- Net revenues increased 10.9% to $5.5 million from $5.0 million in Q1 FY 2016.
- Gross profit rose 12.1% to $4.3 million from $3.9 million in Q1 FY 2016.
- Investment in research and development increased to $351,000 from $42,000 in Q1 FY 2016.
- Operating income declined to $289,000 from $585,000 in Q1 FY 2016, primarily reflecting higher investment in R&D and increased SG&A expense to support the growth of the business, partially offset by higher home care revenues and lower cost of sales.
- Net income totaled $191,000, or $0.02 per diluted share, compared to $341,000, or $0.04 per diluted share, in Q1 FY 2016.
- Commenced development of an innovative wireless connectivity and reporting solution to improve therapy adherence; beta testing expected to begin in January 2017.
- Increased field sales staff to 31 at the end of Q1 FY 2017 from 29 at the end of Q1 FY 2016 to further enhance growth.
- Introduced new color options for SmartVest® garments and SmartVest SQL® generators.
Ms. Skarvan continued, "In Q1 FY 2017, we boosted investment in product innovation and personnel, reflecting our strong optimism about the significant market opportunity for our SmartVest® Airway Clearance System in high frequency chest wall oscillation ("HFCWO") therapy. In late FY 2016, we commenced development of an exciting new wireless connectivity feature that we believe will strengthen our patient and clinician partnerships, leading to greater therapy adherence and improved quality of life for individuals with compromised pulmonary function. We expect to launch this solution prior to the end of FY 2017. In response to patient feedback, in October 2016 we introduced new color options for our SmartVest garments and SmartVest SQL generators. We believe that these advancements, combined with SmartVest's light weight, quiet operation and ease-of-use, will promote greater patient acceptance and satisfaction. We also continued to recruit, hire and train additional sales staff to increase awareness of SmartVest's advantages and further penetrate domestic regions, particularly in higher populated metropolitan areas."Development of Wireless Connectivity for the SmartVest SQL AirWay Clearance System Electromed is developing the SmartVest SQL Airway Clearance System to include wireless connectivity for integration with interactive dashboard applications to encourage patient engagement with HFCWO therapy and promote adherence to prescribed treatment. The SmartVest System with wireless connectivity will allow data connection between physicians and patients with impaired airway clearance, offering real-time visibility to HFCWO treatment information to better collaborate in making patient-centered care decisions. Electromed will pilot the integrated SmartVest System the second half of fiscal year 2017, with planned expansion prior to the end of the fiscal year. Q1 FY 2017 Review Net revenues in Q1 FY 2017 increased 10.9% to $5.5 million from $5.0 million in Q1 FY 2016, driven by strong results in the home care market where revenue increased by 14.4%, or $0.6 million, compared to Q1 FY 2016. Home care sales increased primarily due to a higher average rate of reimbursement per approval, an increase in referrals and an increase in approvals from third-party payers as a result of continued improvements in our reimbursement operations.
Gross profit in Q1 FY 2017 rose 12.1% to $4.3 million from $3.9 million in Q1 FY 2016, driven by an increase in domestic home care revenue, higher average selling price per unit, and a decrease in the Company's manufacturing costs of the SmartVest SQL. Gross margin in Q1 FY 2017 increased to 78.1% from 77.2% in Q1 FY 2016, primarily reflecting higher average selling price per unit and a decrease in our manufacturing costs of the SmartVest SQL as compared to the prior fiscal year.Operating expenses, which include selling, general and administrative ("SG&A") as well as research and development ("R&D") expenses, totaled $4.0 million, or 72.8% of revenue, in Q1 FY 2017 compared with $3.3 million, or 65.5% of revenue, in the same period of the prior year. SG&A expenses increased 14.1% to $3.7 million in Q1 FY 2017 from $3.2 million in Q1 FY 2016, primarily due to higher payroll and compensation-related expenses, higher professional fees, and increased travel, meals and entertainment expenses. R&D expenses increased to $351,000 in Q1 FY 2017 from $42,000 in Q1 FY 2016, primarily driven by incremental investment in the Company's wireless connectivity project. Operating income in Q1 FY 2017 declined to $289,000 from $585,000 in Q1 FY 2016, reflecting higher operating expenses, which were partially offset by higher revenue and gross profit. Net income before income tax expense in Q1 FY 2017 was $272,000, compared to $565,000 in Q1 FY 2016. In Q1 FY 2017, the Company reported income tax expense of $81,000, compared to $224,000 in the same period of the prior year. The Company reported net income of $191,000, or $0.02 per basic and diluted share, in Q1 FY 2017, compared to $341,000, or $0.04 per basic and diluted share, in Q1 FY 2016. Financial Condition Electromed's balance sheet at September 30, 2016 included cash and cash equivalents of $3.8 million, long-term debt of $1.1 million, working capital of $13.2 million, and stockholders' equity of $16.7 million.
