Greetings, and welcome to the ElectroMed First Quarter Fiscal 2026 Earnings Call. At this time, 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 my pleasure to introduce you to your host, Mike Kavanagh, Investor Relations. Thank you, Mike. You may begin.

Good afternoon, and thank you for joining the ElectroMed earnings call. Earlier today, ElectroMed Incorporated released financial results for the first quarter of fiscal 2026. The press release is currently available on the company's website at www.smartbest.com. Before we get started, I would like to remind everyone 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 plan. 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. It should not place any undue reliance on those 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 me on the call today are Jim Kniff, Electromed's President and Chief Executive Officer, and Brad Nagel, Chief Financial Officer. As on previous calls, Jim will provide operational highlights from the quarter. Brad will then review the financials, and we will close with a question and answer session. With that, I will now turn the call over to Jim Kniff, President and Chief Executive Officer

of ElectroMed. Thank you, Mike, and thank you to everyone joining our call today. I'm proud to share that we started the fiscal year with strong momentum, delivering our 12th consecutive quarter of year-over-year revenue and profit growth. This consistency reflects the strength of our business fundamentals, the dedication of our team, and the growing recognition of our SmartBest therapy as a critical element in the effective treatment of patients with bronchiectasis, a non-curable and chronic disease. In addition, I'm excited to announce that we have been recognized by Time Magazine in their inaugural ranking of America's top 100 growth leaders. This list rounds up the top-performing publicly listed companies in the United States, characterized by revenue growth as well as financial security. We are proud to be part of this select group of companies across a wide range of industries. Starting with our key financials in Q1, we generated $16.9 million in revenue, representing a 15% year-over-year increase. I'm happy to report that growth was broad-based across our three primary channels. Our core home care channel grew 13% year-over-year, reflecting consistent salesforce productivity gains and the continued thoughtful expansion of our sales team. Distributor sales increased 41% with continued demand from our carefully curated home medical equipment partners. Our hospital sales surged 52%, underscoring the early success for strategic investments in this emerging channel. We've long recognized that hospitals represent a critical point of intervention for patients with chronic respiratory conditions, particularly those with bronchiectasis. Hospitals are where many of these patients first present with symptoms and where early diagnosis and treatment decisions are made. As such, we will continue to invest in this market. Operating income rose to $2.7 million, a 38% increase year over year, and represented 16% of revenue, a strong indicator of our operational efficiency and disciplined cost management, which helped to drive ElectroMed's operating leverage. The strength across our P&L enabled us to deliver fully diluted EPS of 25 cents, a significant improvement over the prior year. As previously announced in fiscal 2026 Q1, our board authorized a $10 million stock repurchase program. This reinforces our belief that ElectroMed remains a compelling investment and continues our commitment to returning value to shareholders. With that backdrop of strong top-line growth, I'd like to discuss some of our ongoing commercial initiatives, which have helped to drive our strong results. As in previous quarters, we continue to invest in our commercial infrastructure to support long-term growth. In fiscal 2026 Q1, we expanded our direct home care Salesforce to 57 representatives, up from 55 in Q4 fiscal year 2025. This is the team who will continue to make ElectroMed the leader in the home care market. As we've discussed in previous calls, one of the most compelling opportunities for ElectroMed lies in addressing the large and underserved market for bronchiectasis treatment. Today, it's estimated that 923,000 patients in the United States are diagnosed with bronchiectasis, yet only 16% are using high-frequency chest wall oscillation therapy. That leaves an immediate addressable group of nearly 800,000 diagnosed patients who we believe could benefit from our SmartVest system. Even more astonishing, it is estimated that there may be over 4 million additional individuals who have undiagnosed bronchiectasis, highlighting the urgent need for education. To address this gap, we launched the Triple Down on Bronchiectasis campaign, which promotes a three-pronged treatment paradigm. Number one, clear airways first with SmartVest to remove mucus. Number two, treat the patient's infection. And number three, help reduce inflammation. The messaging to emphasize clear airways first is a concept that's resonating strongly with both physicians and patients. We've reached over 18,000 individuals with this message, and more than 3,000 have actively engage with our content. We also continue to invest in clinical education and advocacy to support early diagnosis and appropriate prescribing a smart vest therapy. In fiscal 2026 Q1, we hosted three CEU webinars for medical professionals, including two sessions on the ABCs of bronchiectasis and one session on bronchiectasis overlap syndromes. Additionally, during this quarter, we'll be attending three national trade shows and numerous regional events to showcase our technology and reinforce the importance of airway clearance and bronchiectasis management. In another example, we completed a manuscript based on data from the NTM Bronchiectasis Research Registry, which found that 58% of qualifying patients were not prescribed HFCWO therapy, technology, despite meeting clinical criteria. This gap represents a significant opportunity for early intervention our team is working to close. Operationally, Q1 was a milestone quarter.

