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Electromed, Inc. Announces Fiscal 2021 Third Quarter Financial Results

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-- Second Consecutive Quarter of Year over Year Growth, Continuing Profitability & Positive Cash Flow while Investing in Key Strategic Initiatives --

Electromed, Inc. ("Electromed" or the "Company") (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced its financial results for the three months ended March 31, 2021 ("Q3 FY 2021").

Q3 FY 2021 Highlights

  • Net revenue increased 0.5% to $8.8 million, compared to $8.7 million during the three months ended March 31, 2020 ("Q3 FY 2020"), driven by a 4.2% increase in home care revenue.

  • Gross profit percentage increased to 76.3% of net revenue, compared to 75.4% in Q3 FY 2020, primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care.

  • Net income equaled $224,000, or $0.03 per diluted share, compared to $653,000, or $0.07 per diluted share, in Q3 FY 2020, and reflects increased strategic investments in both R&D and SG&A.

  • Cash as of March 31, 2021 was $12.5 million, benefiting from $834,000 in operating cash flow in Q3 FY 2021.

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, "Although this winter’s resurgence of new COVID-19 cases and hospitalizations dampened our home care revenue in January and February, we noted a sharp rebound in March, during which we achieved record monthly referrals and revenue. In March, we benefited from increased patient visits to clinics and greater access for our sales representatives as restrictions were further lifted and vaccines started to become more widely administered throughout the country. In our institutional segment, which had the greatest overall impact from the pandemic, we registered 43.4% sequential revenue growth, another positive indication that hospitals are increasing their non-COVID-19 patient census and our sales representatives are gaining greater hospital access."

Ms. Skarvan concluded, "While we continue to operate within the constraints of a pandemic, the ongoing nationwide deployment of vaccinations, the extension of the provisional waiver from the Centers for Medicare & Medicaid Services, and our strong operating performance in March gives us optimism that positive operating performance will continue in the fourth quarter. Even during these uncertain times, our solid cash flow generation capacity and strong balance sheet enable us to invest in Electromed’s future. We continue to make strategic investments in research and development, sales, marketing, and infrastructure to position Electromed for profitable long-term growth and to support our goal of enhancing patients’ quality of life one breath at a time with our differentiated SmartVest® Airway Clearance System."

Q3 FY 2021 Review

Net revenue in Q3 FY 2021 increased 0.5% to $8.8 million, from $8.7 million in Q3 FY 2020. Home care revenue increased 4.2% to $8.2 million in Q3 FY 2021 from $7.8 million in Q3 FY 2020, primarily due to an increase in referrals and approvals. Field sales employees totaled 48, of which 39 were direct sales, at the end of Q3 FY 2021, compared to 44 at the end of Q3 FY 2020, of which 37 were direct sales. We commenced recruiting for four additional direct field sales employees in April. Institutional revenue decreased 27.3% to $443,000 from $609,000 in Q3 FY 2020, primarily due to the continued impact of COVID-19 on hospital purchasing activity. Home care distributor revenue decreased 36.0% to $105,000 from $164,000 in Q3 FY 2020. International revenue decreased 44.5% to $76,000 from $137,000 in Q3 FY 2020.

Gross profit in Q3 FY 2021 totaled $6.7 million, or 76.3% of net revenue, compared to $6.6 million, or 75.4% of net revenue, in Q3 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 Q3 FY 2021 increased 14.4% to $6.1 million from $5.3 million in Q3 FY 2020. The increase in SG&A spending was primarily due to increased payroll and compensation-related expenses associated with higher average number of sales and marketing personnel, greater temporary resources to assist with systems infrastructure investments and increased incentive payments on higher home care revenue. The Company also incurred higher discretionary marketing expenses related to a direct-to-consumer marketing campaign and a comprehensive market research project, as well as higher professional fees. These increased expenses were partially offset by lower travel, meals and entertainment expenses. As a percentage of revenue, SG&A expenses were 68.9%, compared to 60.5% in Q3 FY 2020.

Research and development ("R&D") expenses in Q3 FY 2021 totaled $407,000, compared to $392,000 in Q3 FY 2020, and include expenses for the development of a next generation platform. As a percentage of revenue, R&D expenses were 4.6% compared to 4.5% in Q3 FY 2020.

Net income before income taxes in Q3 FY 2021 totaled $253,000 in Q3 FY 2021, compared to $947,000 in Q3 FY 2020, and reflects increased strategic investments in both R&D and SG&A.

Net income was $224,000, or $0.03 per diluted share in Q3 FY 2021, compared to $653,000, or $0.07 per diluted share, in Q3 FY 2020. In Q3 FY 2021, income tax expense totaled $29,000, compared to an income tax expense of $294,000 in the same period of the prior year.

