Electromed, Inc. Reports Higher Fourth Quarter and Full Year Revenues and Profits

Guía de Regalos

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, Minn.–(BUSINESS WIRE)–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.

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.

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:

       

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  

Contacts

Electromed, Inc.
Jeremy Brock, 952-758-9299
Chief Financial
Officer
investorrelations@electromed.com