ELMD Electromed Inc

Growth initiatives drive record revenue, improve margins and enhance operational efficiency

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, 2023 (“Q2 FY 2024”).

Q2 FY 2024 Financial Highlights

• Net revenue increased 17% to a record $13.7 million in Q2 FY 2024, from $11.7 million in the second quarter of the prior fiscal year.
• Gross margins were 77% of revenue, compared to 74% in the second quarter of the prior fiscal year.
• Operating income was a record $2,263,000 or 16.5% of revenue, compared with $1,274,000 or 10.1% of revenue in the second quarter of the prior fiscal year.
• Net income was a record $1,674,000 for the quarter, or $0.19 per diluted share, compared to $977,000, or $0.11 per diluted share in the second quarter of the prior fiscal year.
• Cash as of December 31, 2023, was $10.4 million, an increase of $3.1 million compared to cash as of June 30, 2023.

“I am thrilled to announce another record revenue quarter for Electromed,” said Jim Cunniff, President and Chief Executive Officer. “The Company's consistent growth strategy focusing on developing best-in-class products, exemplary customer service and disciplined commercial expansion is generating positive results. We see these investments paying off through continued revenue growth and increased profitability. The Electromed team and I remain focused on serving our customers and promoting our state-of-the-art airway clearance technology, Smartvest Clearway, to drive continued market penetration. We are moving from strength to strength, and we look forward to continued success in the second half of fiscal year 2024.”

Q2 FY 2024 Results

Net revenue for Q2 FY 2024 grew 17% to $13.7 million, from $11.7 million in Q2 FY 2023.

Revenue in our direct homecare business increased year-over-year by 18.0% to $12.7 million, from $10.7 million in the same period in fiscal 2023. The increase in revenue was due to an increase in sales territories and efficiencies recognized within our reimbursement department as a result of recent investments made to streamline the claims process. Field sales force employees totaled 58 at quarter end, 49 of which were direct sales representatives. The annualized homecare revenue per weighted average direct sales representative in Q2 was $1,007,000, slightly higher than Electromed’s annual target range of $850,000 to $950,000.

Gross profit increased to $10,545,000, or 77.0% of net revenues for Q2 FY 2024, from $8,682,000 or 74.0% of net revenues, in the same period in fiscal 2023. The increase in gross profit in fiscal 2024 was primarily due to increased revenue, lower material procurement costs, and shipping costs this year.

Selling, general and administrative (“SG&A”) expenses were $8,175,000 for Q2 FY 2024, representing an increase of $921,000 or 12.7%, compared to the same period in fiscal 2023. The increase in SG&A expense was primarily due to increased payroll and compensation expense related to the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals.

Operating income for the quarter was a record $2,263,000 or 16.5% of total revenue, compared to $1,274,000 or 10.1% of total revenue for the same period in the prior fiscal year. The increase in operating income was driven primarily by increased revenue and gross profit rate improvement.

Net income for Q2 FY 2024 was a record $1,674,000, or $0.19 per diluted share, compared to $977,000, or $0.11 per diluted share, for the same period in the prior fiscal year.

As of December 31, 2023, Electromed had $10.4 million in cash, $23.0 million in accounts receivable and no debt, achieving a working capital of $32.7 million and an increase in total shareholders’ equity of $2.7 million to $40.3 million. The cash balance reflects an increase of $3.1 million for the six months ended December 31, 2023, compared to a decrease in cash of $1.2 million in the six months ended December 31, 2022. This increase in cash was driven by an increase in operating income as well as a benefit from improved cash collections and management of working capital.

Conference Call and Webcast Information

The conference call with members of Electromed management will be held at 5:00 p.m. Eastern Time on Tuesday, February 13, 2024.

Interested parties may participate in the call by dialing (877) 407-0789 (Domestic) or (201) 689-8562 (International).

The live conference call webcast will be accessible in the Investor Relations section of Electromed’s website and directly via the following link: https://viavid.webcasts.com/starthere.jsp?ei=1650986&tp_key=12e0064318

For those who cannot listen to the live broadcast, a replay will be available by dialing (844) 512-2921 (Domestic) or (412) 317-6671 (International) and referencing the replay pin number 13743606. Additionally, an online replay will be available in the Investor Relations section of Electromed’s web site at: https://investors.smartvest.com/events-and-presentations/default.aspx

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 was founded in 1992. Further information about Electromed 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 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

 

December 31, 2023

June 30, 2023

(Unaudited)

(Audited)

Assets

Current Assets

Cash and cash equivalents

$

10,434,000

$

7,372,000

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

 

22,988,000

 

24,130,000

Contract assets

 

574,000

 

487,000

Inventories

 

4,760,000

 

4,221,000

Prepaid expenses and other current assets

 

509,000

 

1,577,000

Total current assets

 

39,265,000

 

37,787,000

Property and equipment, net

 

5,377,000

 

5,672,000

Finite-life intangible assets, net

 

616,000

 

605,000

Other assets

 

125,000

 

