-- 18.0% revenue growth from prior year period
with net income of $0.7 million --
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 March 31,
2020 (“Q3 FY 2020”).
Q3 FY 2020 Highlights
- Net revenue increased 18.0% to $8.7 million from $7.4 million
for the three months ended March 31, 2019 (“Q3 FY 2019”).
- Operating margin improved to 10.4% from 6.3% in Q3 FY
2019.
- Net income rose 85.1% to $0.7 million, or $0.07 per diluted
share, from $0.4 million, or $0.04 per diluted share, in Q3 FY
2019.
- Cash balance as of March 31, 2020 was $9.9 million benefiting
from $0.9 million in cash flow.
Kathleen Skarvan, President and Chief Executive Officer of
Electromed, commented, “During this challenging time brought on by
the COVID-19 pandemic, our priority has been the safety and health
of our employees. We have continued to manufacture product and
implemented changes to our workplace in accordance with the
guidelines from the Centers for Disease Control and Prevention. For
our clinician and patient protection, we have transitioned our
sales team to primarily virtual visits and are training patients
virtually since COVID-19 pandemic shelter-in-place orders have
prompted many clinics to close temporarily, limit their operating
hours or conduct business virtually.”
Ms. Skarvan continued, “Serving our patients, particularly at
this time when healthcare systems may be overwhelmed by COVID-19
patients, to improve airway clearance, enhance respiratory function
and reduce hospitalizations is critically important. We applaud the
entire Electromed team for their unwavering commitment that ensured
seamless manufacturing and delivery of SmartVest® Airway Clearance
devices that resulted in outstanding revenue growth in both our
homecare and institutional sales channels for the quarter.
Operating margin improved by more than 400 basis points compared to
the prior year period, notwithstanding increases in certain
SG&A costs and more than doubling of R&D investment,
reflecting our ongoing focus on cost containment.”
“We continue to modify our processes and practices in an effort
to mitigate the impact of COVID-19 on our business so that we can
continue to provide to our clinicians and their patients who need
airway clearance therapy access to our SmartVest into the future.
With our differentiated SmartVest airway clearance products, a
large underpenetrated bronchiectasis market, and our strong balance
sheet to support our future initiatives we believe we are
positioned to continue delivering profitable growth as the nation
emerges from this crisis.”
Centers for Medicare and Medicaid
Services Waiver
In March the Centers for Medicare and Medicaid Services (CMS)
modified requirements during this pandemic for prescribing
respiratory related devices, of which SmartVest is included.
Clinical indications and documentation typically required will not
be enforced for respiratory related products including SmartVest
(HFCWO (E0483), LCD L33785); Medicare patients only. The minimum
documentation now requires a valid order and documentation of a
respiratory related diagnosis. Face to face and in-person
requirements for respiratory devices are being waived. We have
taken additional actions to stay connected to our practitioners
during this challenging time.
Q3 FY 2020 Review
Net revenue increased 18.0% to $8.7 million, from $7.4 million
in Q3 FY 2019, primarily driven by higher home care revenue. Home
care revenue rose 14.3% to $7.8 million from $6.9 million in Q3 FY
2019, primarily due to a higher average allowable based on payer
mix and a greater percentage of referrals getting approval. Field
sales employees totaled 44, of which 37 were direct sales, at the
end of Q3 FY 2020, compared to 41 at the end of Q3 FY 2019, of
which 35 were direct sales. Annualized home care revenue was
$880,000 per direct field sales employee, exceeding target
productivity range of $750,000 to $850,000. Institutional revenue
increased 46.9% to $0.6 million from $0.4 million in Q3 FY 2019,
primarily due to a higher average selling price per device and
increase in volume of devices and garments sold. 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 $164,000
during Q3 FY 2020.
Gross profit increased 18.3% to $6.6 million, or 75.4% of net
revenue, from $5.6 million, or 75.2% of net revenue, in Q3 FY 2019.
The increase in gross profit resulted primarily from an increase in
home care revenue.
Operating expenses, which include selling, general and
administrative (“SG&A”) as well as research and development
(“R&D”) expenses, totaled $5.7 million, or 65.0% of net
revenue, compared with $5.1 million, or 69.0% of net revenue, in Q3
FY 2019. SG&A expenses increased by $349,000 to $5.3 million
from $4.9 million in Q3 FY 2019. As a percentage of revenue,
SG&A expenses improved to 60.5% compared to 66.7% in the same
period in the prior year. R&D expenses increased to $392,000
from $171,000 in Q3 FY 2019, for the development of a next
generation device.
Operating income totaled $0.9 million, compared to $0.5 million
in Q3 FY 2019.
Net income before income taxes totaled $0.9 million compared to
$0.5 million in Q3 FY 2019.
Net income equaled $0.7 million, or $0.07 per diluted share,
compared to $0.4 million, or $0.04 per diluted share, in Q3 FY
2019. In Q3 FY 2020, income tax expense totaled $294,000, compared
to $139,000 in the same period of the prior year.
Year-to-Date FY 2020
Summary
For the nine months ended March 31, 2020, net revenue grew 12.8%
to $25.6 million, from $22.7 million in the same period of fiscal
2019. Gross margins were 76.6%, compared to 75.7% in the prior
fiscal year period, while net income was approximately $2.9
million, or $0.33 per diluted share, compared to approximately $0.9
million, or $0.10 per diluted share, in the first nine months of
fiscal 2019.
