Electromed, Inc. Announces Fiscal 2021 Second Quarter Financial Results

Feb. 9, 2021 21:05 UTC

 

-- 11.1% Net Revenue Growth, Driven by a 16.1% Increase in Home Care Revenue --

 

NEW PRAGUE, Minn.--(BUSINESS WIRE)-- 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, 2020 (“Q2 FY 2021”).

Q2 FY 2021 Highlights

  • Net revenue increased 11.1% to $9.5 million, compared to $8.5 million during the three months ended December 31, 2019 (“Q2 FY 2020”), driven by a 16.1% increase in home care revenue.
  • Gross profit percentage increased to 79.2% of net revenue, compared to 78.1% in Q2 FY 2020, primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care.
  • Net income equaled $1.2 million, or $0.13 per diluted share, compared to $1.2 million, or $0.14 per diluted share, in Q2 FY 2020, and reflects increased strategic investments in both R&D and SG&A.
  • Cash as of December 31, 2020 was $11.7 million, benefiting from $669,000 in operating cash flow in Q2 FY 2021.

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “In the second quarter we continued to adapt successfully to healthcare system disruption caused by the COVID-19 pandemic. Our strong execution of a hybrid virtual and face-to-face selling approach combined with the ability for prescribers to more easily provide care via the provisional CMS waiver drove a 16.1% increase in home care revenue compared to the prior year period. The home care success more than offset the ongoing challenges to the other markets of our business negatively impacted by the pandemic, most clearly seen in the year over year decline in the institutional market. However, compared to the first quarter of our current fiscal year our business benefited from increased face-to-face interaction between patients and physicians and improved access to clinics for our sales staff.”

Ms. Skarvan concluded, “We are encouraged by this quarter’s strong financial results and pleased with our sales team’s execution and ability to adapt to ever changing conditions in the market due to the COVID-19 pandemic. While we continue to operate within the constraints of a pandemic, we are cautiously optimistic about our prospects for continued revenue growth in the second half of fiscal 2021. Against this backdrop, we continue to fund strategic investments for our long-term growth, including research and development on our next generation device for HFCWO therapy and expanding our direct-to-patient marketing to increase awareness of bronchiectasis and SmartVest® as an effective treatment. During this pandemic, our priority continues to be the health, safety and well-being of our teammates, clinicians and patients, while executing on our strategy to gain greater share of the large, underpenetrated bronchiectasis market. We are well positioned to succeed given our strong balance sheet, excellent cash flow profile and differentiated SmartVest® Airway Clearance System.”

Q2 FY 2021 Review

Net revenue in Q2 FY 2021 increased 11.1% to $9.5 million, from $8.5 million in Q2 FY 2020. Home care revenue increased 16.1% to $8.9 million in Q2 FY 2021 from $7.7 million in Q2 FY 2020. Field sales employees totaled 45, of which 38 were direct sales, at the end of Q2 FY 2021, compared to 40 at the end of Q2 FY 2020, of which 34 were direct sales. Institutional revenue decreased 37.4% to $309,000 from $494,000 in Q2 FY 2020, primarily due to a decrease in the volume of devices and disposable wraps sold due to COVID-19’s continued impact on hospital purchasing activity. Home care distributor revenue increased 13.7% to $149,000 from $131,000 in Q2 FY 2020. International revenue decreased 46.6% to $135,000 from $253,000 in Q2 FY 2020.

Gross profit in Q2 FY 2021 totaled $7.5 million, or 79.2% of net revenue, compared to $6.7 million, or 78.1% of net revenue, in Q2 FY 2020. The increase in gross profit percentage was primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care.

Selling, general and administrative (“SG&A”) expenses in Q2 FY 2021 increased 9.5% to $5.4 million from $5.0 million in Q2 FY 2020. The increase in SG&A spending was primarily due to increased payroll and compensation-related expenses associated with higher incentive payments on stronger home care revenue and higher average sales and marketing headcount, as well as increased direct-to-consumer marketing expenses, partially offset by lower travel, meals and entertainment expenses. As a percentage of revenue, SG&A expenses were 57.2%, compared to 58.1% in Q2 FY 2020. Research and development expenses increased to $507,000 from $143,000 in Q2 FY 2020, primarily due to the development of a next generation platform. As a percentage of revenue, R&D expenses were 5.3% compared to 1.7% in Q2 FY 2020.

