Greetings and welcome to Electromed Inc.'s Fourth Quarter and Full Year Fiscal 2020 Financial Results Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now a pleasure to introduce your host, Kalle Ahl of The Equity Group. Thank you, Mr. Ahl. You may begin.

Thank you, Diego, and good afternoon everyone. Electromed’s fourth quarter fiscal 2020 financial results were released today after the market close. A copy of the earnings release can be found in the Investor Relations section of the company’s website at www.smartvest.com. As a matter of formality, I need to remind you that some of the statements that management will make on this call are considered forward-looking statements, including statements about the company’s future operating and financial results and plans. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management’s expectations as of today’s date. You should not place undue reliance on these forward-looking statements, and the company does not undertake any obligation to update or revise forward-looking statements whether as a result of new information, future events or otherwise. Please refer to the company’s SEC filings for further guidance on this matter. Joining us from Electromed this afternoon are Kathleen Skarvan, President and Chief Executive Officer, and Mike MacCourt, Chief Financial Officer. Kathleen will begin with some opening remarks, after which Mike will present a summary of the company’s financial results, then we will open the call for questions. Now, it’s my pleasure to turn the call over to Kathleen.

Thank you, Kelly. Good afternoon, everyone, and thank you for joining us today. In fiscal 2020, we delivered increased revenues, enhanced profitability and achieved significant bottom-line improvement with record net income of $4.2 million, or $0.47 per diluted share, more than doubling from fiscal 2019. We accomplished these results despite a challenging fourth quarter, during which the pandemic disrupted global economies, healthcare systems, and people's lives. Our thoughts are with those individuals whose health has been jeopardized by this crisis. We extend our gratitude to the healthcare professionals fighting COVID-19 on the frontlines. Our fourth quarter revenues declined 20.1% year-over-year to $6.9 million as COVID-19 dampened industry-wide interaction among clinicians and patients, leading to lower homecare referrals. During the quarter, we accelerated our virtual sales and patient training efforts, boosted direct-to-patient marketing, and generated awareness of center for Medicare and Medicaid system waivers that temporarily relax certain rules for prescribing SmartVest airway clearance devices to our non-commercial Medicare population. These actions, combined with an upward trend in physician office reopenings and greater clinician activity as the quarter progressed, allowed us to exit the quarter and commence fiscal 2021 with homecare referrals approaching near pre-COVID-19 levels. We are encouraged by the recent trends in referrals, which is a leading indicator for our business, and commend the excellent work of our sales team to balance virtual and in-person visits during the pandemic. Moreover, the CMS waivers, which eliminate certain clinical indications, documentation, and face-to-face prescribing requirements for respiratory devices like SmartVest, have been extended to the end of October. With the CMS waiver, we believe that a higher than average percentage of CMS referrals we receive can turn into approvals. CMS business represents between 50% and 55% of our homecare revenue. In the fourth quarter, we successfully navigated extraordinary volatility and could not have done so without the amazing dedication of our employees, whose health, safety, and well-being remain our top priority. Our team had to adjust to staggered hours, socially distanced workstations, remote-work arrangements, mask and glove protocols, virtual meetings, travel restrictions, strict sanitation practices, and in some cases furloughs, while continuing to serve our clinicians and patients with best-in-class customer service and differentiated