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Section 1: 8-K (FORM 8-K DATED AUGUST 27, 2019)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

     

FORM 8-K

     

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): August 27, 2019 

     
     

ELECTROMED, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Minnesota 001-34839 41-1732920

(State or Other Jurisdiction of

Incorporation)

(Commission File Number)

(I.R.S. Employer Identification

Number)

 

500 Sixth Avenue NW

New Prague, MN 56071

(Address of Principal Executive Offices)(Zip Code)

 

(952) 758-9299

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

     

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Common Stock, $0.01 par value   ELMD   NYSE American LLC
(Title of each class)   (Trading Symbol)   (Name of each exchange on which registered)

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934. Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On August 27, 2019, Electromed, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal year ended June 30, 2019. The full text of the press release is attached as Exhibit 99.1.

 

Item 9.01Financial Statements and Exhibits.

 

(d) Exhibits:

 

Exhibit Number   Description   Method of Filing
99.1   Press Release dated August 27, 2019   Furnished Electronically

 

The information contained in this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ELECTROMED, INC.  
     
Date: August 27, 2019 By: /s/ Jeremy T. Brock  
  Name: Jeremy T. Brock  
  Title: Chief Financial Officer  

 

 

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Section 2: EX-99.1 (PRESS RELEASE DATED AUGUST 27, 2019)

 

Exhibit 99.1 

 

 

FOR IMMEDIATE RELEASE

 

Electromed, Inc. Announces Fiscal 2019 Fourth Quarter and Full Year Financial Results

 

-- Fourth quarter results driven by 10.1% year-over-year growth in home care revenue and operating margin improvement to 17.3% --

 

New Prague, Minnesota – August 27, 2019 – Electromed, Inc. (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced financial results for the three months ended June 30, 2019 (Q4 FY 2019).

 

Q4 FY 2019 Highlights

Net revenue increased 9.3% to $8.6 million from $7.9 million during the three months ended June 30, 2018 (Q4 FY 2018).

 

Operating income grew 17.5% to $1.5 million, from $1.3 million in Q4 FY 2018, notwithstanding the recognition of a refund of a medical device excise tax in the prior year quarter that increased Q4 FY 2018 operating income by $406,000 and higher current year depreciation and amortization expense of $117,000 due to our decision to terminate a lease of office space, requiring us to accelerate the leasehold amortization associated with the property.

 

Net income expanded 13.9% to $1.1 million, or $0.13 per diluted share, from $1.0 million, or $0.11 per diluted share, in Q4 FY 2018.

 

Cash flow from operating activities increased 148.6% to $1.4 million from $0.6 million in Q4 FY 2018.

 

FY 2019 Highlights

Net revenue increased 10.6% to $31.3 million from $28.3 million during the fiscal year ended June 30, 2018 (FY 2018).

 

Operating income grew 6.5% to $2.9 million, from $2.7 million in FY 2018, notwithstanding the recognition of a refund of a medical device excise tax in the prior year that increased FY 2018 operating income by $406,000 and higher current year depreciation and amortization expense of $151,000 due to our decision to terminate a lease of office space, requiring us to accelerate the leasehold amortization associated with the property.

 

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “In the fourth quarter of fiscal 2019, we delivered record revenue of $8.6 million, driven by a 10.1% year-over-year increase in home care revenue. Moreover, we achieved strong growth in operating income and cash flow from operating activities, reflecting our continuing cost containment efforts and the sales force restructuring we implemented in March 2019. Regarding our emphasis on sales force productivity, this quarter we produced approximately $908,000 of annualized home care revenue per direct field sales employee, exceeding our target range of between $750,000 and $850,000. While quarter to quarter fluctuations in our business can be expected, in fiscal 2020 we are confident about attaining target productivity levels and low double-digit revenue growth.”

 

Ms. Skarvan continued, “Educating physicians on the value of SmartVest® Airway Clearance therapy for bronchiectasis patients is key to our growth. This quarter BMC Pulmonary Medicine published a first-of-its-kind independent study that concluded early initiation of therapy with SmartVest decreases severe exacerbations, reduces antibiotic use and stabilizes lung function for bronchiectasis patients. This study along with published outcomes studies in Respiratory Therapy in 2016 and 2018 demonstrate the growing body of clinical evidence supporting the use of our SmartVest® Airway Clearance device as a standard of care among individuals with non-Cystic Fibrosis Bronchiectasis. Guided by our patient-centric mission of making life’s important moments possible, one breath at a time, we aim to further penetrate the large and growing bronchiectasis market.”