Conference CallManagement will host a conference call tomorrow at 8:00 am CT (9:00 am ET) to discuss Q1 FY 2017 financial results and other matters. Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic)
- (201) 493-6739 (International)
|Electromed, Inc. Condensed Balance Sheets|
|September 30, 2016||June 30, 2016|
|Accounts receivable (net of allowances for doubtful accounts of $45,000)||8,043,565||7,611,437|
|Prepaid expenses and other current assets||497,412||412,856|
|Income tax receivable||134,396||192,685|
|Total current assets||15,105,519||15,820,776|
|Property and equipment, net||3,243,775||3,375,189|
|Finite-life intangible assets, net||894,853||904,033|
|Deferred income taxes||343,000||343,000|
|Liabilities and Shareholders' Equity|
|Current maturities of long-term debt||$||44,961||$||46,309|
|Other accrued liabilities||255,502||287,194|
|Total current liabilities||1,909,354||3,072,526|
|Long-term debt, less current maturities and net of debt issuance costs||1,136,189||1,146,395|
|Commitments and Contingencies|
|Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,217,112 and 8,187,112 issued and outstanding at September 30, 2016 and June 30, 2016, respectively||82,171||81,871|
|Additional paid-in capital||13,658,459||13,549,551|
|Total shareholders' equity||16,658,976||16,358,596|
|Total liabilities and shareholders' equity||$||19,704,519||$||20,577,517|
|Electromed, Inc. Condensed Statements of Operations (Unaudited)|
|Three Months Ended September 30,|
|Cost of revenues||1,217,736||1,141,758|
|Selling, general and administrative||3,687,908||3,232,719|
|Research and development||350,840||41,543|
|Total operating expenses||4,038,748||3,274,262|
|Interest expense, net of interest income of $3,366 and $624 respectively||16,707||20,206|
|Net income before income taxes||272,172||564,962|
|Income tax expense||(81,000||)||(224,000||)|
|Income per share:|
|Weighted-average common shares outstanding:|
|Electromed, Inc. Condensed Statements of Cash Flows (Unaudited)|
|Three Months Ended September 30,|
|Cash Flows From Operating Activities|
|Adjustments to reconcile net income to net cash provided (used) by operating activities:|
|Amortization of finite-life intangible assets||30,674||30,674|
|Amortization of debt issuance costs||4,344||4,664|
|Share-based compensation expense||109,208||39,149|
|Loss on disposal of property and equipment and intangible assets||-||24,965|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||(12,500||)||(106,930||)|
|Accounts payable and accrued liabilities||(1,161,824||)||(171,273||)|
|Net cash provided (used) by operating activities||(1,215,869||)||311,430|
|Cash Flows From Investing Activities|
|Expenditures for property and equipment||(49,462||)||(101,006||)|
|Expenditures for finite-life intangible assets||(21,494||)||(13,829||)|
|Net cash used in investing activities||(70,956||)||(114,835||)|
|Cash Flows From Financing Activities|
|Principal payments on long-term debt including capital lease obligations||(12,518||)||(11,858||)|
|Net increase (decrease) in cash||(1,299,343||)||184,737|
|Beginning of period||5,123,355||3,598,240|
|End of period||$||3,824,012||$||3,782,977|