Net income before income taxes totaled $1.6 million in Q2 FY 2021, compared to $1.6 million in Q2 FY 2020, and reflects increased strategic investments in both R&D and SG&A.

Net income was $1.2 million, or $0.13 per diluted share, compared to $1.2 million, or $0.14 per diluted share, in Q2 FY 2020. In Q2 FY 2021, income tax expense totaled $389,000, compared to an income tax expense of $419,000 in the same period of the prior year.

Year-to-Date FY 2021 Summary

For the six months ended December 31, 2020, net revenue grew 3.9% to $17.5 million, from $16.8 million in the same period of fiscal 2020. The revenue increase was primarily due to growth in our home care market, partially offset by lower institutional revenue. Gross profit percentage was 78.1%, compared to 77.3% in the prior fiscal year period. The gross margin percentage increase was primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care. Net income was approximately $1.7 million, or $0.19 per diluted share, compared to approximately $2.2 million, or $0.25 per diluted share, in the first six months of fiscal 2020. The net income decrease was primarily due to increased strategic investments in R&D and SG&A.

Financial Condition

The Company’s balance sheet at December 31, 2020 included cash of $11.7 million, accounts receivable of $15.4 million, no debt, working capital of $27.4 million, and shareholders’ equity of $32.3 million.

Conference Call

Management will host a conference call on Tuesday, February 9, 2021 at 4:00 pm CT (5:00 pm ET) to discuss Q2 FY 2021 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/43323/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 “believe,” “intend,” “may,” “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 Home Care 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 we may describe 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 press release. We undertake no obligation to update them in light of new information or future events.

Financial Tables Follow:

Electromed, Inc.

Condensed Balance Sheets

       

 

December 31, 2020

 

June 30, 2020

 

(Unaudited)

 

 

Assets

 

 

 

Current Assets

 

 

 

Cash

$

11,742,115

 

$

10,479,150

Accounts receivable (net of allowances for doubtful accounts of $45,000)

 

15,395,124

 

 

12,940,677

Contract assets

 

696,993

 

 

902,619

Inventories, net

 

2,603,495

 

 

3,084,620

Prepaid expenses and other current assets

 

381,763

 

 

353,318

Income tax receivable

 

76,271

 

 

262,155

Total current assets

 

30,895,761

 

 

28,022,539

Property and equipment, net

 

3,583,374

 

 

3,788,469

Finite-life intangible assets, net

 

622,697

 

 

598,389

Other assets

 

43,792

 

 

80,166

Deferred income taxes

 

678,000

 

 

755,000

Total assets

$

35,823,624

 

$

33,244,563

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

Current Liabilities

 

 

 

Current maturities of other long-term liabilities

$

40,455

 

$

72,328

Accounts payable

 

722,905

 

 

555,510

Accrued compensation

 

1,823,742

 

 

1,404,497

Warranty reserve

 

770,000

 

 

740,000

Other accrued liabilities

 

128,859

 

 

214,045

Total current liabilities

 

3,485,961

 

 

2,986,380

Other long-term liabilities

 

3,929

 

 

8,868

Total liabilities

 

3,489,890

 

 

2,995,248

 

Commitments and Contingencies

 

 

 

 

Shareholders’ Equity

 

 

 

Common stock, $0.01 par value per share, 13,000,000 shares authorized; 8,635,045 and 8,567,834 shares issued and outstanding, respectively

 

86,350

 

 

85,678

Additional paid-in capital

 

16,825,192

 

 

16,480,134

Retained earnings

 

15,422,192

 

 

13,683,503

Total shareholders’ equity

 

32,333,734

 

 

30,249,315

Total liabilities and shareholders’ equity

$

35,823,624

 

$

33,244,563

Electromed, Inc.