 

 

 

 

Q4 FY 2019 Review

Net revenue increased 9.3% to $8.6 million, from $7.9 million in Q4 FY 2018, primarily driven by higher home care revenue. Home care revenue rose 10.1% to $8.0 million from $7.3 million in Q4 FY 2018, primarily due to a higher average allowable due to payor mix as compared to the prior year and greater productivity from the Company’s field sales staff. Field sales employees totaled 40, of which 34 were direct sales, at the end of Q4 FY 2019, compared to 42 at the end of Q3 FY 2019, of which 36 were direct sales, and 50 at the end of Q4 FY 2018 of which 42 were direct sales.

 

Gross profit increased 8.1% to $6.7 million, or 77.5% of net revenue, from $6.2 million, or 78.4% of net revenue, in Q4 FY 2018. The increase in gross profit resulted primarily from an increase in home care revenue. The decrease in gross profit as a percentage of net revenue was driven by a lower selling price per device in our institutional market.

 

Operating expenses, which include selling, general and administrative (SG&A) as well as R&D expenses, totaled $5.2 million, or 60.2% of net revenue, compared with $4.9 million, or 62.3% of net revenue, in the same period of the prior year. SG&A expenses increased by $212,000 to $5.1 million from $4.9 million in Q4 FY 2018. The prior year quarter benefited from a refund of a medical device tax that reduced Q4 FY 2018 SG&A expense by $406,000 while the current year included additional depreciation and amortization of $117,000 due to terminating a lease of office space, requiring us to accelerate the leasehold amortization associated with the property. As a percentage of revenue, SG&A expenses improved to 59.0% compared to 61.8%, reflecting ongoing cost-containment efforts. R&D expenses increased to $107,000, from $41,000 in Q4 FY 2018, due to work on an innovative product feature designed to improve patients’ access to treatment adherence data.

 

Operating income totaled $1.5 million, compared to $1.3 million in Q4 FY 2018.

 

Net income before income tax expense totaled $1.5 million compared to $1.3 million in Q4 FY 2018.

 

Net income equaled $1.1 million, or $0.13 per diluted share, compared to $1.0 million, or $0.11 per diluted share, in Q4 FY 2018. In Q4 FY 2019, income tax expense totaled $432,000, compared to $339,000 in the same period of the prior year.

 

FY 2019 Full Year Summary

For the fiscal year ended June 30, 2019, revenue grew 10.6% to $31.3 million, from $28.3 million in fiscal 2018, driven by a 10.3% increase in home care revenue. Gross margins were 76.2%, compared to 76.9% in the prior fiscal year, while net income was approximately $2.0 million, or $0.23 per diluted share, compared to approximately $1.8 million, or $0.21 per diluted share, in fiscal 2018.

 

Financial Condition

The Company’s balance sheet at June 30, 2019 included cash of $7.8 million, no debt, working capital of $20.9 million, and shareholders’ equity of $25.7 million.

 

 

 

 

Conference Call

Management will host a conference call on August 28, 2019 at 8:00 am CT (9:00 am ET) to discuss Q4 FY 2019 financial results and other matters.

 

Interested parties may participate in the call by dialing: 

(877) 407-9753 (Domestic)
(201) 493-6739 (International)

 

The conference call will also be accessible via the following link: 

https://78449.themediaframe.com/dataconf/productusers/elctr/mediaframe/31950/indexl.html

 

For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of the Company’s web site at: http://investors.smartvest.com/

 

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. The Company is headquartered in New Prague, Minnesota and was founded in 1992. Further information about the Company can be found at www.smartvest.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 can generally be identified by words such as “believe,” “estimate,” “expect,” “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 competitive nature of our market; risks associated with expansion into international markets; changes to Medicare, Medicaid, or private insurance reimbursement policies; new drug or pharmaceutical discoveries; changes to health care laws; changes affecting the medical device industry; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; our ability to protect and expand our intellectual property portfolio; our ability to renew our line of credit or obtain additional credit as necessary; our ability to develop new sales channels for our product; and general economic and business conditions, as well as other factors described from time to time in our 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.

 

Contacts:  
   
Electromed, Inc. The Equity Group Inc.
Jeremy Brock, Chief Financial Officer Kalle Ahl, CFA
(952) 758-9299 (212) 836-9614
[email protected] [email protected]
   
  Devin Sullivan
  (212) 836-9608
  [email protected]

 

 

 

 

Financial Tables Follow:

 

Electromed, Inc.

