Full Press Release Details
Electromed, Inc. Announces Fiscal 2017
First Quarter Financial Results
- Boosts R&D Investment to Develop Wireless
for the SmartVest SQL AirWay Clearance
New Prague, Minnesota - November 8,
2016 - Electromed, Inc. ("Electromed" or "the Company") (NYSE MKT: ELMD), a leader in innovative
airway clearance technologies, today announced financial results for its fiscal 2017 first quarter ("Q1 FY 2017") ended
Q1 FY 2017 Highlights
Kathleen Skarvan, President and Chief
Executive Officer of Electromed, commented, "We are pleased to follow up a record FY 2016 revenue year with 10.9% growth
in Q1 FY 2017 revenue, profitable operations, and a commitment to investing in our future growth in the areas of personnel, product
evolution, marketing, and efficiency improvements. Both revenue and referrals accelerated on a month-to-month basis throughout
Q1 FY 2017 and we ended September 2016 with the highest level of referrals in our history. While quarterly revenue may fluctuate
based on the referral mix of payers, among other factors, we believe that our ongoing efforts will translate into continuing growth
Ms. Skarvan continued, "In Q1 FY
2017, we boosted investment in product innovation and personnel, reflecting our strong optimism about the significant market opportunity
for our SmartVest Airway Clearance System in high frequency chest wall oscillation ("HFCWO") therapy. In late
FY 2016, we commenced development of an exciting new wireless connectivity feature that we believe will strengthen our patient
and clinician partnerships, leading to greater therapy adherence and improved quality of life for individuals with compromised
pulmonary function. We expect to launch this solution prior to the end of FY 2017. In response to patient feedback, in October
2016 we introduced new color options for our SmartVest garments and SmartVest SQL generators. We believe that these advancements,
combined with SmartVest's light weight, quiet operation and ease-of-use, will promote greater patient acceptance and satisfaction.
We also continued to recruit, hire and train additional sales staff to increase awareness of SmartVest's advantages and further
penetrate domestic regions, particularly in higher populated metropolitan areas."
Development of Wireless Connectivity
for the SmartVest SQL AirWay Clearance System
Electromed is developing the SmartVest
SQL Airway Clearance System to include wireless connectivity for integration with interactive dashboard applications to encourage
patient engagement with HFCWO therapy and promote adherence to prescribed treatment. The SmartVest System with wireless connectivity
will allow data connection between physicians and patients with impaired airway clearance, offering real-time visibility to HFCWO
treatment information to better collaborate in making patient-centered care decisions. Electromed will pilot the integrated SmartVest
System the second half of fiscal year 2017, with planned expansion prior to the end of the fiscal year.
Net revenues in Q1 FY 2017 increased
10.9% to $5.5 million from $5.0 million in Q1 FY 2016, driven by strong results in the home care market where revenue
increased by 14.4%, or $0.6 million, compared to Q1 FY 2016. Home care sales increased primarily due to a higher average rate
of reimbursement per approval, an increase in referrals and an increase in approvals from third-party payers as a result of
continued improvements in our reimbursement operations.
Gross profit in Q1 FY 2017 rose 12.1%
to $4.3 million from $3.9 million in Q1 FY 2016, driven by an increase in domestic home care revenue, higher average selling price
per unit, and a decrease in the Company's manufacturing costs of the SmartVest SQL. Gross margin in Q1 FY 2017 increased
to 78.1% from 77.2% in Q1 FY 2016, primarily reflecting higher average selling price per unit and a decrease in our manufacturing
costs of the SmartVest SQL as compared to the prior fiscal year.
Operating expenses, which include selling,
general and administrative ("SG&A") as well as research and development ("R&D") expenses, totaled
$4.0 million, or 72.8% of revenue, in Q1 FY 2017 compared with $3.3 million, or 65.5% of revenue, in the same period of the prior
year. SG&A expenses increased 14.1% to $3.7 million in Q1 FY 2017 from $3.2 million in Q1 FY 2016, primarily due to higher
payroll and compensation-related expenses, higher professional fees, and increased travel, meals and entertainment expenses. R&D
expenses increased to $351,000 in Q1 FY 2017 from $42,000 in Q1 FY 2016, primarily driven by incremental investment in the Company's
wireless connectivity project.
Operating income in Q1 FY 2017 declined
to $289,000 from $585,000 in Q1 FY 2016, reflecting higher operating expenses, which were partially offset by higher revenue and
Net income before income tax expense in
Q1 FY 2017 was $272,000, compared to $565,000 in Q1 FY 2016. In Q1 FY 2017, the Company reported income tax expense of $81,000,
compared to $224,000 in the same period of the prior year.
The Company reported net income of $191,000,
or $0.02 per basic and diluted share, in Q1 FY 2017, compared to $341,000, or $0.04 per basic and diluted share, in Q1 FY 2016.
Electromed's balance sheet at September
30, 2016 included cash and cash equivalents of $3.8 million, long-term debt of $1.1 million, working capital of $13.2 million,
and stockholders' equity of $16.7 million.
