-- Net income of $1.2 million driven by 6.7%
revenue growth from prior year period and 18.3% operating margin
--
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,
2019 (“Q2 FY 2020”).
Q2 FY 2020 Highlights
- Net revenue increased 6.7% to $8.5 million from $8.0 million
for the three months ended December 31, 2018 (“Q2 FY 2019”).
- Operating margin improved to 18.3% from 8.4% in Q2 FY
2019.
- Operating income grew 132.1% to $1.6 million from $0.7 million
in Q2 FY 2019.
- Net income rose 211.4% to $1.2 million, or $0.14 per diluted
share, from $0.4 million, or $0.04 per diluted share, in Q2 FY
2019.
- Cash flow from operating activities increased to $1.4 million
from $0.5 million in Q2 FY 2019.
Kathleen Skarvan, President and Chief Executive Officer of
Electromed, commented, “We delivered another strong bottom-line
performance in the second quarter, with net income of approximately
$1.2 million, driven by year-over-year revenue growth of 6.7% and
significant operating margin improvement to 18.3%. This quarter we
produced $938,000 of annualized homecare revenue per direct field
sales employee, exceeding our target productivity range of between
$750,000 and $850,000. Our institutional business continued to
perform well, with second quarter revenue up 22.8% year-over-year.
Overall, we are very pleased with the execution of our organic
growth strategy in the first half of fiscal 2020.”
Ms. Skarvan continued, “For the remainder of the fiscal year, we
plan to increase investment on clinical studies, new product
development and sales staff expansion to reach our previously
disclosed target of 38 direct field sales employees. We believe
these investments will help us achieve low double-digit revenue
growth and operating margin improvement over the long term. An
increasing number of physicians and patients are embracing the
benefits of high frequency chest wall oscillation therapy with our
SmartVest® Airway Clearance device, particularly in the large,
underpenetrated bronchiectasis market, underpinning our enthusiasm
for growth.”
Q2 FY 2020 Review
Net revenue increased 6.7% to $8.5 million, from $8.0 million in
Q2 FY 2019, primarily driven by higher home care revenue. Home care
revenue rose 4.6% to $7.7 million from $7.3 million in Q2 FY 2019,
primarily due to a higher average allowable based on payer mix and
improved productivity. Field sales employees totaled 40, of which
34 were direct sales, at the end of Q2 FY 2020, compared to 38 at
the end of Q1 FY 2020, of which 32 were direct sales, and 52 at the
end of Q2 FY 2019, of which 44 were direct sales. Institutional
revenue increased 22.8% to $494,000 from $402,000 in Q2 FY 2019,
primarily due to a higher average selling price per device compared
to the prior fiscal year. In Q1 FY 2020 the Company began selling
to home medical equipment distributors who in turn sell the
SmartVest System in the U.S. home care market. Revenue from home
medical equipment distributors totaled $131,000 during Q2 FY
2020.
Gross profit increased 10.1% to $6.7 million, or 78.1% of net
revenue, from $6.1 million, or 75.7% of net revenue, in Q2 FY 2019.
The increase in gross profit resulted primarily from an increase in
home care revenue. The increase in gross profit as a percentage of
net revenue was driven by a higher average allowable based on payer
mix compared to the same period of the prior year.
Operating expenses, which include selling, general and
administrative (“SG&A”) as well as research and development
(“R&D”) expenses, totaled $5.1 million, or 59.8% of net
revenue, compared with $5.4 million, or 67.2% of net revenue, in Q2
FY 2019. SG&A expenses decreased by $185,000 to $5.0 million
from $5.1 million in Q2 FY 2019, primarily reflecting lower payroll
and compensation expenses due to a lower number of employees in
sales and administrative roles. As a percentage of revenue,
SG&A expenses improved to 58.1% compared to 64.3% in the same
period in the prior year, reflecting fewer employees and open
positions in sales and administrative roles. R&D expenses
decreased to $143,000, from $238,000 in Q2 FY 2019.
Operating income totaled $1.6 million, compared to $0.7 million
in Q2 FY 2019.
Net income before income taxes totaled $1.6 million compared to
$0.7 million in Q2 FY 2019.
Net income equaled $1.2 million, or $0.14 per diluted share,
compared to $0.4 million, or $0.04 per diluted share, in Q2 FY
2019. In Q2 FY 2020, income tax expense totaled $419,000, compared
to $311,000 in the same period of the prior year.
Year-to-Date FY 2020
Summary
For the six months ended December 31, 2019, net revenue grew
10.2% to $16.8 million, from $15.3 million in the same period of
fiscal 2019. Gross margins were 77.3%, compared to 75.9% in the
prior fiscal year period, while net income was approximately $2.2
million, or $0.25 per diluted share, compared to approximately $0.5
million, or $0.06 per diluted share, in the first six months of
fiscal 2019.
Financial Condition
The Company’s balance sheet at December 31, 2019 included cash
of $9.2 million, no debt, working capital of $23.3 million, and
shareholders’ equity of $28.5 million.
