-- Fourth quarter results driven by 10.1%
year-over-year growth in home care revenue and operating margin
improvement to 17.3% --
Electromed, Inc. (NYSE American: ELMD), a leader in innovative
airway clearance technologies, today announced financial results
for the three months ended June 30, 2019 (Q4 FY 2019).
Q4 FY 2019 Highlights
- Net revenue increased 9.3% to $8.6 million from $7.9 million
during the three months ended June 30, 2018 (Q4 FY 2018).
- Operating income grew 17.5% to $1.5 million, from $1.3 million
in Q4 FY 2018, notwithstanding the recognition of a refund of a
medical device excise tax in the prior year quarter that increased
Q4 FY 2018 operating income by $406,000 and higher current year
depreciation and amortization expense of $117,000 due to our
decision to terminate a lease of office space, requiring us to
accelerate the leasehold amortization associated with the
property.
- Net income expanded 13.9% to $1.1 million, or $0.13 per diluted
share, from $1.0 million, or $0.11 per diluted share, in Q4 FY
2018.
- Cash flow from operating activities increased 148.6% to $1.4
million from $0.6 million in Q4 FY 2018.
FY 2019 Highlights
- Net revenue increased 10.6% to $31.3 million from $28.3 million
during the fiscal year ended June 30, 2018 (FY 2018).
- Operating income grew 6.5% to $2.9 million, from $2.7 million
in FY 2018, notwithstanding the recognition of a refund of a
medical device excise tax in the prior year that increased FY 2018
operating income by $406,000 and higher current year depreciation
and amortization expense of $151,000 due to our decision to
terminate a lease of office space, requiring us to accelerate the
leasehold amortization associated with the property.
Kathleen Skarvan, President and Chief Executive Officer of
Electromed, commented, “In the fourth quarter of fiscal 2019, we
delivered record revenue of $8.6 million, driven by a 10.1%
year-over-year increase in home care revenue. Moreover, we achieved
strong growth in operating income and cash flow from operating
activities, reflecting our continuing cost containment efforts and
the sales force restructuring we implemented in March 2019.
Regarding our emphasis on sales force productivity, this quarter we
produced approximately $908,000 of annualized home care revenue per
direct field sales employee, exceeding our target range of between
$750,000 and $850,000. While quarter to quarter fluctuations in our
business can be expected, in fiscal 2020 we are confident about
attaining target productivity levels and low double-digit revenue
growth.”
Ms. Skarvan continued, “Educating physicians on the value of
SmartVest® Airway Clearance therapy for bronchiectasis patients is
key to our growth. This quarter BMC Pulmonary Medicine published a
first-of-its-kind independent study that concluded early initiation
of therapy with SmartVest decreases severe exacerbations, reduces
antibiotic use and stabilizes lung function for bronchiectasis
patients. This study along with published outcomes studies in
Respiratory Therapy in 2016 and 2018 demonstrate the growing body
of clinical evidence supporting the use of our SmartVest® Airway
Clearance device as a standard of care among individuals with
non-Cystic Fibrosis Bronchiectasis. Guided by our patient-centric
mission of making life’s important moments possible, one breath at
a time, we aim to further penetrate the large and growing
bronchiectasis market.”
Q4 FY 2019 Review
Net revenue increased 9.3% to $8.6 million, from $7.9 million in
Q4 FY 2018, primarily driven by higher home care revenue. Home care
revenue rose 10.1% to $8.0 million from $7.3 million in Q4 FY 2018,
primarily due to a higher average allowable due to payor mix as
compared to the prior year and greater productivity from the
Company’s field sales staff. Field sales employees totaled 40, of
which 34 were direct sales, at the end of Q4 FY 2019, compared to
42 at the end of Q3 FY 2019, of which 36 were direct sales, and 50
at the end of Q4 FY 2018 of which 42 were direct sales.
Gross profit increased 8.1% to $6.7 million, or 77.5% of net
revenue, from $6.2 million, or 78.4% of net revenue, in Q4 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 our
institutional market.
Operating expenses, which include selling, general and
administrative (SG&A) as well as R&D expenses, totaled $5.2
million, or 60.2% of net revenue, compared with $4.9 million, or
62.3% of net revenue, in the same period of the prior year.
SG&A expenses increased by $212,000 to $5.1 million from $4.9
million in Q4 FY 2018. The prior year quarter benefited from a
refund of a medical device tax that reduced Q4 FY 2018 SG&A
expense by $406,000 while the current year included additional
depreciation and amortization of $117,000 due to terminating a
lease of office space, requiring us to accelerate the leasehold
amortization associated with the property. As a percentage of
revenue, SG&A expenses improved to 59.0% compared to 61.8%,
reflecting ongoing cost-containment efforts. R&D expenses
increased to $107,000, from $41,000 in Q4 FY 2018, due to work on
an innovative product feature designed to improve patients’ access
to treatment adherence data.
Operating income totaled $1.5 million, compared to $1.3 million
in Q4 FY 2018.
Net income before income tax expense totaled $1.5 million
compared to $1.3 million in Q4 FY 2018.
Net income equaled $1.1 million, or $0.13 per diluted share,
compared to $1.0 million, or $0.11 per diluted share, in Q4 FY
2018. In Q4 FY 2019, income tax expense totaled $432,000, compared
to $339,000 in the same period of the prior year.
