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 June 30, 2020 (“Q4 FY 2020”).
Q4 FY 2020 Highlights
- Net revenue decreased 20.1% to $6.9 million, from $8.6 million for the three months ended June 30, 2019 (“Q4 FY 2019”), primarily due to industrywide disruption from the COVID-19 pandemic.
- Operating income, which included $0.9 million of government stimulus income from the Provider Relief Fund established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), totaled $1.3 million, compared to $1.5 million in Q4 FY 2019.
- Net income was $1.3 million, or $0.15 per diluted share, compared to $1.1 million, or $0.13 per diluted share, in Q4 FY 2019.
- Cash as of June 30, 2020 was $10.5 million benefiting from $1.3 million in operating cash flow in Q4 FY 2020.
FY 2020 Highlights
- Net revenue increased 3.7% to $32.5 million from $31.3 million during the fiscal year ended June 30, 2019 (“FY 2019”).
- Operating income grew 80.9% to $5.1 million, from $2.8 million in FY 2019.
- Net income rose 110.1% to $4.2 million, or $0.47 per diluted share, from $2.0 million, or $0.23 per diluted share, in FY 2019.
- Cash increased by $2.7 million during fiscal 2020, benefitting from $4.2 million in operating cash flow.
Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “In fiscal 2020 we delivered revenue growth and record profitability, despite a challenging fourth quarter during which the COVID-19 pandemic significantly impacted our operating and financial results. Encouragingly, our home care referrals approached pre-COVID-19 levels as we exited the fourth quarter, in tandem with an uptick in the reopening of physician offices and related activities. I commend our entire Electromed team for their unwavering commitment to ensuring seamless manufacturing and delivery of SmartVest® Airway Clearance during these challenging times.”
Ms. Skarvan continued, “We expect continued uncertainty surrounding COVID-19 through fiscal 2021 that will continue to impact our financial and operational results. We believe we have a strong balance sheet and an extremely dedicated team, which will enable us to withstand this pandemic and pursue a greater share of the large, underpenetrated bronchiectasis market. Our priority continues to be the health, safety and wellbeing of our teammates, clinicians and patients, while executing on our organic growth strategy. With this in mind, we plan to continue investing in our business, serving patients by balancing virtual and in-person visits, and providing best-in-class customer service and delivering our differentiated SmartVest® Airway Clearance devices to drive long-term profitable growth.”
Q4 FY 2020 Review
Net revenue in Q4 FY 2020 decreased 20.1% to $6.9 million, from $8.6 million in Q4 FY 2019, primarily driven by lower home care revenue. Home care revenue declined 21.3% to $6.3 million from $8.0 million in Q4 FY 2019, primarily due to lower referrals driven by the COVID-19 pandemic. Field sales employees totaled 44, of which 37 were direct sales, at the end of Q4 FY 2020, compared to 40 at the end of Q4 FY 2019, of which 34 were direct sales. Annualized home care revenue was $678,000 per direct field sales employee, below our target productivity range of $750,000 - $850,000 due to the revenue decline associated with the COVID-19 pandemic. Institutional revenue decreased 25.9% to $273,000 from $368,000 in Q4 FY 2019, primarily due to a decrease in volume of devices and garments sold.
Gross profit in Q4 FY 2020 decreased 16.2% to $5.6 million, or 81.3% of net revenue, from $6.7 million, or 77.5% of net revenue, in Q4 FY 2019. The decrease in gross profit dollars was primarily due to the decrease in home care revenue driven by the COVID-19 pandemic. The increase in gross profit percentage was due to a higher mix of Medicare patients, in-sourcing of patient training activity and reduced warranty costs.
Selling, general and administrative (“SG&A”) expenses in Q4 FY 2020 decreased by $277,000 to $4.8 million from $5.1 million in Q4 FY 2019. The decline in SG&A spending was primarily due to lower incentive payments driven by lower home care revenue and reductions in travel expenses related to the COVID-19 pandemic. As a percentage of revenue, SG&A expenses were 69.7% compared to 59.0% in the same period in the prior year. Research and development expenses increased to $415,000 from $107,000 in Q4 FY 2019, in connection with the development of a next generation device. As a partial offset to our core operating expenses, we received and recognized $0.9 million of government stimulus from the Provider Relief Fund established under the CARES Act which is intended to offset losses in revenue and expenses Medicare fee-for-service providers incurred due to the impacts of the COVID-19 pandemic.
