Electromed, Inc. Announces Record Financial Performance in Fiscal 2024 Second Quarter

Rhea-AI Summary

Electromed, Inc. announces record revenue in Q2 FY 2024, with a 17% increase to $13.7 million. Gross margins improved to 77%, while operating income reached $2.26 million. Net income was $1.67 million, with cash at $10.4 million. The company attributes growth to product development and market expansion.

Insights

Financial Analyst

The reported 17% increase in net revenue and the improvement in gross margins from 74% to 77% for Electromed indicate a robust financial performance for Q2 FY 2024. This growth is particularly notable given the competitive landscape of medical device companies, where innovation and market penetration are critical for success. The company's ability to exceed its annual target range for homecare revenue per sales representative suggests operational efficiency and effectiveness in its sales strategy.

Furthermore, the record operating income of $2,263,000, or 16.5% of revenue, is a strong indicator of Electromed's profitability and may be attractive to investors. The increase in cash balance to $10.4 million, coupled with no debt, reflects a healthy balance sheet. The focus on streamlining the claims process appears to be yielding financial benefits, as evidenced by the improved cash collections and management of working capital. These financial metrics are essential for assessing the company's fiscal health and future growth prospects.

Market Research Analyst

Electromed's growth in its direct homecare business by 18.0% year-over-year points to a successful penetration in the airway clearance technology market. The company's investment in expanding sales territories and enhancing the reimbursement process aligns with industry trends focusing on customer service and operational efficiency. The increase in SG&A expenses is consistent with the company's growth strategy, reflecting necessary investments in personnel to support higher patient referrals and market expansion.

The airway clearance technology sector is expected to grow due to rising incidences of respiratory diseases and an aging population, suggesting that Electromed's strategic positioning and product offerings like Smartvest Clearway may continue to drive revenue growth. The company's focus on product development and commercial expansion is crucial in maintaining a competitive edge in this specialized market.

Medical Device Industry Expert

Electromed's financial results demonstrate the successful implementation of growth initiatives in a highly specialized medical device market. The Smartvest Clearway technology is a key product in the airway clearance space and its increasing market penetration reflects the company's commitment to innovation and customer service excellence. The reported gross profit increase is indicative of the company's ability to manage costs effectively, particularly in an industry where material procurement and shipping can significantly impact margins.

The medical device industry often faces regulatory hurdles and reimbursement challenges, which makes the reported efficiencies in Electromed's reimbursement department a significant achievement. This operational efficiency can lead to faster revenue recognition and increased customer satisfaction, both of which are important for sustained growth in this sector.

Growth initiatives drive record revenue, improve margins and enhance operational efficiency

NEW PRAGUE, Minn.--(BUSINESS WIRE)-- Electromed, Inc. (“Electromed” or the “Company”) (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced financial results for the three months ended December 31, 2023 (“Q2 FY 2024”).

Q2 FY 2024 Financial Highlights

• Net revenue increased 17% to a record $13.7 million in Q2 FY 2024, from $11.7 million in the second quarter of the prior fiscal year.
• Gross margins were 77% of revenue, compared to 74% in the second quarter of the prior fiscal year.
• Operating income was a record $2,263,000 or 16.5% of revenue, compared with $1,274,000 or 10.1% of revenue in the second quarter of the prior fiscal year.
• Net income was a record $1,674,000 for the quarter, or $0.19 per diluted share, compared to $977,000, or $0.11 per diluted share in the second quarter of the prior fiscal year.
• Cash as of December 31, 2023, was $10.4 million, an increase of $3.1 million compared to cash as of June 30, 2023.

“I am thrilled to announce another record revenue quarter for Electromed,” said Jim Cunniff, President and Chief Executive Officer. “The Company's consistent growth strategy focusing on developing best-in-class products, exemplary customer service and disciplined commercial expansion is generating positive results. We see these investments paying off through continued revenue growth and increased profitability. The Electromed team and I remain focused on serving our customers and promoting our state-of-the-art airway clearance technology, Smartvest Clearway, to drive continued market penetration. We are moving from strength to strength, and we look forward to continued success in the second half of fiscal year 2024.”

Q2 FY 2024 Results

Net revenue for Q2 FY 2024 grew 17% to $13.7 million, from $11.7 million in Q2 FY 2023.

Revenue in our direct homecare business increased year-over-year by 18.0% to $12.7 million, from $10.7 million in the same period in fiscal 2023. The increase in revenue was due to an increase in sales territories and efficiencies recognized within our reimbursement department as a result of recent investments made to streamline the claims process. Field sales force employees totaled 58 at quarter end, 49 of which were direct sales representatives. The annualized homecare revenue per weighted average direct sales representative in Q2 was $1,007,000, slightly higher than Electromed’s annual target range of $850,000 to $950,000.

