Electromed, Inc. Announces Fiscal 2018 Second Quarter Financial Results -- 18.2% year-over-year increase in home care revenue -- New Prague, Minnesota

Electromed, Inc. Announces Fiscal 2018

Second Quarter Financial Results

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

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

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."

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

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%

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.

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.

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:

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.

Financial Tables Follow:

Condensed Balance Sheets

Condensed Statements of Operations

Condensed Statements of Cash Flows