Condensed Balance Sheets

  

   June 30, 2019   June 30, 2018 
Assets        
Current Assets          
Cash  $7,807,928   $7,455,844 
Accounts receivable (net of allowances for doubtful accounts of $45,000)   12,760,042    11,811,308 
Contract assets   995,847    776,338 
Inventories   2,622,000    2,486,848 
Prepaid expenses and other current assets   353,214    757,448 
Total current assets   24,539,031    23,287,786 
Property and equipment, net   3,604,744    3,091,242 
Finite-life intangible assets, net   581,413    649,103 
Deferred income taxes   629,000    364,000 
Total assets  $29,354,188   $27,392,131 
           
Liabilities and Shareholders’ Equity          
Current Liabilities          
Current maturities of long-term debt  $-   $1,101,043 
Accounts payable   586,575    810,644 
Accrued compensation   1,404,662    1,269,849 
Income taxes payable   288,511    397,390 
Warranty reserve   810,000    760,000 
Other accrued liabilities   530,454    464,357 
Total current liabilities   3,620,202    4,803,283 
           
Commitments and Contingencies          
           
Shareholders’ Equity          
Common stock, $0.01 par value; authorized: 13,000,000 shares; 8,408,351 and 8,288,659 issued and outstanding at June 30, 2019 and June 30, 2018, respectively   84,084    82,887 
Additional paid-in capital   16,127,826    14,953,103 
Retained earnings   9,522,076    7,552,858 
Total shareholders’ equity   25,733,986    22,588,848 
Total liabilities and shareholders’ equity  $29,354,188   $27,392,131 

 

 

 

 

Electromed, Inc.

Condensed Statements of Operations

  

   For the Three Months Ended
June 30,
   For the Twelve Months Ended
June 30,
 
   2019   2018   2019   2018 
Net revenues  $8,603,602   $7,872,266   $31,299,750   $28,306,696 
Cost of revenues   1,935,289    1,702,546    7,451,806    6,534,084 
Gross profit   6,668,313    6,169,720    23,847,944    21,772,612 
                     
Operating expenses                    
Selling, general and administrative   5,076,201    4,864,400    20,446,122    18,808,867 
Research and development   106,526    40,641    583,311    251,443 
Total operating expenses   5,182,727    4,905,041    21,029,433    19,060,310 
Operating income   1,485,586    1,264,679    2,818,511    2,712,302 
                     
Interest income, net   33,358    28,296    90,707    19,871 
Net income before income taxes   1,518,944    1,292,975    2,909,218    2,732,173 
                     
Income tax expense   432,000    339,000    940,000    901,000 
Net income  $1,086,944   $953,975   $1,969,218   $1,831,173 
                     
Income per share:                    
Basic  $0.13   $0.12   $0.24   $0.22 
Diluted  $0.13   $0.11   $0.23   $0.21 
                     
Weighted-average common shares outstanding:                    
Basic   8,341,684    8,221,437    8,306,338    8,207,365 
Diluted   8,615,207    8,578,295    8,631,469    8,620,102 

 

 

 

 

Electromed, Inc.

Condensed Statements of Cash Flows

 

   Twelve Months Ended June 30, 
   2019   2018 
Cash Flows From Operating Activities          
Net income  $1,969,218   $1,831,173 
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation   804,587    676,426 
Amortization of finite-life intangible assets   120,640    113,601 
Amortization of debt issuance costs   1,958    6,351 
Share-based compensation expense   924,071    862,674 
Deferred taxes   (265,000)   (359,000)
Loss on disposal of property and equipment   11,186    25,990 
Loss on disposal of intangible assets   4,840    4,122 
Changes in operating assets and liabilities:          
Accounts receivable   (948,734)   (1,278,581)
Contract asset   (219,509)   19,047 
Inventories   (106,174)   228,988 
Prepaid expenses and other assets   404,234    (472,594)
Income tax payable   (108,879)   240,866 
Accounts payable and accrued liabilities   (2,564)   543,137 
Net cash provided by operating activities   2,589,874    2,442,200 
           
Cash Flows From Investing Activities          
Expenditures for property and equipment   (1,330,598)   (526,227)
Proceeds from sales of fixed assets   1,750    - 
Expenditures for finite-life intangible assets   (57,790)   (45,550)
Net cash used in investing activities   (1,386,638)   (571,777)
           
Cash Flows From Financing Activities          
Principal payments on long-term debt including capital lease obligations   (1,103,001)   (50,700)
Issuance of common stock upon exercise of options   251,849    62,412 
Net cash provided by (used in) financing activities   (851,152)   11,712 
Net increase in cash   352,084    1,882,135 
           
Cash          
Beginning of period   7,455,844    5,573,709 
End of period  $7,807,928   $7,455,844 

 

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