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| 8-K - FORM 8-K DATED SEPTEMBER 6, 2016 - Electromed, Inc. | elmd163045_8k.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact
Jeremy Brock
Chief Financial Officer
Electromed, Inc.
952-758-9299
investorrelations@electromed.com
Electromed, Inc. Reports Higher Fourth Quarter and Full Year Revenues and
Profits
Full Year Revenues up 18.5% Year over Year
Full Year Earnings per Share of $0.27 Compared to $0.13 in Prior Year
New Prague, Minnesota – September 6, 2016 - Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for its fourth quarter and fiscal year ended June 30, 2016.
Fourth Quarter Results
Net revenues for the fourth quarter of fiscal 2016 rose 9.5% to $5.7 million, compared to $5.2 million in the same quarter of fiscal 2015. Growth in total net revenues was attributable to strong results in the domestic home care market in which revenues increased by 12.3%, or $0.6 million, compared to the same period of fiscal 2015. Home care sales increased due to a greater number of approvals, a higher average reimbursed price for the Company’s SmartVest® products and an increase in the total number of referrals. Referrals are prescriptions for our products from a physician for a patient and approvals are from third-party payer organizations, including Medicare, Medicaid and private insurance providers.
The Company reported net income of $337,000, or $0.04 per basic and diluted share, for the fourth quarter of fiscal 2016, compared to $255,000, or $0.03 per basic and diluted share, for the same period of fiscal 2015. The increase in net income in the fourth quarter of fiscal 2016 was due to higher revenues, caused primarily by higher approval percentage, increased gross margins due to higher average revenue per shipment and lower cost of sales due to achieving additional cost reductions on production of the Company’s SmartVest SQL.
Gross margin in the fourth quarter of fiscal 2016 was $4.5 million, or 78.9% of net revenues, up from $3.7 million, or 72.0% of net revenues, in the fourth quarter of fiscal 2015. The increase in gross margin percentage resulted primarily from the increase in domestic home care revenues at higher reimbursement per shipment, greater referral to approval percentage compared with the same period in the prior year and lower costs due to additional cost reductions on production of the Company’s SmartVest SQL. Operating expenses, which include selling, general and administrative as well as research and development (R&D) expenses, in the fourth quarter of fiscal 2016, were $4.0 million or 69.4% of net revenues, compared with $3.3 million or 64.2% of net revenues in the same period of the prior year. The increase was due primarily to higher compensation for bonuses, equity compensation and sales incentives. There were also increases in R&D expense, professional fees related to recruiting costs for additional salespeople, and consulting fees for sales training and information technology improvements.
Electromed, Inc.
Results for the Three-and Twelve-Months Ended June 30, 2016
Page 2
Kathleen Skarvan, Electromed’s President and Chief Executive Officer, commented on fourth quarter results, “We are pleased to report our tenth consecutive quarter of year-over-year revenue growth, which reflects our ongoing commitment to delivering the most innovative HFCWO therapy solutions and services in the market. We continued to upgrade our sales force in the fiscal fourth quarter and expect to be fully staffed before the end of the first quarter of fiscal 2017. As we invest in the long-term growth of our business and as a result of normal fluctuations caused by referral and payer mix, variability in our quarter to quarter financial results can be expected. This quarter our profitability continued to improve. We achieved gross margin of 79%, positive cash flow from operations, and a 32% year-over-year increase in net income, despite higher investment in sales initiatives and research and development. We concluded fiscal 2016 with our underlying business fundamentals fully intact and expect continued revenue growth in fiscal 2017.”
Full Year Results
Net revenues for the fiscal year ended June 30, 2016 were $23.0 million, an increase of 18.5% compared with the previous year. Net income for fiscal 2016 was $2.2 million, or $0.27 per basic and diluted share, compared with net income of $1.1 million, or $0.13 per basic and diluted share, for the previous year.