Gross profit increased to $10,545,000, or 77.0% of net revenues for Q2 FY 2024, from $8,682,000 or 74.0% of net revenues, in the same period in fiscal 2023. The increase in gross profit in fiscal 2024 was primarily due to increased revenue, lower material procurement costs, and shipping costs this year.

Selling, general and administrative (“SG&A”) expenses were $8,175,000 for Q2 FY 2024, representing an increase of $921,000 or 12.7%, compared to the same period in fiscal 2023. The increase in SG&A expense was primarily due to increased payroll and compensation expense related to the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals.

Operating income for the quarter was a record $2,263,000 or 16.5% of total revenue, compared to $1,274,000 or 10.1% of total revenue for the same period in the prior fiscal year. The increase in operating income was driven primarily by increased revenue and gross profit rate improvement.

Net income for Q2 FY 2024 was a record $1,674,000, or $0.19 per diluted share, compared to $977,000, or $0.11 per diluted share, for the same period in the prior fiscal year.

As of December 31, 2023, Electromed had $10.4 million in cash, $23.0 million in accounts receivable and no debt, achieving a working capital of $32.7 million and an increase in total shareholders’ equity of $2.7 million to $40.3 million. The cash balance reflects an increase of $3.1 million for the six months ended December 31, 2023, compared to a decrease in cash of $1.2 million in the six months ended December 31, 2022. This increase in cash was driven by an increase in operating income as well as a benefit from improved cash collections and management of working capital.

Conference Call and Webcast Information

The conference call with members of Electromed management will be held at 5:00 p.m. Eastern Time on Tuesday, February 13, 2024.

Interested parties may participate in the call by dialing (877) 407-0789 (Domestic) or (201) 689-8562 (International).

The live conference call webcast will be accessible in the Investor Relations section of Electromed’s website and directly via the following link: https://viavid.webcasts.com/starthere.jsp?ei=1650986&tp_key=12e0064318

For those who cannot listen to the live broadcast, a replay will be available by dialing (844) 512-2921 (Domestic) or (412) 317-6671 (International) and referencing the replay pin number 13743606. Additionally, an online replay will be available in the Investor Relations section of Electromed’s web site at: https://investors.smartvest.com/events-and-presentations/default.aspx

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 Electromed can be found at www.smartvest.com.

Cautionary Statements

Certain statements in this press 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 “anticipate,” “believe,” “estimate,” “expect,” “intend,” “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 duration, extent and severity of the Covid-19 pandemic, including its effects on our business, operations and employees as well as its impact on our customers and distribution channels and on economies and markets more generally; the competitive nature of our market; changes to Medicare, Medicaid, or private insurance reimbursement policies; changes to state and federal health care laws; changes affecting the medical device industry; our ability to develop new sales channels for our products such as the homecare distributor channel; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; new drug or pharmaceutical discoveries; general economic and business conditions; our ability to renew our line of credit or obtain additional credit as necessary; our ability to protect and expand our intellectual property portfolio; the risks associated with expansion into international markets, as well as other factors we may describe from time to time in the Company’s reports filed with 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 Quarterly Reports on Form 10-Q and Current Reports on Form 8-K). Investors should not consider any list of such factors to be an exhaustive statement of all 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 press release. We undertake no obligation to update them in light of new information or future events.

Electromed, Inc.
Condensed Balance Sheets
				December 31, 2023			June 30, 2023
				(Unaudited)			(Audited)
	Assets
	Current Assets
		Cash and cash equivalents		$	10,434,000		$	7,372,000
		Accounts receivable (net of allowances for doubtful accounts of $45,000)			22,988,000			24,130,000
		Contract assets			574,000			487,000
		Inventories			4,760,000			4,221,000
		Prepaid expenses and other current assets			509,000			1,577,000
			Total current assets		39,265,000			37,787,000
	Property and equipment, net				5,377,000			5,672,000
	Finite-life intangible assets, net				616,000			605,000
	Other assets				125,000			161,000
	Deferred income taxes				1,581,000			1,581,000
			Total assets	$	46,964,000		$	45,806,000
	Liabilities and Shareholders' Equity
	Current Liabilities
		Accounts payable			1,041,000			1,372,000
		Accrued compensation			2,806,000			3,018,000
		Income tax payable			253,000			336,000
		Warranty reserve			1,483,000			1,378,000
		Other accrued liabilities			990,000			1,949,000
			Total current liabilities		6,573,000			8,053,000
	Other long-term liabilities				49,000			86,000
			Total liabilities		6,622,000			8,139,000
	Commitments and Contingencies
	Shareholders' Equity
		Common stock, $0.01 par value per share, 13,000,000 shares authorized;
			8,602,677 and 8,555,238 shares issued and outstanding, as of December 31, 2023 and June 30, 2023, respectively		86,000			86,000
		Additional paid-in capital			19,634,000			18,788,000
		Retained earnings			20,622,000			18,793,000
			Total shareholders' equity		40,342,000			37,667,000
			Total liabilities and shareholders' equity	$	46,964,000		$	45,806,000