FY 2019 Full Year
Summary
For the fiscal year ended June 30, 2019, revenue grew 10.6% to
$31.3 million, from $28.3 million in fiscal 2018, driven by a 10.3%
increase in home care revenue. Gross margins were 76.2%, compared
to 76.9% in the prior fiscal year, while net income was
approximately $2.0 million, or $0.23 per diluted share, compared to
approximately $1.8 million, or $0.21 per diluted share, in fiscal
2018.
Financial Condition
The Company’s balance sheet at June 30, 2019 included cash of
$7.8 million, no debt, working capital of $20.9 million, and
shareholders’ equity of $25.7 million.
Conference Call
Management will host a conference call on August 28, 2019 at
8:00 am CT (9:00 am ET) to discuss Q4 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/31950/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.
Financial Tables Follow:
Electromed, Inc.
Condensed Balance
Sheets
June 30, 2019 June 30, 2018
Assets Current Assets Cash
$
7,807,928
$
7,455,844
Accounts receivable (net of allowances for doubtful accounts of
$45,000)
12,760,042
11,811,308
Contract assets
995,847
776,338
Inventories
2,622,000
2,486,848
Prepaid expenses and other current assets
353,214
757,448
Total current assets
24,539,031
23,287,786
Property and equipment, net
3,604,744
3,091,242
Finite-life intangible assets, net
581,413
649,103
Deferred income taxes
629,000
364,000
Total assets
$
29,354,188
$
27,392,131
Liabilities and Shareholders’ Equity Current
Liabilities Current maturities of long-term debt
$
-
$
1,101,043
Accounts payable
586,575
810,644
Accrued compensation
1,404,662
1,269,849
Income taxes payable
288,511
397,390
Warranty reserve
810,000
760,000
Other accrued liabilities
530,454
464,357
Total current liabilities
3,620,202
4,803,283
Commitments and Contingencies Shareholders' Equity
Common stock, $0.01 par value; authorized:
13,000,000 shares; 8,408,351 and 8,288,659 issued and outstanding
at June 30, 2019 and June 30, 2018, respectively
84,084
82,887
Additional paid-in capital
16,127,826
14,953,103
Retained earnings
9,522,076
7,552,858
Total shareholders’ equity
25,733,986
22,588,848
Total liabilities and shareholders’ equity
$
29,354,188
$
27,392,131
Electromed, Inc.
Condensed Statements of
Operations
For the Three Months Ended
June 30,
For the Twelve Months Ended
June 30,
2019
2018
2019
2018
Net revenues
$
8,603,602
$
7,872,266
$
31,299,750
$
28,306,696
Cost of revenues
1,935,289
1,702,546
7,451,806
6,534,084
Gross profit
6,668,313
6,169,720
23,847,944
21,772,612
Operating expenses Selling, general and administrative
5,076,201
4,864,400
20,446,122
18,808,867
Research and development
106,526
40,641
583,311
251,443
Total operating expenses
5,182,727
4,905,041
21,029,433
19,060,310
Operating income
1,485,586
1,264,679
2,818,511
2,712,302
Interest income, net
33,358
28,296
90,707
19,871
Net income before income taxes
1,518,944
1,292,975
2,909,218
2,732,173
Income tax expense
432,000
339,000
940,000
901,000
Net income
$
1,086,944
$
953,975
$
1,969,218
$
1,831,173
Income per share: Basic
$
0.13
$
0.12
$
0.24
$
0.22
Diluted
$
0.13
$
0.11
$
0.23
$
0.21
Weighted-average common shares outstanding: Basic
8,341,684
8,221,437
8,306,338
8,207,365
Diluted
8,615,207
8,578,295
8,631,469
8,620,102
Electromed, Inc.
Condensed Statements of Cash
Flows
Twelve Months Ended June
30,
2019
2018
Cash Flows From Operating Activities Net income
$
1,969,218
$
1,831,173
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation
804,587
676,426
Amortization of finite-life intangible assets
120,640
113,601
Amortization of debt issuance costs
1,958
6,351
Share-based compensation expense
924,071
862,674
Deferred taxes
(265,000
)
(359,000
)
Loss on disposal of property and equipment
11,186
25,990
Loss on disposal of intangible assets
4,840
4,122
Changes in operating assets and liabilities: Accounts receivable
(948,734
)
(1,278,581
)
Contract asset
(219,509
)
19,047
Inventories
(106,174
)
228,988
Prepaid expenses and other assets
404,234
(472,594
)
Income tax payable
(108,879
)
240,866
Accounts payable and accrued liabilities
(2,564
)
543,137
Net cash provided by operating activities
2,589,874
2,442,200
Cash Flows From Investing Activities Expenditures for
property and equipment
(1,330,598
)
(526,227
)
Proceeds from sales of fixed assets
1,750
-
Expenditures for finite-life intangible assets
(57,790
)
(45,550
)
Net cash used in investing activities
(1,386,638
)
(571,777
)
Cash Flows From Financing Activities Principal payments on
long-term debt including capital lease obligations
(1,103,001
)
(50,700
)
Issuance of common stock upon exercise of options
251,849
62,412
Net cash provided by (used in) financing activities
(851,152
)
11,712
Net increase in cash
352,084
1,882,135
Cash Beginning of period
7,455,844
5,573,709
End of period
$
7,807,928
$
7,455,844
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190827005733/en/
Electromed, Inc. Jeremy Brock, Chief Financial Officer
(952) 758-9299 investorrelations@electromed.com
The Equity Group Inc. Kalle Ahl, CFA (212) 836-9614
kahl@equityny.com
Devin Sullivan (212) 836-9608
dsullivan@equityny.com
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