Operating income totaled $1.3 million, compared to $1.5 million in Q4 FY 2019.
Net income before income taxes totaled $1.3 million compared to $1.5 million in Q4 FY 2019.
Net income was $1.3 million, or $0.15 per diluted share, compared to $1.1 million, or $0.13 per diluted share, in Q4 FY 2019. In Q4 FY 2020, income tax benefit totaled $9,000, compared to an income tax expense of $432,000 in the same period of the prior year. During Q4 FY 2020, a discrete tax benefit of $343,000 was recognized as a result of the exercise of outstanding stock options.
FY 2020 Summary
For the fiscal year ended June 30, 2020, revenue grew 3.7% to $32.5 million, from $31.3 million in fiscal 2019, driven by $430,000 of incremental distributor revenue, a 24.7% increase in institutional revenue, and a 1.3% increase in home care revenue. Gross margins were 77.6%, compared to 76.2% in the prior fiscal year, while net income was $4.2 million, or $0.47 per diluted share, compared to $2.0 million, or $0.23 per diluted share, in fiscal 2019. The Company’s cash increased by $2.7 million, driven by $4.2 million of operating cash flow.
Financial Condition
The Company’s balance sheet at June 30, 2020 included cash of $10.5 million, accounts receivable of $12.9 million, no debt, working capital of $25.0 million, and shareholders’ equity of $30.2 million.
Conference Call
Management will host a conference call on Tuesday, August 25, 2020 at 4:00 pm CT (5:00 pm ET) to discuss Q4 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/40248/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 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.
Electromed, Inc. Condensed Balance Sheets | |||||
| June 30, 2020 | June 30, 2019 | ||||
| Assets | (unaudited) | ||||
| Current Assets | |||||
| Cash | $ | 10,479,150 | $ | 7,807,928 | |
| Accounts receivable (net of allowances for doubtful accounts of $45,000) | 12,940,677 | 12,760,042 | |||
| Contract assets | 902,619 | 995,847 | |||
| Inventories, net | 3,084,620 | 2,622,000 | |||
| Prepaid expenses and other current assets | 353,318 | 353,214 | |||
| Income taxes receivable | 262,155 | - | |||
| Total current assets | 28,022,539 | 24,539,031 | |||
| Property and equipment, net | 3,788,469 | 3,604,744 | |||
| Finite-life intangible assets, net | 598,389 | 581,413 | |||
| Other assets | 80,166 | 45,044 | |||
| Deferred income taxes | 755,000 | 629,000 | |||
| Total assets | $ | 33,244,563 | $ | 29,399,232 | |
| Liabilities and Shareholders’ Equity | |||||
| Current Liabilities | |||||
| Current maturities of other long-term liabilities | $ | 72,328 | $ | 30,320 | |
| Accounts payable | 555,510 | 586,575 | |||
| Accrued compensation | 1,404,497 | 1,404,662 | |||
| Income taxes payable | - | 288,511 | |||
| Warranty reserve | 740,000 | 810,000 | |||
| Other accrued liabilities | 214,045 | 530,453 | |||
| Total current liabilities | 2,986,380 | 3,650,521 | |||
| Other long-term liabilities | 8,868 | 14,737 | |||
| Total liabilities | 2,995,248 | 3,665,258 | |||
| Commitments and Contingencies | |||||
| Shareholders' Equity | |||||
| Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,567,834 and 8,408,351 issued and outstanding at June 30, 2020 and June 30, 2019, respectively | 85,678 | 84,084 | |||
| Additional paid-in capital | 16,480,134 | 16,127,826 | |||
| Retained earnings | 13,683,503 | 9,522,064 | |||
| Total shareholders’ equity | 30,249,315 | 25,733,974 | |||
| Total liabilities and shareholders’ equity | $ | 33,244,563 | $ | 29,399,232 | |
Electromed, Inc. Condensed Statements of Operations | |||||||||||||
| For the Three Months Ended June 30, | For the Twelve Months Ended June 30, | ||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||