Management will host a conference call tomorrow
at 8:00 am CT (9:00 am ET) to discuss Q1 FY 2017 financial results and other matters.
Interested parties may participate in the call
The conference call will also be accessible
via the following link:
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:
Condensed Balance Sheets
| September 30, 2016 | June 30, 2016 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 3,824,012 | $ | 5,123,355 | ||||
| Accounts receivable (net of allowances for doubtful accounts of $45,000) | 8,043,565 | 7,611,437 | ||||||
| Inventories | 2,606,134 | 2,480,443 | ||||||
| Prepaid expenses and other current assets | 497,412 | 412,856 | ||||||
| Income tax receivable | 134,396 | 192,685 | ||||||
| Total current assets | 15,105,519 | 15,820,776 | ||||||
| Property and equipment, net | 3,243,775 | 3,375,189 | ||||||
| Finite-life intangible assets, net | 894,853 | 904,033 | ||||||
| Other assets | 117,372 | 134,519 | ||||||
| Deferred income taxes | 343,000 | 343,000 | ||||||
| Total assets | $ | 19,704,519 | $ | 20,577,517 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current Liabilities | ||||||||
| Current maturities of long-term debt | $ | 44,961 | $ | 46,309 | ||||
| Accounts payable | 425,015 | 589,225 | ||||||
| Accrued compensation | 523,876 | 1,489,798 | ||||||
| Warranty reserve | 660,000 | 660,000 | ||||||
| Other accrued liabilities | 255,502 | 287,194 | ||||||
| Total current liabilities | 1,909,354 | 3,072,526 | ||||||
| Long-term debt, less current maturities and net of debt issuance costs | 1,136,189 | 1,146,395 | ||||||
| Total liabilities | 3,045,543 | 4,218,921 | ||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,217,112 and 8,187,112 issued and outstanding at September 30, 2016 and June 30, 2016, respectively | 82,171 | 81,871 | ||||||
| Additional paid-in capital | 13,658,459 | 13,549,551 | ||||||
| Retained earnings | 2,918,346 | 2,727,174 | ||||||
| Total shareholders' equity | 16,658,976 | 16,358,596 | ||||||
| Total liabilities and shareholders' equity | $ | 19,704,519 | $ | 20,577,517 |
Condensed Statements of Operations (Unaudited)
| Three Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Net revenues | $ | 5,545,363 | $ | 5,001,188 | ||||
| Cost of revenues | 1,217,736 | 1,141,758 | ||||||
| Gross profit | 4,327,627 | 3,859,430 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative | 3,687,908 | 3,232,719 | ||||||
| Research and development | 350,840 | 41,543 | ||||||
| Total operating expenses | 4,038,748 | 3,274,262 | ||||||
| Operating income | 288,879 | 585,168 | ||||||
| Interest expense, net of interest income of $3,366 and $624 respectively | 16,707 | 20,206 | ||||||
| Net income before income taxes | 272,172 | 564,962 | ||||||
| Income tax expense | (81,000 | ) | (224,000 | ) | ||||
| Net income | $ | 191,172 | $ | 340,962 | ||||
| Income per share: | ||||||||
| Basic | $ | 0.02 | $ | 0.04 | ||||
| Diluted | $ | 0.02 | $ | 0.04 | ||||
| Weighted-average common shares outstanding: | ||||||||
| Basic | 8,167,112 | 8,133,857 | ||||||
| Diluted | 8,452,780 | 8,173,684 |
Condensed Statements of Cash Flows (Unaudited)
| Three Months Ended September 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net income | $ | 191,172 | $ | 340,962 | ||||
| Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||||
| Depreciation | 155,781 | 154,849 | ||||||
| Amortization of finite-life intangible assets | 30,674 | 30,674 | ||||||
| Amortization of debt issuance costs | 4,344 | 4,664 | ||||||
| Share-based compensation expense | 109,208 | 39,149 | ||||||
| Loss on disposal of property and equipment and intangible assets | - | 24,965 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (432,128 | ) | 61,514 | |||||
| Inventories | (100,596 | ) | (67,144 | ) | ||||
| Prepaid expenses and other assets | (12,500 | ) | (106,930 | ) | ||||
| Accounts payable and accrued liabilities | (1,161,824 | ) | (171,273 | ) | ||||
| Net cash provided (used) by operating activities | (1,215,869 | ) | 311,430 | |||||
| Cash Flows From Investing Activities | ||||||||
| Expenditures for property and equipment | (49,462 | ) | (101,006 | ) | ||||
| Expenditures for finite-life intangible assets | (21,494 | ) | (13,829 | ) | ||||
| Net cash used in investing activities | (70,956 | ) | (114,835 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Principal payments on long-term debt including capital lease obligations | (12,518 | ) | (11,858 | ) | ||||
| Net increase (decrease) in cash | (1,299,343 | ) | 184,737 | |||||
| Cash | ||||||||
| Beginning of period | 5,123,355 | 3,598,240 | ||||||
| End of period | $ | 3,824,012 | $ | 3,782,977 |