Condensed Statements of Operations

(Unaudited)

           

 

Three Months Ended
December 31,

 

 

 

Six Months Ended
December 31,

 

 

2020

 

 

 

2019

 

 

 2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

$

9,496,073

 

 

$

8,546,942

 

 

$

17,500,245

 

$

16,849,440

Cost of revenues

 

1,970,830

 

 

 

1,871,434

 

 

 

3,826,780

 

 

3,831,584

Gross profit

 

7,525,243

 

 

 

6,675,508

 

 

 

13,673,465

 

 

13,017,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

5,435,025

 

 

 

4,965,053

 

 

 

10,439,205

 

 

9,859,858

Research and development

 

507,497

 

 

 

143,477

 

 

 

988,556

 

 

242,414

Total operating expenses

 

5,942,522

 

 

 

5,108,530

 

 

 

11,427,761

 

 

10,102,272

Operating income

 

1,582,721

 

 

 

1,566,978

 

 

 

2,245,704

 

 

2,915,584

Interest income, net

 

9,706

 

 

 

37,078

 

 

 

18,985

 

 

77,028

Net income before income taxes

 

1,592,427

 

 

 

1,604,056

 

 

 

2,264,689

 

 

2,992,612

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

389,000

 

 

 

419,000

 

 

526,000

 

 

793,000

Net income

$

1,203,427

 

 

$

1,185,056

 

 

 

1,738,689

 

$

2,199,612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.14

 

 

$

0.14

 

 

 

0.20

 

$

0.26

Diluted

$

0.13

 

 

$

0.14

 

 

 

0.19

 

$

0.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,570,313

 

 

 

8,390,125

 

 

 

8,560,590

 

 

8,384,807

Diluted

 

8,924,861

 

 

 

8,759,143

 

 

 

8,926,182

 

 

8,698,168

                             

Electromed, Inc.

Condensed Statements of Cash Flows

(Unaudited)

   

 

Six Months Ended December 31,

 

 

2020

 

 

 

2019

 

Cash Flows From Operating Activities

 

 

 

Net income

$

1,738,689

 

 

$

2,199,612

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation

 

250,489

 

 

 

318,982

 

Amortization of finite-life intangible assets

 

65,074

 

 

 

60,219

 

Share-based compensation expense

 

429,776

 

 

 

444,258

 

Deferred income taxes Changes in operating assets and liabilities:

 

77,000

 

 

 

18,000

 

Loss on disposal of property and equipment Changes in operating assets and liabilities:

 

-

 

 

 

1,294

 

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

(2,454,447

)

 

 

41,822

 

Contract assets

 

205,626

 

 

 

(194,963

)

Inventories

 

490,430

 

 

 

(19,448

)

Prepaid expenses and other assets

 

7,929

 

 

 

76,213

 

Income tax receivable

 

185,884

 

 

 

(206,489

)

Income tax payable

 

-

 

 

 

(288,511

)

Accounts payable and accrued liabilities

 

494,429

 

 

 

(427,390

)

Net cash provided by operating activities

 

1,490,879

 

 

 

2,023,599

 

 

 

 

 

Cash Flows From Investing Activities

 

 

 

Expenditures for property and equipment

 

(53,778

)

 

 

(669,842

)

Expenditures for finite-life intangible assets

 

(90,090

)

 

 

(30,899

)

Net cash used in investing activities

 

(143,868

)

 

 

(700,741

)

 

 

 

 

Cash Flows From Financing Activities

 

 

 

Issuance of common stock upon exercise of options

 

45,669

 

 

 

75,936

 

Taxes paid on net share settlement of stock option exercises

 

(129,715

)

 

 

-

 

Net cash provided by (used in) financing activities

 

(84,046

)

 

 

75,936

 

Net increase in cash

 

1,262,965

 

 

 

1,398,794

 

Cash

 

 

 

Beginning of period

 

10,479,150

 

 

 

7,807,928

 

End of period

$

11,742,115

 

 

$

9,206,722

 

 

Contacts

Electromed, Inc.
Mike MacCourt, 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

 
 

Source: Electromed, Inc.

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