- Net revenue increased 9.6% to $7.0 million from $6.4 million during the three months ended December 31, 2016 ("Q2 FY 2017"), driven by an 18.2% year-over-year increase in home care revenue.
- Gross profit rose 13.4% to $5.6 million from $4.9 million in Q2 FY 2017.
- Selling, general and administrative expenses increased 16.2% to $4.8 million, from $4.1 million in Q2 FY 2017, primarily reflecting the hiring of new employees to support revenue growth initiatives.
- Operating income grew 5.6% to $770,000, from $729,000 in Q2 FY 2017.
- Net income equaled $349,000, or $0.04 per diluted share, compared to $444,000, or $0.05 per diluted share, in Q2 FY 2017.
- Net income for Q2 FY 2018 included a non-recurring discrete deferred tax expense of $160,000 related to the Tax Cuts and Jobs Act ("the Tax Act"). On a go-forward basis, the Tax Act reduces the statutory corporate federal tax rate from 34% to 21%, effective January 1, 2018, and is estimated to benefit the Company's after-tax net income by approximately 13% beginning in fiscal 2018, as well as positively impact earnings per share and cash flow.
- Cash flow from operations totaled $1.2 million, compared to $1.3 million in Q2 FY 2017.
- Field sales employees grew to 43 at the end of Q2 FY 2018 from 35 at the end of Q2 FY 2017.
Ms. Skarvan continued, "Having completed most of our direct sales expansion for the fiscal year, with the number of field sales employees up more than 20% compared to the end of Q2 FY 2017, our near-term growth strategies are focused on improving sales force productivity, amplifying our direct-to-patient marketing and expanding the body of clinical evidence supporting SmartVest® benefits for bronchiectasis patients. We continue to manage the business for long-term growth, while remaining focused on profitability and positive cash flow short term. Year-over-year revenue growth in the second half of fiscal 2018 is estimated to be in line with fiscal 2017 growth levels. We remain confident in the growth opportunity for SmartVest® and excited about our direction, as we strive to improve quality of life and outcomes for an expanding number of patients with compromised pulmonary function."Q2 FY 2018 Review Net revenue increased 9.6% to $7.0 million in Q2 FY 2018 from $6.4 million in Q2 FY 2017, driven by higher home care revenue. Home care revenue rose 18.2% to $6.5 million in Q2 FY 2018 from $5.5 million in Q2 FY 2017. This increase was primarily due to growth in approvals as a result of continued improvements in the Company's reimbursement operations, which led to a greater referral to approval percentage as compared to the prior year. Gross profit increased 13.4% to $5.6 million, or 80.0% of net revenue, in Q2 FY 2018 from $4.9 million, or 77.3% of net revenue, in Q2 FY 2017. The increase in gross profit resulted primarily from an increase in home care revenue. Operating expenses, which include selling, general and administrative ("SG&A") expenses as well as research and development ("R&D") expenses, totaled $4.8 million, or 69.0% of net revenue, in Q2 FY 2018 compared with $4.2 million, or 65.9% of net revenue, in the same period of the prior year. SG&A expenses increased 16.2% to $4.8 million in Q2 FY 2018 from $4.1 million in Q2 FY 2017, primarily due to additional employees in sales, annual salary increases, higher share-based equity compensation expense, and additional sales incentives on higher revenue accruals. R&D expenses totaled $57,000 in Q2 FY 2018 compared to $101,000 in Q2 FY 2017.
Operating income increased 5.6% to $770,000 in Q2 FY 2018, from $729,000 in Q2 FY 2017, reflecting higher gross profit partially offset by higher SG&A expense.Net income before income tax expense totaled $765,000 in Q2 FY 2018, compared to $714,000 in Q2 FY 2017. Net income equaled $349,000, or $0.04 per diluted share, in Q2 FY 2018, compared to $444,000, or $0.05 per diluted share, in Q2 FY 2017. In Q2 FY 2018, income tax expense totaled $416,000, compared to $270,000 in the same period of the prior year. Income tax expense during Q2 FY 2018 included a discrete deferred tax expense of $160,000 as a result of re-measuring certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future under the Tax Act that was enacted by the U.S. Government on December 22, 2017. On a go forward basis, the Act reduces the statutory corporate federal tax rate from 34% to 21%, effective January 1, 2018, and is estimated to benefit the Company's after-tax net income, earnings per share and cash flow by approximately 13% beginning in 2018. Year-to-Date FY 2018 Summary For the six months ended December 31, 2017, revenue grew 12.2% to $13.4 million from $11.9 million in the same period of fiscal 2017, driven by a 17.4% increase in home care revenue. Gross margins were 78.7%, compared to 77.7% in the prior fiscal year, while net income was approximately $470,000, or $0.05 per diluted share, compared to approximately $635,000, or $0.08 per diluted share in fiscal 2017. Financial Condition Electromed's balance sheet at December 31, 2017 included cash of $6.8 million, current maturities of long-term debt of $1.1 million, working capital of $15.5 million, and shareholders' equity of $19.9 million.