(unaudited) | (unaudited) | (unaudited) | |||||||||||
| Net revenues | $ | 6,877,351 | $ | 8,603,602 | $ | 32,470,688 | $ | 31,299,750 | |||||
| Cost of revenues | 1,288,711 | 1,935,289 | 7,270,642 | 7,451,806 | |||||||||
| Gross profit | 5,588,640 | 6,668,313 | 25,200,046 | 23,847,944 | |||||||||
| Operating expenses (income) | |||||||||||||
| Selling, general and administrative | 4,796,507 | 5,073,421 | 19,944,851 | 20,435,010 | |||||||||
| Research and development | 415,236 | 106,526 | 1,049,612 | 583,311 | |||||||||
| Government stimulus income | (913,108 | ) | - | (913,108 | ) | - | |||||||
| Total operating expenses | 4,298,635 | 5,179,947 | 20,081,355 | 21,018,321 | |||||||||
| Operating income | 1,290,005 | 1,488,366 | 5,118,691 | 2,829,623 | |||||||||
| Interest income, net | 9,547 | 33,359 | 120,748 | 90,707 | |||||||||
| Net income before income taxes | 1,299,552 | 1,521,725 | 5,239,439 | 2,920,330 | |||||||||
| Income tax expense (benefit) | (9,000 | ) | 432,000 | 1,078,000 | 940,000 | ||||||||
| Net income | $ | 1,308,552 | $ | 1,089,725 | $ | 4,161,439 | $ | 1,980,330 | |||||
| Income per share: | |||||||||||||
| Basic | $ | 0.15 | $ | 0.13 | $ | 0.50 | $ | 0.24 | |||||
| Diluted | $ | 0.15 | $ | 0.13 | $ | 0.47 | $ | 0.23 | |||||
| Weighted-average common shares outstanding: | |||||||||||||
Basic | 8,443,954 | 8,341,684 | 8,403,220 | 8,306,338 | |||||||||
| Diluted | 8,968,800 | 8,615,207 | 8,826,418 | 8,631,469 | |||||||||
Electromed, Inc. Condensed Statements of Cash Flows | |||||||
| Twelve Months Ended June 30, | |||||||
2020 | 2019 | ||||||
| Cash Flows From Operating Activities | (unaudited) | ||||||
| Net income | $ | 4,161,439 | $ | 1,980,330 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation | 616,468 | 804,587 | |||||
| Amortization of finite-life intangible assets | 121,762 | 120,640 | |||||
| Amortization of debt issuance costs | - | 1,958 | |||||
Share-based compensation expense | 901,932 | 924,071 | |||||
| Deferred taxes | (126,000 | ) | (265,000 | ) | |||
| Loss on disposal of property and equipment | 2,622 | 11,186 | |||||
| Loss on disposal of intangible assets | - | 4,840 | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable | (180,635 | ) | (948,734 | ) | |||
| Contract assets | 93,228 | (219,509 | ) | ||||
| Inventories | (449,335 | ) | (106,174 | ) | |||
| Prepaid expenses and other assets | 78,222 | 591,457 | |||||
| Income tax receivable | (262,155 | ) | - | ||||
| Income tax payable | (288,511 | ) | (108,879 | ) | |||
| Accounts payable and accrued liabilities | (472,589 | ) | (200,899 | ) | |||
| Net cash provided by operating activities | 4,196,448 | 2,589,874 | |||||
| Cash Flows From Investing Activities | |||||||
| Expenditures for property and equipment | (844,226 | ) | (1,330,598 | ) | |||
| Proceeds from sales of equipment | - | 1,750 | |||||
| Expenditures for finite-life intangible assets | (132,970 | ) | (57,790 | ) | |||
| Net cash used in investing activities | (977,196 | ) | (1,386,638 | ) | |||
| 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 | 80,369 | 251,849 | |||||
| Taxes paid on stock options exercised on a net basis | (628,399 | ) | - | ||||
| Net cash used in financing activities | (548,030 | ) | (851,152 | ) | |||
| Net increase in cash | 2,671,222 | 352,084 | |||||
| Cash | |||||||
| Beginning of period | 7,807,928 | 7,455,844 | |||||
| End of period | $ | 10,479,150 | $ | 7,807,928 | |||
View source version on businesswire.com: https://www.businesswire.com/news/home/20200825005829/en/
Contacts:
Mike MacCourt, Chief Financial Officer
(952) 758-9299
investorrelations@electromed.com
