Electromed, Inc. Reports Another $6 Million Quarter
Operating Income Increased 1178%
NEW PRAGUE, Minn.--(BUSINESS WIRE)-- Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for the three- and nine-month periods ended March 31, 2016.
Net revenues for the third quarter of fiscal 2016 were $6.04 million, a 32.5% or $1.48 million increase, compared to the third quarter of fiscal 2015. Growth in total net revenues was attributable to strong results in the home care market in which revenue increased by 37.6%, or $1.46 million, compared to the same period of fiscal 2015. Home care sales, which accounted for nearly 89% of revenues, increased due to a higher number of approvals, a higher conversion rate of referrals to approvals, and a higher average selling price from third party payers, such as insurance companies, Medicare and Medicaid, for the Company’s SmartVest® products.
The Company reported net income of $.47 million, or $0.06 per basic and diluted share, for the third quarter of fiscal 2016, compared to $0.04 million, or $0.00 per basic and diluted share, for the same period of fiscal 2015. The increase in net income was the result of increased revenue and reductions in manufacturing costs year over year.
Gross margins in the third quarter of fiscal 2016 were 76.7%, up from 69.3% in the third quarter of fiscal 2015. The increase in gross profit percentage and gross profit dollars from $3.16 million to $4.63 million resulted from the increases in domestic home care revenue and the lower manufacturing costs. Operating expenses, which include selling, general and administrative as well as research and development expenses, in the third quarter of fiscal 2016, were $3.89 million, or 64.5% of revenue, compared with $3.10 million, or 68.0% of revenue, in the same period of the prior year. The increase was due to additional employees in the Company’s sales and sales support departments, additional expenses related to sales incentives and bonuses based on higher revenue, consulting fees associated with information technology (IT) improvements and outsourcing certain IT services.
Operating income increased 1177.6% to $.74 million in the third quarter of fiscal 2016, compared with $0.06 million in the same period of fiscal 2015. Net income increased 1194.6%, to $0.48 million in the third quarter of fiscal 2016, driven by higher net revenues and the improved gross margin.
For the nine months ended March 31, 2016, revenue increased 21.7%, to $17.30 million, compared to the same period of fiscal 2015. Gross margins were 77.4%, up from 69.4% in the same period of the prior year, while net income increased to $1.88 million, or $0.23 per basic and diluted share, compared to $0.84 million, or $0.10 per basic and diluted share, in the same period of the prior year.
Commenting on the results, Kathleen Skarvan, Electromed’s President and Chief Executive Officer said, “I am very pleased with our third quarter results as we continued to deliver strong revenue growth and increased profitability. Our reimbursement team again excelled at moving referrals received by patients through the reimbursement process. Our sales organization delivered solid referral results and, during the quarter, we announced the addition of an experienced sales leader as John Kowalczyk joined as Vice President of Sales, leading our domestic sales initiatives.”
“In the third quarter, we again delivered improved gross margins which enabled us to drive higher overall profitability. Our net income was fully taxed, suggesting the potential earnings capability of the Company as we continue to grow revenues. We will be subject to normal seasonal and quarter-to-quarter fluctuations in revenue and profitability as we continue to upgrade our sales force, enter new regional markets in the U.S, and invest in product development and enhancements. However, I believe we have made sufficient progress on our strategic objectives to view the recent financial performance of the Company as marking a new level that we believe is generally sustainable moving forward.”
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. It is headquartered in New Prague, Minnesota and founded in 1992. Further information about the Company 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, planned expenses, 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 our industry and business, the effectiveness of our sales and marketing and cost control initiatives, changes to reimbursement programs, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including our 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
March 31, 2016
June 30, 2015
Accounts receivable (net of allowances for doubtful accounts of $45,000)
Prepaid expenses and other current assets
Income tax receivable
Total current assets
Property and equipment, net
Finite-life intangible assets, net
Deferred income taxes
Liabilities and Shareholders’ Equity
Current maturities of long-term debt
Income tax payable
Other accrued liabilities
Total current liabilities
Long-term debt, less current maturities
Commitments and Contingencies
Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,187,112 and 8,133,857 issued and outstanding at March 31, 2016 and June 30, 2015, respectively
Additional paid-in capital
Total shareholders’ equity
Total liabilities and shareholders’ equity
Condensed Statements of Operations (Unaudited)
For the Three Months Ended
For the Nine Months Ended
Cost of revenues
Selling, general and administrative
Research and development
Total operating expenses
Interest expense, net of interest income of $4,978, $371$8,525 and $2,044, respectively
Net income before income taxes
Income tax expense
Income per share:
Weighted-average common shares outstanding:
Condensed Statements of Cash Flows (Unaudited)
Nine Months Ended March 31,
Cash Flows From Operating Activities
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of finite-life intangible assets
Amortization of debt issuance costs
Share-based compensation expense
Loss on disposal of property and equipment and intangibles assets
Changes in operating assets and liabilities:
Prepaid expenses and other assets
Income tax receivable
Accounts payable and accrued liabilities
Net cash provided by operating activities
Cash Flows From Investing Activities
Expenditures for property and equipment
Expenditures for finite-life intangible assets
Net cash used in investing activities
Cash Flows From Financing Activities
Principal payments on long-term debt including capital lease obligations