Year-to-Date FY 2021 Summary

For the nine months ended March 31, 2021, net revenue grew 2.7% to $26.3 million, from $25.6 million in the same period of our fiscal year ended June 30, 2020 ("FY 2020"). The revenue increase was primarily due to growth in the Company’s home care market, partially offset by lower institutional and international revenue. Gross profit percentage was 77.5%, compared to 76.6% 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 $2.0 million, or $0.22 per diluted share, compared to $2.9 million, or $0.33 per diluted share, in the first nine months of FY 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 March 31, 2021 included cash of $12.5 million, accounts receivable of $16.2 million, no debt, working capital of $28.1 million, and shareholders’ equity of $32.9 million.

Conference Call

Management will host a conference call on Tuesday, May 11, 2021 at 4:00 pm CT (5:00 pm ET) to discuss Q3 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/44645/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; and the risks associated with our planned sales force expansion, 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

March 31, 2021

June 30, 2020

(Unaudited)

Assets

Current Assets

Cash

$ 12,500,688

$ 10,479,150

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

16,236,661

12,940,677

Contract assets

557,531

902,619

Inventories, net

2,256,012

3,084,620

Prepaid expenses and other current assets

483,399

353,318

Income tax receivable

253,891

262,155

Total current assets

32,288,182

28,022,539

Property and equipment, net

3,526,935

3,788,469

Finite-life intangible assets, net

602,430

598,389

Other assets

100,016

80,166

Deferred income taxes

653,000

755,000

Total assets

$ 37,170,563

$ 33,244,563

Liabilities and Shareholders’ Equity

Current Liabilities

Current maturities of other long-term liabilities

$ 40,681

$ 72,328

Accounts payable

1,023,603

555,510

Accrued compensation

2,273,415

1,404,497

Warranty reserve

740,000

740,000

Other accrued liabilities

160,551

214,045

Total current liabilities

4,238,250

2,986,380

Other long-term liabilities

59,702

8,868

Total liabilities

4,297,952

2,995,248

Commitments and Contingencies

Shareholders’ Equity

Common stock, $0.01 par value per share, 13,000,000 shares authorized;

8,637,420 and 8,567,834 shares issued and outstanding, respectively

86,374

85,678

Additional paid-in capital

17,140,274

16,480,134

Retained earnings

15,645,963

13,683,503

Total shareholders’ equity

32,872,611

30,249,315

Total liabilities and shareholders’ equity

$ 37,170,563

$ 33,244,563

Electromed, Inc.

Condensed Statements of Operations

(Unaudited)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2021

2020

2021

2020

Net revenues

$

8,786,972

$

8,743,897

$

26,287,217

$

25,593,337

Cost of revenues

2,086,120

2,150,347

5,912,900

5,981,931

Gross profit

6,700,852

6,593,550

20,374,317

19,611,406

Operating expenses

Selling, general and administrative

6,050,666

5,288,485

16,489,871

15,148,344

Research and development

407,199

391,962

1,395,755

634,376

Total operating expenses

6,457,865

5,680,447

17,885,626

15,782,720

Operating income

242,987

913,103

2,488,691

3,828,686

Interest income, net

9,784

34,171

28,769

111,200

Net income before income taxes

252,771

947,274

2,517,460

3,939,886

Income tax expense

29,000

294,000

555,000

1,087,000

Net income

$

223,771

$

653,274

$

1,962,460

$

2,852,886

Income per share:

Basic

$

0.03

$

0.08

$

0.23

$

0.34

Diluted

$

0.03

$

0.07

$

0.22

$

0.33

Weighted-average common shares outstanding:

Basic

8,576,523

8,403,154

8,565,839

8,390,916

Diluted

8,907,045

8,880,794

8,921,494

8,759,493

Electromed, Inc.

Condensed Statements of Cash Flows

(Unaudited)

Nine Months Ended March 31,

2021

2020

Cash Flows From Operating Activities

Net income

$

1,962,460

$

2,852,886

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

Depreciation

358,660

469,784

Amortization of finite-life intangible assets

98,785

90,863

Share-based compensation expense

755,999

676,558

Deferred income taxes

102,000

27,000

Loss on disposal of property and equipment

-

1,294

Changes in operating assets and liabilities:

Accounts receivable

(3,295,984

)

(530,360

)

Contract assets

345,088

(150,995

)

Inventories

838,747

(13,852

)

Prepaid expenses and other assets

(68,616

)

50,329

Income tax receivable

8,264

(409,064

)

Income tax payable

-

(288,511

)

Accounts payable and accrued liabilities

1,219,429

136,361

Net cash provided by operating activities

2,324,832

2,912,293

Cash Flows From Investing Activities

Expenditures for property and equipment

(105,472

)

(752,875

)

Expenditures for finite-life intangible assets

(102,659

)

(97,460

)

Net cash used in investing activities

(208,131

)

(850,335

)

Cash Flows From Financing Activities

Issuance of common stock upon exercise of options

45,669

63,423

Taxes paid on net share settlement of stock option exercises

(140,832

)

-

Net cash provided by (used in) financing activities

(95,163

)

63,423

Net increase in cash

2,021,538

2,125,381

Cash

Beginning of period

10,479,150

7,807,928

End of period

$

12,500,688

$

9,933,309

View source version on businesswire.com: https://www.businesswire.com/news/home/20210511006057/en/

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