3,993,099 
           
Commitments and Contingencies          
           
Shareholders’ Equity          
Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,270,167 and 8,230,167 issued and outstanding at December 31, 2017 and June 30, 2017, respectively    82,702    82,302 
Additional paid-in capital    14,414,450    14,028,602 
Retained earnings    5,427,051    4,956,646 
Total shareholders’ equity    19,924,203    19,067,550 
Total liabilities and shareholders’ equity   $23,703,608   $23,060,649 

 

 

 

 

Electromed, Inc.

Condensed Statements of Operations

 

   For the Three Months Ended
December 31,
   For the Six Months Ended
December 31,
 
   2017   2016   2017   2016 
                 
Net revenues  $6,984,626   $6,372,243   $13,366,405   $11,917,606 
Cost of revenues   1,398,001    1,445,786    2,843,286    2,663,522 
Gross profit   5,586,625    4,926,457    10,523,119    9,254,084 
                     
Operating expenses                    
   Selling, general and administrative   4,759,652    4,096,197    9,463,163    7,784,107 
   Research and development   56,794    100,801    127,458    451,641 
Total operating expenses   4,816,446    4,196,998    9,590,621    8,235,748 
Operating income   770,179    729,459    932,498    1,018,336 
Interest expense, net of interest income of $8,888, $3,603, $18,517 and $6,969, respectively   4,894    15,598    9,093    32,304 
Net income before income taxes   765,285    713,861    923,405    986,032 
                     
Income tax expense   416,000    270,000    453,000    351,000 
    Net income  $349,285   $443,861   $470,405   $635,032 
                     
 Income per share:                    
Basic  $.04   $.05   $.06   $.08 
Diluted  $.04   $.05   $.05   $.08 
                     
Weighted-average common shares outstanding:                    
Basic   8,200,167    8,167,112    8,200,167    8,167,112 
Diluted   8,648,866    8,426,996    8,645,987    8,440,698 

 

 

 

 

Electromed, Inc.

Condensed Statements of Cash Flows

 

   Six Months Ended December 31, 
   2017   2016 
Cash Flows From Operating Activities          
Net income   $470,405   $635,032 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation    329,719    312,075 
Amortization of finite-life intangible assets    56,610    60,963 
Amortization of debt issuance costs    4,394    9,216 
Share-based compensation expense    386,248    234,634 
Deferred income taxes   43,000    13,000 
Loss on disposal of intangible assets       111,497 
Changes in operating assets and liabilities:          
Accounts receivable    269,390    (673,458)
Inventories    183,617    (53,894)
Prepaid expenses and other assets    8,461    7,046 
Income tax receivable        189,789 
Income tax payable    (72,414)    
Accounts payable and accrued liabilities    (149,647)   (807,188)
Net cash provided by operating activities    1,529,783    38,712 
           
Cash Flows From Investing Activities          
Expenditures for property and equipment    (228,176)   (267,117)
Expenditures for finite-life intangible assets    (10,038)   (44,518)
Net cash used in investing activities    (238,214)   (311,635)
           
Cash Flows From Financing Activities          
Principal payments on long-term debt including capital lease obligations
   (25,041)   (24,056)
Payment of deferred financing fees        (4,872)
Net cash used in financing activities    (25,041)   (28,928)
Net increase (decrease) in cash    1,266,528    (301,851)
Cash          
Beginning of period    5,573,709    5,123,355 
End of period   $6,840,237   $4,821,504 

 

###