The higher revenues in fiscal 2016 were the result of sales growth in the domestic home care market. Home care, which accounted for about 89% of total revenues, increased 20.5% compared with fiscal 2015. The increase resulted primarily from higher approval rates on referrals, higher average reimbursed price and an increase in the total number of referrals.
Gross margin for fiscal 2016 was $17.9 million, or 77.7% of net revenues, compared with $13.6 million, or 70.1% of net revenues, in the prior year. The increase was primarily the result of higher net revenues, with a higher approval percentage on devices shipped, higher average reimbursed price per unit, and lower costs due to additional cost reductions on production of the Company’s SmartVest SQL. Operating expenses were $14.8 million or 64.2% of net revenues in fiscal 2016, compared with $12.3 million or 63.3% of net revenues in the prior year. Cash flow from operations was $2.2 million in fiscal 2016, compared with $2.8 million in the prior year.
Commenting on the full year results, Ms. Skarvan said, “In fiscal 2016, we delivered profitable, organic growth, more than doubling earnings per share and generating $2.2 million in operating cash flow. Our passion for our patients, focus on continuous improvement and emphasis on growing SmartVest’s share of an expanding HFCWO market underpin our strong reported financial results. In fiscal 2017, our strategy will remain focused on our patient and delivering to them what we believe is the most comfortable and user-friendly HFCWO system available. To further this strategy, in fiscal 2017, we plan to innovate our products and services, enhance our superior service model, increase lead generation primarily in adult pulmonology and with patients diagnosed with bronchiectasis and maximize therapy adherence of SmartVest.”
“We enter 2017 in one of the strongest positions of the Company’s history. I am grateful to our dedicated team of employees, who every day delivers outstanding patient care and satisfaction, an essential component of our success.”
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 the Company can be found at www.smartvest.com.
Electromed, Inc.
Results for the Three-and Twelve-Months Ended June 30, 2016
Page 3
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 and our sales force, product and service innovations, 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 the Company’s industry and business, the effectiveness of the Company’s sales and marketing and cost control initiatives, changes to reimbursement programs, as well as other factors described from time to time in the Company’s reports to 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 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:
-more-
Electromed, Inc.
Balance Sheets
| June 30, 2016 | June 30, 2015 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 5,123,355 | $ | 3,598,240 | ||||
| Accounts receivable (net of allowances for doubtful accounts of $45,000) | 7,611,437 | 6,518,816 | ||||||
| Inventories | 2,480,443 | 2,072,108 | ||||||
| Prepaid expenses and other current assets | 412,856 | 397,833 | ||||||
| Income tax receivable | 192,685 | — | ||||||
| Total current assets | 15,820,776 | 12,586,997 | ||||||
| Property and equipment, net | 3,375,189 | 3,635,516 | ||||||
| Finite-life intangible assets, net | 904,033 | 999,842 | ||||||
| Other assets | 144,263 | 182,699 | ||||||
| Deferred income taxes | 343,000 | — | ||||||
| Total assets | $ | 20,587,261 | $ | 17,405,054 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Current maturities of long-term debt | $ | 46,309 | $ | 48,749 | ||||
| Accounts payable | 589,225 | 538,518 | ||||||
| Accrued compensation | 1,489,798 | 700,370 | ||||||
| Income tax payable | — | 122,657 | ||||||
| Warranty reserve | 660,000 | 660,000 | ||||||
| Other accrued liabilities | 287,194 | 208,983 | ||||||
| Total current liabilities | 3,072,526 | 2,279,277 | ||||||
| Long-term debt, less current maturities | 1,156,139 | 1,202,446 | ||||||
| Total liabilities | 4,228,665 | 3,481,723 | ||||||
| Commitments and Contingencies | ||||||||
| Equity | ||||||||
| Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,187,112 and 8,133,857 issued and outstanding at June 30, 2016 and 2015, respectively | 81,871 | 81,339 | ||||||
| Additional paid-in capital | 13,549,551 | 13,327,320 | ||||||
| Retained earnings | 2,727,174 | 514,672 | ||||||
| Total shareholders’ equity | 16,358,596 | 13,923,331 | ||||||
| Total liabilities and shareholders’ equity | $ | 20,587,261 | $ | 17,405,054 | ||||
Electromed, Inc.