SmartVest airway clearance products. We are pleased to report that all of our furloughed employees returned to work in August, coinciding with an uptick in physician office reopenings and the easing of restrictions in certain regions of the country. Moving on to some recent changes in our leadership team. In May, we appointed Mike MacCourt as our new Chief Financial Officer. He brings to Electromed approximately two decades of financial leadership and multidimensional business experience across a range of medical device, consulting, and Fortune 500 companies. Prior to his most recent role as Senior Director of Commercial Finance at Starkey Hearing Technologies, he spent over nine years at Medtronic in roles of increasing responsibility, concluding as divisional CFO of the Lung Health business for the last five years. He has an extensive consulting background primarily at PricewaterhouseCoopers, where he held management roles in both financial process improvement and business analytics. I believe Mike will optimize Electromed’s finance function, and I am very excited to be working with him. Separately, in mid-July, we promoted Doug Fetters to Senior Director of National Sales, overseeing all domestic sales initiatives. Doug has two decades of sales leadership experience in the healthcare industry, and has been instrumental in accelerating growth in the company's institutional markets. His appointment coincides with the departure of our former Vice President of Sales, Bud Reeves, who resigned from the company to accept an executive officer position at a privately held medical device company. Doug worked closely with Bud to enhance our sales talent, incentives, and approach over the past year and a half. Thus far, the sales leadership transition has been seamless. We plan to commence a national search process to recruit a leader for the newly created position of Chief Commercial Officer, which will oversee both the sales and marketing teams at Electromed. We'll plan to keep you updated on that progress. On the institutional side of our business, despite COVID-19 related weakness this quarter, as hospitals and long-term care facilities adjusted operating protocols and procurement management related to all airway clearance therapies, based on their concern of COVID-19 spread in the hospital. Our direction, though, remains to focus on fortifying the hospital call point and strengthening our partnerships with integrated delivery networks. As a reminder, growth in the institutional business should augment our homecare revenue, as HFCWO brand used in the hospital is often the default brand described when discharging a patient. Finally, we view our homecare distributors segment as that third leg of the stool, but reiterate that our direct sales channel remains our primary focus. We believe the homecare distributor channel is complementary to our core business, particularly in those areas of the country where our SmartVest brand is under-recognized, and we see opportunities for accelerating growth on a supplemental basis. In closing, as we execute on our growth strategy across our three primary segments, and as the impact of COVID-19 abates, we believe we can resume longer-term, low double-digit revenue growth and improve profitability. While the interim situation remains uncertain, Electromed has a strong balance sheet with $10.5 million in cash and no debt, along with a robust cash flow generation profile. Our long-term thesis remains intact; non-cystic fibrosis bronchiectasis represents a significant and growing market opportunity, conservatively estimated at more than 4 million individuals in the United States. We believe that approximately 630,000 people with a bronchiectasis diagnosis could benefit from HFCWO therapy. Yet only an estimated 77,000 patients in the Medicare population have been treated with a device like SmartVest to date. As our nation emerges from this pandemic, we anticipate returning to the strong cadence of profitable growth we achieved pre-COVID-19. With that, I will turn it over to Mike for a more detailed discussion of our financial results.