Conference CallManagement will host a conference call on February 14, 2018 at 8:00 am CT (9:00 am ET) to discuss Q2 FY 2018 financial results and other matters. Interested parties may participate in the call by dialing:
- (877) 407-9753 (Domestic)
- (201) 493-6739 (International)
|Condensed Balance Sheets|
|December 31, 2017||June 30, 2017|
|Accounts receivable (net of allowances for doubtful accounts of $45,000)||9,680,369||9,949,759|
|Prepaid expenses and other current assets||379,713||393,319|
|Total current assets||19,293,958||18,476,272|
|Property and equipment, net||3,215,369||3,303,233|
|Finite-life intangible assets, net||674,704||721,276|
|Deferred income taxes||417,000||460,000|
|Liabilities and Shareholders' Equity|
|Current maturities of long-term debt, net of debt issuance costs||$||1,124,745||$||50,703|
|Income tax payable||84,110||156,524|
|Other accrued liabilities||360,538||438,748|
|Total current liabilities||3,779,405||2,895,974|
|Long-term debt, less current maturities and net of debt issuance costs||-||1,097,125|
|Commitments and Contingencies|
|Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,270,167 and 8,230,167 issued and outstanding at December 31, 2017 and June 30, 2017, respectively||82,702||82,302|
|Additional paid-in capital||14,414,450||14,028,602|
|Total shareholders' equity||19,924,203||19,067,550|
|Total liabilities and shareholders' equity||$||23,703,608||$||23,060,649|
|Condensed Statements of Operations|
|For the Three Months Ended||For the Six Months Ended|
|December 31,||December 31,|
|Cost of revenues||1,398,001||1,445,786||2,843,286||2,663,522|
|Selling, general and administrative||4,759,652||4,096,197||9,463,163||7,784,107|
|Research and development||56,794||100,801||127,458||451,641|
|Total operating expenses||4,816,446||4,196,998||9,590,621||8,235,748|
|Interest expense, net of interest income of $8,888, $3,603, $18,517 and $6,969, respectively||4,894||15,598||9,093||32,304|
|Net income before income taxes||765,285||713,861||923,405||986,032|
|Income tax expense||416,000||270,000||453,000||351,000|
|Income per share:|
|Weighted-average common shares outstanding:|
|Condensed Statements of Cash Flows|
|Six Months Ended December 31,|
|Cash Flows From Operating Activities|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Amortization of finite-life intangible assets||56,610||60,963|
|Amortization of debt issuance costs||4,394||9,216|
|Share-based compensation expense||386,248||234,634|
|Deferred income taxes Changes in operating assets and liabilities:||43,000||13,000|
|Loss on disposal of intangible assets Inventories Accounts receivable||-||111,497|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other assets||8,461||7,046|
|Income tax receivable||-||189,789|
|Income tax payable||(72,414||)||-|
|Accounts payable and accrued liabilities||(149,647||)||(807,188||)|
|Net cash provided by operating activities||1,529,783||38,712|
|Cash Flows From Investing Activities|
|Expenditures for property and equipment||(228,176||)||(267,117||)|
|Expenditures for finite-life intangible assets||(10,038||)||(44,518||)|
|Net cash used in investing activities||(238,214||)||(311,635||)|
|Cash Flows From Financing Activities|
|Principal payments on long-term debt including capital lease obligations||(25,041||)||(24,056||)|
|Payment of deferred financing fees||-||(4,872||)|
|Net cash used in financing activities||(25,041||)||(28,928||)|
|Net increase (decrease) in cash||1,266,528||(301,851||)|
|Beginning of period||5,573,709||5,123,355|
|End of period||$||6,840,237||$||4,821,504|