Financial Condition
The Company’s balance sheet at March 31, 2020 included cash of
$9.9 million, accounts receivable of $13.3 million, no debt,
working capital of $24.2 million, and shareholders’ equity of $29.3
million.
Conference Call
Management will host a conference call on Wednesday, May 13,
2020 at 7:30 am CT (8:30 am ET) to discuss Q3 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/37769/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, makes, 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
duration, extent and severity of the COVID-19 pandemic, including
its effects on our business, operations and employees as well as
its impact on our customers and distribution channels and on
economies and markets more generally, 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
March 31, 2020 June 30, 2019
(Unaudited) Assets Current Assets Cash
$
9,933,309
$
7,807,928
Accounts receivable (net of allowances for doubtful accounts of
$45,000)
13,290,402
12,760,042
Contract assets
1,146,842
995,847
Inventories, net
2,646,971
2,622,000
Prepaid expenses and other current assets
360,956
353,214
Income taxes receivable
409,064
-
Total current assets
27,787,544
24,539,031
Property and equipment, net
3,878,347
3,604,744
Finite-life intangible assets, net
604,905
581,413
Other assets
100,421
45,044
Deferred income taxes
602,000
629,000
Total assets
$
32,973,217
$
29,399,232
Liabilities and Shareholders’ Equity Current
Liabilities Current maturities of other long-term liabilities
$
76,866
$
30,320
Accounts payable
874,133
586,575
Accrued compensation
1,444,480
1,404,662
Income taxes payable
-
288,511
Warranty reserve
780,000
810,000
Other accrued liabilities
446,573
530,453
Total current liabilities
3,622,052
3,650,521
Other long-term liabilities
24,324
14,737
Total liabilities
3,646,376
3,665,258
Commitments and Contingencies
Net increase (decrease) in
cash Shareholders' Equity Common stock, $0.01 par value;
authorized: 13,000,000 shares; 8,483,785 and 8,408,351issued and
outstanding at March 31, 2020 and June 30, 2019, respectively
84,838
84,084
Additional paid-in capital
16,867,053
16,127,826
Retained earnings
12,374,950
9,522,064
Total shareholders’ equity
29,326,841
25,733,974
Total liabilities and shareholders’ equity
$
32,973,217
$
29,399,232
Electromed, Inc.
Condensed Statements of
Operations (Unaudited)
For the Three Months EndedMarch 31, For the Nine
Months EndedMarch 31,
2020
2019
2020
2019
Net revenues
$
8,743,897
$
7,407,779
$
25,593,337
$
22,696,149
Cost of revenues
2,150,347
1,833,478
5,981,931
5,516,517
Gross profit
6,593,550
5,574,301
19,611,406
17,179,632
Operating expenses Selling, general and administrative
5,288,485
4,938,992
15,148,344
15,361,590
Research and development
391,962
170,757
634,376
476,785
Total operating expenses
5,680,447
5,109,749
15,782,720
15,838,375
Operating income
913,103
464,552
3,828,686
1,341,257
Interest income, net
34,171
27,374
111,200
57,348
Net income before income taxes
947,274
491,926
3,939,886
1,398,605
Income tax expense
294,000
139,000
1,087,000
508,000
Net income
$
653,274
$
352,926
$
2,852,886
$
890,605
Income per share: Basic
$
0.08
$
0.04
$
0.34
$
0.11
Diluted
$
0.07
$
0.04
$
0.33
$
0.10
Weighted-average common shares outstanding: Basic
8,403,154
8,325,346
8,390,916
8,294,568
Diluted
8,880,794
8,612,448
8,759,493
8,637,414
Electromed, Inc.
Condensed Statements of Cash
Flows (Unaudited)
Nine Months Ended March 31,
2020
2019
Cash Flows From Operating Activities Net income
$
2,852,886
$
890,605
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation
469,784
527,472
Amortization of finite-life intangible assets
90,863
89,728
Amortization of debt issuance costs
-
1,958
Share-based compensation expense
676,558
729,470
Deferred income taxes
27,000
27,000
Loss on disposal of property and equipment
1,294
1,710
Changes in operating assets and liabilities: Accounts receivable
(530,360
)
(464,400
)
Contract assets
(150,995
)
(67,463
)
Inventories
(13,852
)
(205,524
)
Prepaid expenses and other assets
50,329
490,147
Income tax receivable
(409,064
)
(239,989
)
Income tax payable
(288,511
)
(397,390
)
Accounts payable and accrued liabilities
136,361
(211,371
)
Net cash provided by operating activities
2,912,293
1,171,953
Cash Flows From Investing Activities Expenditures for
property and equipment
(752,875
)
(197,445
)
Expenditures for finite-life intangible assets
(97,460
)
(43,309
)
Net cash used in investing activities
(850,335
)
(240,754
)
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
63,423
251,849
Net cash provided by (used in) financing activities
63,423
(851,152
)
Net increase in cash
2,125,381
80,047
Cash Beginning of period
7,807,928
7,455,844
End of period
$
9,933,309
$
7,535,891
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200512005745/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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