Conference Call
Management will host a conference call on February 12, 2020 at
7:30 am CT (8:30 am ET) to discuss Q2 FY 2020 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 also will be accessible via the following
link:
https://78449.themediaframe.com/dataconf/productusers/elctr/mediaframe/34587/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 press 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
“anticipate,” “believe,” “estimate,” “expect,” “intend,” “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; changes to Medicare, Medicaid, or
private insurance reimbursement policies; changes to state and
federal health care laws; changes affecting the medical device
industry; our ability to develop new sales channels for our
products such as the homecare distributor channel; our need to
maintain regulatory compliance and to gain future regulatory
approvals and clearances; new drug or pharmaceutical discoveries;
general economic and business conditions; our ability to renew our
line of credit or obtain additional credit as necessary; our
ability to protect and expand our intellectual property portfolio;
the risks associated with expansion into international markets, as
well as other factors described from time to time in the Company’s
reports filed with 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 Quarterly Reports on Form
10-Q and Current Reports on 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
December 31, 2019 June 30, 2019
(Unaudited) Assets Current Assets Cash
$
9,206,722
$
7,807,928
Accounts receivable (net of allowances for doubtful accounts of
$45,000)
12,718,220
12,760,042
Contract assets
1,190,810
995,847
Inventories
2,651,420
2,622,000
Prepaid expenses and other current assets
313,436
353,214
Income taxes receivable
206,489
-
Total current assets
26,287,097
24,539,031
Property and equipment, net
3,914,934
3,604,744
Finite-life intangible assets, net
552,093
581,413
Other assets
122,057
45,044
Deferred income taxes
611,000
629,000
Total assets
$
31,487,181
$
29,399,232
Liabilities and Shareholders’ Equity Current
Liabilities Current maturities of other long-term liabilities
$
82,938
$
30,320
Accounts payable
610,610
586,575
Accrued compensation
1,202,694
1,404,662
Income taxes payable
-
288,511
Warranty reserve
770,000
810,000
Other accrued liabilities
327,531
530,453
Total current liabilities
2,993,773
3,650,521
Other long-term liabilities
39,628
14,737
Total liabilities
3,033,401
3,665,258
Commitments and Contingencies Shareholders' Equity
Common stock, $0.01 par value; authorized: 13,000,000 shares;
8,478,448and 8,408,351 issued and outstanding at December 31, 2019
and June 30, 2019,respectively
84,784
84,084
Additional paid-in capital
16,647,320
16,127,826
Retained earnings
11,721,676
9,522,064
Total shareholders’ equity
28,453,780
25,733,974
Total liabilities and shareholders’ equity
$
31,487,181
$
29,399,232
Electromed, Inc.
Condensed Statements of
Operations (Unaudited)
For the Three Months EndedDecember 31, For the Six
Months EndedDecember 31,
2019
2018
2019
2018
Net revenues
$
8,546,942
$
8,012,487
$
16,849,440
$
15,288,370
Cost of revenues
1,871,434
1,950,040
3,831,584
3,683,039
Gross profit
6,675,508
6,062,447
13,017,856
11,605,331
Operating expenses Selling, general and administrative
4,965,053
5,149,613
9,859,858
10,422,598
Research and development
143,477
237,838
242,414
306,028
Total operating expenses
5,108,530
5,387,451
10,102,272
10,728,626
Operating income
1,566,978
674,996
2,915,584
876,705
Interest income, net
37,078
16,521
77,028
29,974
Net income before income taxes
1,604,056
691,517
2,992,612
906,679
Income tax expense
419,000
311,000
793,000
369,000
Net income
$
1,185,056
$
380,517
$
2,199,612
$
537,679
Income per share: Basic
$
0.14
$
0.05
$
0.26
$
0.06
Diluted
$
0.14
$
0.04
$
0.25
$
0.06
Weighted-average common shares outstanding: Basic
8,390,125
8,298,861
8,384,807
8,279,493
Diluted
8,759,143
8,669,739
8,698,168
8,658,346
Electromed, Inc.
Condensed Statements of Cash
Flows (Unaudited)
Six Months Ended December 31,
2019
2018
Cash Flows From Operating Activities Net income
$
2,199,612
$
537,679
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation
318,982
329,947
Amortization of finite-life intangible assets
60,219
59,863
Amortization of debt issuance costs
-
1,958
Share-based compensation expense
444,258
500,745
Deferred income taxes
18,000
3,000
Loss on disposal of property and equipment
1,294
1,198
Changes in operating assets and liabilities: Accounts receivable
41,822
(126,158
)
Contract assets
(194,963
)
(5,468
)
Inventories
(19,448
)
(242,459
)
Prepaid expenses and other assets
76,213
513,702
Income tax receivable
(206,489
)
(24,860
)
Income tax payable
(288,511
)
(397,390
)
Accounts payable and accrued liabilities
(427,390
)
(331,168
)
Net cash provided by operating activities
2,023,599
820,589
Cash Flows From Investing Activities Expenditures for
property and equipment
(669,842
)
(122,337
)
Expenditures for finite-life intangible assets
(30,899
)
(28,794
)
Net cash used in investing activities
(700,741
)
(151,131
)
Cash Flows From Financing Activities Principal payments on
long-term debt including capital lease obligations
-
(1,103,001
)
Issuance of common stock upon exercise of options
75,936
188,821
Net cash provided by (used in) financing activities
75,936
(914,180
)
Net increase (decrease) in cash
1,398,794
(244,722
)
Cash Beginning of period
7,807,928
7,455,844
End of period
$
9,206,722
$
7,211,122
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200211005936/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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