Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact
Jeremy Brock
Chief Financial Officer
Electromed, Inc.
952-758-9299
investorrelations@electromed.com
Electromed, Inc. Reports Record $6 Million Dollar Quarter
Operating Income Increased 180%
New Prague, Minnesota – February 9, 2016 - Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for the three- and six-month periods ended December 31, 2015.
Net revenues for the second quarter of fiscal 2016 were $6.26 million, a 28.3% or $1.38 million increase, compared to the second quarter of fiscal 2015. Growth in total net revenues was attributable to strong results in the home care market in which revenue increased by 21.5%, or $0.97 million, compared to the same period of fiscal 2015. Home care sales, which accounted for nearly 88% 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 $1.07 million, or $0.13 per basic and diluted share, for the second quarter of fiscal 2016, compared to $0.42 million, or $0.05 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. During the second quarter, the Company also released the full valuation allowance on its net deferred tax assets, which positively affected net income by $288,000.
Gross margins in the second quarter of fiscal 2016 were 78.2%, up from 69.7% in the second quarter of fiscal 2015. The increase in gross profit percentage and gross profit dollars from $3.40 to $4.90 million resulted from the increases in domestic home care revenue along with lower manufacturing costs. Operating expenses, which include selling, general and administrative as well as research and development expenses, in the second quarter of fiscal 2016, were $3.65 million or 58.3% of revenue, compared with $2.96 million or 60.5% of revenue in the same period of the prior year. The increase was due to a combination of 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 179.3% to $1.25 million in the second quarter of fiscal 2016, compared with $0.45 million in the same period of fiscal 2015. Net income increased 152.5%, to $1.07 million in the second quarter of fiscal 2016 driven by higher net revenues, the improved gross margin and a lower than normalized tax rate of 13.0% in the second quarter.
For the six months ended December 31, 2015, revenue increased 16.7%, to $11.26 million, compared to the same period of fiscal 2015. Gross margins were 77.8%, up from 69.4% in the same period of the prior year, while net income increased to $1.41 million, or $0.17 per basic and diluted share, compared to $0.80 million or $0.10 per basic and diluted share in the same period of the prior year.
Electromed, Inc.
Results for the Three-and Six- Months Ended December 31, 2015
Page 2
Commenting on the second quarter results, Kathleen Skarvan, President and Chief Executive Officer of the Company said, “We are extremely pleased with our second quarter results as we reported record quarterly net revenues and earnings before tax. Home care sales continue to be positively affected by the combination of higher quality referrals generated by our sales force and strong performance by our reimbursement organization in obtaining reimbursement for both current and older referrals. Our strategy to build stronger synergy between our sales and reimbursement teams is resulting in higher levels of customer service, higher quality referrals and increased proficiency in processing referrals. Our higher sales also were impacted by expanded payer contracting across the United States.
“Our engineering and manufacturing teams continued to make progress in lowering the costs of our key product which helped us to produce record gross margins. Going forward, we will realize a positive impact to operating profit with the recent Consolidated Appropriations Act, 2016 that included a two-year moratorium on the medical device excise tax starting January 1, 2016. Our annualized expense, based on the first two quarters of fiscal 2016, was $264,000. We believe we have raised the range on the level of net revenues we can generate quarterly. This should, in turn, result in stronger operating income as we expect our revenues will grow more quickly than our expense base. We are increasingly confident that the market for our SmartVest will continue to grow, driven by an aging population, improved diagnostic procedures and growing confidence that HFCWO is an effective therapy for patients with compromised airway clearance.”
About Electromed, Inc.
Electromed, Inc. develops, manufactures, markets, and sells innovative products that provide airway clearance therapy, including the SmartVest® Airway Clearance System and related products, to patients with compromised pulmonary function with a commitment to excellence and compassionate service. Further information about the Company can be found at www.electromed.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:
Electromed, Inc.
Results for the Three-and Six- Months Ended December 31, 2015
Page 3
Electromed, Inc.
Condensed Balance Sheets
| December 31, 2015 | June 30, 2015 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | 4,528,580 | $ | 3,598,240 | ||||
| Accounts receivable (net of allowances for doubtful accounts of $45,000) | 6,903,378 | 6,518,816 | ||||||
| Inventories | 2,393,622 | 2,072,108 | ||||||
| Prepaid expenses and other current assets | 341,507 | 397,833 | ||||||
| Total current assets | 14,167,087 | 12,586,997 | ||||||
| Property and equipment, net | 3,460,979 | 3,635,516 | ||||||
| Finite-life intangible assets, net | 948,512 | 999,842 | ||||||
| Other assets | 185,375 | 182,699 | ||||||
| Deferred income taxes | 288,000 | — | ||||||
| Total assets | $ | 19,049,953 | $ | 17,405,054 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Current maturities of long-term debt | $ | 48,774 | $ | 48,749 | ||||
| Accounts payable | 620,922 | 538,518 | ||||||
| Accrued compensation | 836,322 | 700,370 | ||||||
| Income tax payable | 77,124 | 122,657 | ||||||
| Warranty reserve | 640,000 | 660,000 | ||||||
| Other accrued liabilities | 207,287 | 208,983 | ||||||
| Total current liabilities | 2,430,429 | 2,279,277 | ||||||
| Long-term debt, less current maturities | 1,178,375 | 1,202,446 | ||||||
| Total liabilities | 3,608,804 | 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 December 31, 2015 and June 30, 2015, respectively | 81,871 | 81,339 | ||||||
| Additional paid-in capital | 13,435,952 | 13,327,320 | ||||||
| Retained earnings | 1,923,326 | 514,672 | ||||||
| Total shareholders’ equity | 15,441,149 | 13,923,331 | ||||||
| Total liabilities and shareholders’ equity | $ | 19,049,953 | $ | 17,405,054 | ||||
Electromed,
Inc.