Electromed, Inc.
Condensed Statements of Operations
				Three Months Ended						Six Months Ended
				December 31,						December 31,
				2023			2022			2023			2022
	Net revenues			$	13,689,000		$	11,729,000		$	26,013,000		$	22,387,000
	Cost of revenues				3,144,000			3,047,000			5,970,000			5,374,000
		Gross profit			10,545,000			8,682,000			20,043,000			17,013,000
	Operating expenses
		Selling, general and administrative			8,175,000			7,254,000			17,325,000			15,243,000
		Research and development			107,000			154,000			313,000			452,000
		Total operating expenses			8,282,000			7,408,000			17,638,000			15,695,000
		Operating income			2,263,000			1,274,000			2,405,000			1,318,000
	Interest income, net				96,000			7,000			173,000			11,000
			Net income before income taxes		2,359,000			1,281,000			2,578,000			1,329,000
	Income tax expense				685,000			304,000			749,000			271,000
			Net income	$	1,674,000		$	977,000		$	1,829,000		$	1,058,000
	Income per share:
		Basic		$	0.20		$	0.12		$	0.21		$	0.13
		Diluted		$	0.19		$	0.11		$	0.21		$	0.12
	Weighted-average common shares outstanding:
		Basic			8,545,120			8,442,939			8,541,254			8,442,684
		Diluted			8,800,172			8,684,352			8,791,519			8,685,184

Electromed, Inc.
Condensed Statements of Cash Flows
						Six Months Ended December 31,
						2023				2022
						(Unaudited)				(Unaudited)
	Cash Flows From Operating Activities
		Net income				$	1,829,000			$	1,058,000
		Adjustments to reconcile net income to net cash provided by (used in) operating activities:
			Depreciation				398,000				272,000
			Amortization of finite-life intangible assets				25,000				47,000
			Share-based compensation expense				791,000				316,000
			Deferred income taxes				-				10,000
			Changes in operating assets and liabilities:
				Accounts receivable			1,142,000				(503,000	)
				Contract assets			(87,000	)			(221,000	)
				Inventories			(509,000	)			(321,000	)
				Prepaid expenses and other current assets			1,104,000				176,000
				Income tax payable, net			(83,000	)			79,000
				Accounts payable and accrued liabilities			(1,171,000	)			(711,000	)
				Accrued compensation			(212,000	)			(532,000	)
					Net cash provided by (used in) operating activities		3,227,000				(330,000	)
	Cash Flows From Investing Activities
			Expenditures for property and equipment				(180,000	)			(687,000	)
			Expenditures for finite-life intangible assets				(40,000	)			(30,000	)
					Net cash used in investing activities		(220,000	)			(717,000	)
	Cash Flows From Financing Activities
			Issuance of common stock upon exercise of options				55,000				16,000
			Taxes paid on net share settlement of stock option exercises				-				(60,000	)
			Repurchase of common stock				-				(153,000	)
					Net cash provided by (used in) financing activities		55,000				(197,000	)
					Net decrease in cash		3,062,000				(1,244,000	)
	Cash And Cash Equivalents
		Beginning of period					7,372,000				8,153,000
		End of period				$	10,434,000			$	6,909,000

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240213378340/en/

Brad Nagel, Chief Financial Officer

(952) 758-9299

investorrelations@electromed.com

Mike Cavanaugh, Investor Relations

ICR Westwicke

(617) 877-9641

mike.cavanaugh@westwicke.com

Source: Electromed, Inc.

FAQ

What was Electromed's net revenue in Q2 FY 2024?

Electromed's net revenue in Q2 FY 2024 was $13.7 million, marking a 17% increase from the previous year.

What were Electromed's gross margins in Q2 FY 2024?

Electromed's gross margins in Q2 FY 2024 improved to 77% compared to 74% in the same period the previous fiscal year.

What was Electromed's operating income in Q2 FY 2024?

Electromed's operating income in Q2 FY 2024 was a record $2.26 million, representing 16.5% of revenue.

What was Electromed's net income in Q2 FY 2024?

Electromed's net income in Q2 FY 2024 was a record $1.67 million, or $0.19 per diluted share.

What was Electromed's cash position as of December 31, 2023?

As of December 31, 2023, Electromed had $10.4 million in cash, reflecting an increase of $3.1 million compared to the previous period.