Statements of Operations
| For
the Three Months Ended June 30, | For
the Twelve Months Ended June 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
| Net revenues | $ | 5,693,004 | $ | 5,199,146 | $ | 22,991,999 | $ | 19,408,385 | ||||||||
| Cost of revenues | 1,201,753 | 1,453,819 | 5,115,736 | 5,808,158 | ||||||||||||
| Gross profit | 4,491,251 | 3,745,327 | 17,876,263 | 13,600,227 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Selling, general and administrative | 3,755,024 | 3,259,637 | 14,386,563 | 11,974,384 | ||||||||||||
| Research and development | 197,349 | 78,446 | 380,392 | 315,647 | ||||||||||||
| Total operating expenses | 3,952,373 | 3,338,083 | 14,766,955 | 12,290,031 | ||||||||||||
| Operating income | 538,878 | 407,244 | 3,109,308 | 1,310,196 | ||||||||||||
| Interest expense, net of interest income of $4,133, $284, $2,328 and $12,393 respectively | 15,656 | 20,226 | 66,806 | 85,710 | ||||||||||||
| Net income before income taxes | 523,222 | 387,018 | 3,042,502 | 1,224,486 | ||||||||||||
| Income tax expense | (186,000 | ) | (132,000 | ) | (830,000 | ) | (132,000 | ) | ||||||||
| Net Income | $ | 337,222 | $ | 255,018 | $ | 2,212,502 | $ | 1,092,486 | ||||||||
| Income per share: | ||||||||||||||||
| Basic | $ | 0.04 | $ | 0.03 | $ | 0.27 | $ | 0.13 | ||||||||
| Diluted | $ | 0.04 | $ | 0.03 | $ | 0.27 | $ | 0.13 | ||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||
| Basic | 8,140,575 | 8,119,638 | 8,135,514 | 8,115,595 | ||||||||||||
| Diluted | 8,400,863 | 8,164,864 | 8,248,391 | 8,153,703 | ||||||||||||
Electromed, Inc.
Statements of Cash Flows
| Years Ended June 30, | ||||||||
| 2016 | 2015 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net income | $ | 2,212,502 | $ | 1,092,486 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 616,021 | 613,304 | ||||||
| Amortization of finite-life intangible assets | 122,681 | 122,911 | ||||||
| Amortization of debt issuance costs | 18,016 | 19,210 | ||||||
| Share-based compensation expense | 222,763 | 110,350 | ||||||
| Deferred taxes | (343,000 | ) | — | |||||
| Loss on disposal of property and equipment and intangibles assets | 58,162 | 300,530 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (1,092,621 | ) | (31,549 | ) | ||||
| Inventories | (347,623 | ) | 163,388 | |||||
| Prepaid expenses and other assets | (173,768 | ) | 6,541 | |||||
| Accounts payable and accrued liabilities | 873,770 | 384,043 | ||||||
| Net cash provided by operating activities | 2,166,903 | 2,781,214 | ||||||
| Cash Flows From Investing Activities | ||||||||
| Expenditures for property and equipment | (534,944 | ) | (523,185 | ) | ||||
| Expenditures for finite-life intangible assets | (42,577 | ) | (101,322 | ) | ||||
| Net cash used in investing activities | (579,521 | ) | (624,507 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Principal payments on long-term debt including capital lease obligations | (48,747 | ) | (46,372 | ) | ||||
| Payments of deferred financing fees | (13,520 | ) | (14,797 | ) | ||||
| Net cash used in financing activities | (62,267 | ) | (61,169 | ) | ||||
| Net increase in cash | 1,525,115 | 2,095,538 | ||||||
| Cash | ||||||||
| Beginning of period | 3,598,240 | 1,502,702 | ||||||
| End of period | $ | 5,123,355 | $ | 3,598,240 | ||||