Thank you, Kathleen. And good afternoon, everyone. I'm really excited to be participating in my first call with Electromed and look forward to many more to come. Our net revenue in the fourth quarter of fiscal 2020 decreased 20.1% to $6.9 million from $8.6 million in the fourth quarter of fiscal 2019, driven primarily by lower homecare revenue. Homecare revenue declined 21.3% to $6.3 million, primarily due to lower referrals as a result of the COVID-19 pandemic. At quarter end, our field sales employees totaled 44, of which 37 were direct sales compared to 40 at the end of the fourth quarter of fiscal 2019, of which 34 were direct sales. Annualized homecare revenue was $678,000 per direct field sales employee, below our target productivity range of $750,000 to $850,000 due to the revenue decline associated with the COVID-19 pandemic. Institutional revenue decreased 25.9% to $273,000, primarily due to a decrease in the volume of devices and garments sold, as hospitals and long-term care facilities have adjusted their operating protocols and procurement management in relation to the COVID-19 pandemic. In the first quarter of fiscal 2020, we began selling through home medical equipment distributors. Distributor revenue totaled $14,000 during Q4 fiscal year 2020. International revenue, which is not a strategic growth area for Electromed, totaled approximately $262,000 compared to $192,000 in the prior year period. Quarter-to-quarter sales variability can be expected due to the nature of our business and the COVID-19 outbreak will likely continue to have a temporary overall negative impact on our revenue. As Kathleen mentioned, however, we were encouraged to see a pickup in homecare referrals as we exited the fourth quarter to near pre-COVID-19 levels. Gross profit decreased 16.2% to $5.6 million or 81.3% of net revenue in Q4 fiscal year 2020 from $6.7 million or 77.5% of net revenue in Q4 of fiscal year 2019. The decrease in gross profit dollars resulted primarily from the decrease in homecare revenue. The increase in gross profit as a percentage of net revenue was driven by a higher average allowable based on payer mix, lower warranty returns, and greater in-house versus outsourced training compared to the prior year. We expect our longer-term gross margins will be in the mid to high 70% range. Operating expenses, which include SG&A, as well as R&D expenses totaled $4.3 million, or 62.5% of revenue in Q4 fiscal year 2020, compared with $5.2 million or 60.2% of revenue in the same period of the prior year. SG&A expenses decreased 5.5% to $4.8 million in Q4 fiscal year 2020, from $5.1 million in Q4 fiscal year 2019, primarily due to lower incentives and reduced travel due to COVID-19 and lower G&A costs related to our temporary furlough. R&D expenses increased to $415,000 in Q4 fiscal year 2020, from $107,000 in Q4 fiscal year 2019, reflecting our continued investment in new product development. Operating income, which included $0.9 million of government stimulus income from the Provider Relief Fund established by the CARES Act, totaled $1.3 million compared to $1.5 million in Q4 fiscal year 2019. Net income before income tax totaled $1.3 million in the fourth quarter of fiscal 2020 compared to $1.5 million in the prior year quarter. In the quarter, income tax benefit was $9,000 compared to income tax expense of $432,000 in the same period of the prior year. During Q4 fiscal year 2020, income taxes benefited from a discrete tax benefit of $343,000 related to the exercise of stock options. Our net income totaled $1.3 million or $0.15 per diluted share in the fourth quarter of fiscal 2020 compared to $1.1 million or $0.13 per diluted share in the prior year period. Briefly summarizing our results for the fiscal year ended June 30, 2020, revenue grew 3.7% to $32.5 million from $31.3 million in fiscal 2019, driven by $430,000 of incremental distributor revenue, a 24.7% increase in institutional revenue, and a 1.3% increase in homecare revenue. Gross margins were 77.6% compared to 76.2% in the prior year, while net income was approximately $4.2 million or $0.47 per diluted share, compared to $2 million or $0.23 per diluted share in fiscal 2019. Now, moving on to the balance sheet and operating cash flow. Our balance sheet at June 30, 2020, included cash and cash equivalents of $10.5 million, no long-term debt, working capital of $25 million, and shareholders equity of $30.2 million. Cash flow from operations in Q4 fiscal year 2020 totaled $1.3 million compared to $1.4 million in Q4 fiscal year 2019. Operating cash flow was $4.2 million for the fiscal year ended June 30, 2020 compared to $2.6 million in the prior year. We are very pleased to be debt-free and well-positioned to continue building our cash reserves to support Electromed’s long-term growth strategies. Moreover, given the uncertainty surrounding the COVID-19 crisis, we are fortunate to have the financial flexibility that our balance sheet affords us. We have been evaluating longer-term options surrounding the optimal use of cash to maximize shareholder value. For the foreseeable future, however, we plan to retain our cash. This concludes our prepared remarks. Operator, please start the Q&A portion of the call.