161,000

Deferred income taxes

 

1,581,000

 

1,581,000

Total assets

$

46,964,000

$

45,806,000

 

Liabilities and Shareholders' Equity

Current Liabilities

Accounts payable

 

1,041,000

 

1,372,000

Accrued compensation

 

2,806,000

 

3,018,000

Income tax payable

 

253,000

 

336,000

Warranty reserve

 

1,483,000

 

1,378,000

Other accrued liabilities

 

990,000

 

1,949,000

Total current liabilities

 

6,573,000

 

8,053,000

Other long-term liabilities

 

49,000

 

86,000

Total liabilities

 

6,622,000

 

8,139,000

 

Commitments and Contingencies

 

Shareholders' Equity

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

8,602,677 and 8,555,238 shares issued and outstanding, as of December 31, 2023 and June 30, 2023, respectively

 

86,000

 

86,000

Additional paid-in capital

 

19,634,000

 

18,788,000

Retained earnings

 

20,622,000

 

18,793,000

Total shareholders' equity

 

40,342,000

 

37,667,000

Total liabilities and shareholders' equity

$

46,964,000

$

45,806,000

Electromed, Inc.

 

Condensed Statements of Operations

 

Three Months Ended

Six Months Ended

December 31,

December 31,

2023

2022

2023

2022

Net revenues

$

13,689,000

$

11,729,000

$

26,013,000

$

22,387,000

Cost of revenues

 

3,144,000

 

3,047,000

 

5,970,000

 

5,374,000

Gross profit

 

10,545,000

 

8,682,000

 

20,043,000

 

17,013,000

 

Operating expenses

Selling, general and administrative

 

8,175,000

 

7,254,000

 

17,325,000

 

15,243,000

Research and development

 

107,000

 

154,000

 

313,000

 

452,000

Total operating expenses

 

8,282,000

 

7,408,000

 

17,638,000

 

15,695,000

Operating income

 

2,263,000

 

1,274,000

 

2,405,000

 

1,318,000

Interest income, net

 

96,000

 

7,000

 

173,000

 

11,000

Net income before income taxes

 

2,359,000

 

1,281,000

 

2,578,000

 

1,329,000

 

Income tax expense

 

685,000

 

304,000

 

749,000

 

271,000

 

Net income

$

1,674,000

$

977,000

$

1,829,000

$

1,058,000

 

 

 

 

Income per share:

Basic

$

0.20

$

0.12

$

0.21

$

0.13

 

Diluted

$

0.19

$

0.11

$

0.21

$

0.12

 

Weighted-average common shares outstanding:

Basic

 

8,545,120

 

8,442,939

 

8,541,254

 

8,442,684

Diluted

 

8,800,172

 

8,684,352

 

8,791,519

 

8,685,184

Electromed, Inc.

 

Condensed Statements of Cash Flows

 

Six Months Ended December 31,

2023

2022

 

 

(Unaudited)

 

(Unaudited)

Cash Flows From Operating Activities

Net income

$

1,829,000

 

$

1,058,000

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation

 

398,000

 

 

272,000

 

Amortization of finite-life intangible assets

 

25,000

 

 

47,000

 

Share-based compensation expense

 

791,000

 

 

316,000

 

Deferred income taxes

 

-

 

 

10,000

 

Changes in operating assets and liabilities:

Accounts receivable

 

1,142,000

 

 

(503,000

)

Contract assets

 

(87,000

)

 

(221,000

)

Inventories

 

(509,000

)

 

(321,000

)

Prepaid expenses and other current assets

 

1,104,000

 

 

176,000

 

Income tax payable, net

 

(83,000

)

 

79,000

 

Accounts payable and accrued liabilities

 

(1,171,000

)

 

(711,000

)

Accrued compensation

 

(212,000

)

 

(532,000

)

Net cash provided by (used in) operating activities

 

3,227,000

 

 

(330,000

)

 

Cash Flows From Investing Activities

Expenditures for property and equipment

 

(180,000

)

 

(687,000

)

Expenditures for finite-life intangible assets

 

(40,000

)

 

(30,000

)

Net cash used in investing activities

 

(220,000

)

 

(717,000

)

 

Cash Flows From Financing Activities

Issuance of common stock upon exercise of options

 

55,000

 

 

16,000

 

Taxes paid on net share settlement of stock option exercises

 

-

 

 

(60,000

)

Repurchase of common stock

 

-

 

 

(153,000

)

Net cash provided by (used in) financing activities

 

55,000

 

 

(197,000

)

Net decrease in cash

 

3,062,000

 

 

(1,244,000

)

 

Cash And Cash Equivalents

Beginning of period

 

7,372,000

 

 

8,153,000

 

End of period

$

10,434,000

 

$

6,909,000

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240213378340/en/

Brad Nagel, Chief Financial Officer (952) 758-9299 investorrelations@electromed.com

Mike Cavanaugh, Investor Relations ICR Westwicke (617) 877-9641 mike.cavanaugh@westwicke.com