Results for the Three-and Six- Months Ended December 31, 2015
Page 4
Electromed, Inc.
Condensed Statements of Operations (Unaudited)
| For
the Three Months Ended December 31, | For
the Six Months Ended December 31, | |||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||||
| Net revenues | $ | 6,262,106 | $ | 4,881,723 | $ | 11,263,295 | $ | 9,652,262 | ||||||||||
| Cost of revenues | 1,363,509 | 1,478,290 | 2,505,268 | 2,954,087 | ||||||||||||||
| Gross profit | 4,898,597 | 3,403,433 | 8,758,027 | 6,698,175 | ||||||||||||||
| Operating expenses | ||||||||||||||||||
| Selling, general and administrative | 3,591,934 | 2,872,402 | 6,824,653 | 5,693,897 | ||||||||||||||
| Research and development | 57,090 | 83,643 | 98,634 | 158,909 | ||||||||||||||
| Total operating expenses | 3,649,024 | 2,956,045 | 6,923,287 | 5,852,806 | ||||||||||||||
| Operating income | 1,249,573 | 447,388 | 1,834,740 | 845,369 | ||||||||||||||
| Interest expense, net of interest income of $2,924, $461 $3,548 and $1,673, respectively | 17,880 | 24,677 | 38,086 | 45,129 | ||||||||||||||
| Net income before income taxes | 1,231,693 | 422,711 | 1,796,654 | 800,240 | ||||||||||||||
| Income tax expense | (164,000 | ) | — | (388,000 | ) | — | ||||||||||||
| Net income | $ | 1,067,693 | $ | 422,711 | $ | 1,408,654 | $ | 800,240 | ||||||||||
| Income per share: | ||||||||||||||||||
| Basic | $ | .13 | $ | .05 | $ | .17 | $ | .10 | ||||||||||
| Diluted | $ | .13 | $ | .05 | $ | .17 | $ | .10 | ||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||||||
| Basic | 8,133,857 | 8,114,252 | 8,133,857 | 8,114,252 | ||||||||||||||
| Diluted | 8,195,389 | 8,130,245 | 8,185,196 | 8,119,575 | ||||||||||||||
Electromed, Inc.
Results for the Three-and Six- Months Ended December 31, 2015
Page 5
Electromed, Inc.
Condensed Statements of Cash Flows (Unaudited)
| Six Months Ended December 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net income | $ | 1,408,654 | $ | 800,240 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 307,778 | 308,525 | ||||||
| Amortization of finite-life intangible assets | 61,272 | 61,654 | ||||||
| Amortization of debt issuance costs | 9,327 | 9,883 | ||||||
| Share-based compensation expense | 109,164 | 38,511 | ||||||
| Deferred taxes | (288,000 | ) | — | |||||
| Loss on disposal of property and equipment and intangibles assets | 24,965 | 139,732 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (384,562 | ) | (141,593 | ) | ||||
| Inventories | (290,582 | ) | 1,004 | |||||
| Prepaid expenses and other assets | 57,843 | 32,161 | ||||||
| Accounts payable and accrued liabilities | 151,127 | 73,961 | ||||||
| Net cash provided by operating activities | 1,166,986 | 1,324,078 | ||||||
| Cash Flows From Investing Activities | ||||||||
| Expenditures for property and equipment | (181,290 | ) | (285,760 | ) | ||||
| Expenditures for finite-life intangible assets | (17,790 | ) | (51,073 | ) | ||||
| Net cash used in investing activities | (199,080 | ) | (336,833 | ) | ||||
| Cash Flows From Financing Activities | ||||||||
| Principal payments on long-term debt including capital lease obligations | (24,046 | ) | (22,789 | ) | ||||
| Payment of deferred financing fees | (13,520 | ) | (14,797 | ) | ||||
| Net cash used in financing activities | (37,566 | ) | (37,586 | ) | ||||
| Net increase in cash | 930,340 | 949,659 | ||||||
| Cash | ||||||||
| Beginning of period | 3,598,240 | 1,502,702 | ||||||
| End of period | $ | 4,528,580 | $ | 2,452,361 | ||||