Thank you. Our first question comes from Kyle Bauser with Colliers Securities. Please state your question.

Hi, good evening, Kathleen and Mike. Thanks for taking the questions, and congrats on an impressive fiscal ‘20 year. First, you talked a little bit about it. But can you provide any metrics that can give us a sense of how beneficial the relaxed guidelines are? For example, turnaround time, conversion rate, or just anything that would be helpful?

Hi, Kyle. Thank you so much. And Mike's going to take that question for us.

Yeah, sure, Kyle. So the CMS waiver really benefits us in two distinct ways. First, we're receiving a higher number of approvals for previously non-covered diagnoses like COPD. Those referrals are being approved at a much higher rate than normal. Non-covered diagnoses are still a small overall percentage of our total referrals, but we have seen an increase with the CMS waiver. Second, with the waiver, virtually all of our covered diagnoses are being approved. We typically have very high approval rates on our covered diagnoses in a normal operating environment. But with the CMS waiver in place, these approval percentages are getting close to 100%. The waivers also reduce the amount of time required to gain approval due to the less documentation being required. So overall, as a rough rule of thumb, the time it's taking us to gain a Medicare approval has been reduced by about 50%. One other benefit is there's a sequestration tax of 2%, that's been applied since 2014, and that's temporarily been suspended, starting in May of this year through the end of the year. This has the net effect of improving the revenue by 2% on our Medicare approvals.

Okay. That's great. Appreciate that. I was surprised to see the homecare channel was actually down less than the institutional channel early on in the pandemic. It seemed like hospitals were using anything and everything to treat COVID patients with respiratory conditions, including SmartVest. Has this cooled off a bit? And are you starting to see the ordering patterns kind of resemble pre-COVID levels?

No, great question, Kyle. So you're absolutely correct in that prior to COVID really increasing cases across the United States, we did see an uptick in our institutional revenue. As we look historically at that, it appears that that was somewhat of a stocking order. A lot of hospitals were preparing for the cases, knowing it was respiratory and thinking that they would be using more airway clearance, including HFCWO. What turned out, and we've been visiting with our physician advisory board on a number of occasions about this situation, is that there was a pullback due to COVID-19. Hospitals treating COVID-19 patients were very concerned due to the contagious nature of the disease through droplets and a lack of access to personal protective equipment, that their healthcare professionals and other patients might be in jeopardy of contracting it in the hospital. This protocol of limiting all airway clearance related to nebulizers and HFCWO in the hospital has continued to be limited. I will comment, though, that we have seen in the early part of quarter one some pickup in some of our disposable rep sales. This could be an early indicator that hospitals are figuring out how to use these safely in the hospital, or it could also indicate that there are fewer individuals being hospitalized for COVID-19 as well.

Got it. And kind of following up on that, to the extent you can share. You talked a little bit about rep sales, but how have adoption trends looked in July and August?

So, as we stated, exiting quarter four, we did see homecare referrals returning to near pre-COVID levels. We would see similar trends in the early part of quarter one. As far as institutional again, it is starting to show some pickup, but I think it will take some time to return to normal levels for institutional business.

Okay. And can you talk a little bit more about the development of the next-gen device? How is that been going? Will it give you an advantage in the marketplace? Are these enhancements kind of a function of consumer demand and requests you've received from docs in the field?

So, we are on schedule for our development timeline for the next-gen product. We have not talked specifically about those innovations for competitive reasons, nor specifically when we plan to launch, but we will continue to update as we believe that makes sense. Regarding your question, we are primarily taking into account the voice of the customer from patients and physicians around what they believe will be innovative in helping patients to find the treatment easier and simpler to use. That seems to continue to be the focus that we're on there.

Okay, great. And just lastly, any plans to utilize your cash balance any more than what you talked about? Are you just sitting tight until we get through COVID here? Thank you.

You know, as we've talked on previous calls, Kyle, we've engaged the Board in talking about our longer-range plans for the organization and what the appropriate uses of cash may be to support that long-term strategy. We did temporarily suspend them. We are going to those discussions again, starting our internal planning on those long-range plans here over the next six to nine months. Because of the uncertainty of COVID-19, we think the best use right now is to hold on to the cash for the foreseeable future.

Okay, got it. Thanks so much for the updates.

Thank you, Kyle.

Thank you. Ladies and gentlemen, there seems to be no additional requests for questions at this time. I'll turn it back to Kathleen Skarvan for closing comments. Thank you.

Thank you, Diego. Thank you all for participating in our call this afternoon. While we won't be on the road for investor conferences in the near term given COVID-19, we will be participating in the Colliers Institutional Investor Virtual Conference on September 10. We do remain accessible for one-on-one calls. Please reach out to our Investor Relations firm if you are interested in scheduling a follow-up call. We look forward to reporting back to you in November when we will release our first quarter fiscal 2021 financial results. Have a good day and stay safe.

Thank you. That concludes today's conference. All parties may disconnect. Have a good day.