We successfully launched a new CRM system on time and on budget, with no disruptions

to our sales team's activity. This platform is already improving field productivity, delivering better market insights, and enhancing coordination with our fulfillment teams. On previous calls, I've shared with you our smart order e-prescribe solution to support our prescribers, which replaces outdated facts-based workflows. This move greatly enhances efficiency for our clinics by seamlessly providing ElectroMed with complete prescription documentation, enabling us to ship SmartVest to our patients sooner so they can breathe easier. In Q1, over a third of our orders are submitted electronically, enabling faster fulfillment and improved patient outcomes. We also completed our manufacturing optimization plan that began in fiscal 2025, which was executed flawlessly by our operations team. Among other things, this initiative physically restructured our manufacturing facility with the goal of improving production efficiency. Despite the complexity of the transition, there were no disruptions to patient deliveries. And speaking of manufacturing, I'd like to emphasize that ElectraMed is a U.S.-based company with our operations and product assembly located in the U.S., and 99% of our net revenues are generated in the U.S. Given the concentration of our business operations in the U.S., we feel we are well positioned to maintain our strong track record of on-time delivery to our customers and maintain our mid-70s or better gross margins. However, we remain vigilant for possible issues with our primarily domestic suppliers who may have tariff exposure within their upstream supply chains. Overall, I'm extremely pleased with Electromed's team's execution and expect this to continue throughout fiscal 2026 and beyond. This concludes my prepared remarks, and I'd now like to turn the call over to Brad for a review of our financials. Brad? Thanks, Jim. All amounts

below are for the three months ended September 30, 2025, or Q1, fiscal year 2026, and compared to the three months ended September 30, 2024, or Q1, fiscal year 2025. Net revenues grew 15.1% to $16.9 million, up from $14.7 million. Revenue in our direct home care business increased year year-over-year by 12.7% to $14.9 million, up from $13.2 million. The increase in revenue was primarily due to an increase in direct sales representatives and higher net revenues per sales representative. Throughout Q1, we averaged 57 home care sales reps across 61 territories, And the average annualized home care revenue for these reps in Q1 was $1,052,000, which is within ElectraMed's target range of $1,000,000 to $1.1,000,000. Revenue in our non-home care businesses increased year over year, coming in at $2.0 million. Home care distributor revenue of $829,000 grew 41.2%. percent. Hospital revenue grew 51.7 percent increasing to one million forty seven thousand dollars. These were partially offset by a thirty two point two percent decrease in other revenue which decreased to one hundred twenty two thousand dollars. Gross profit increased to thirteen point two million dollars or seventy eight point one percent of net revenues from eleven point five million dollars or 78.3 percent of net revenues. The increase in gross profit dollars was primarily a result of increased overall revenue and higher net revenues per device. The decrease in gross profit percentage was a result of higher costs which were partially offset by higher net revenues per device. Selling general and administrative expenses were 10.3 million dollars representing an increase of 0.9 million dollars or 9.6 percent. The increase in the current period was primarily due to the increased salaries and incentive compensation related to the higher average number of personnel in the sales, sales support, marketing, and reimbursement teams to process higher patient referrals. Operating income was 2.7 million dollars or 15.8 percent of net revenues compared to 1.9 million dollars or 13.2 percent of net revenues. This 37.8 percent increase in operating income was primarily due to an increase in revenue and gross profit. Net income increased by 44.9 percent to 2.1 million dollars or 25 cents per diluted share compared to 1.5 million dollars or 16 cents per diluted share in the first quarter of the prior fiscal year. As of September 30, 2025, ElectraMed had $14.1 million in cash, $24.8 million in accounts receivable, and no debt, achieving a working capital of $35.8 million and total shareholders' equity of $44.7 million. The cash balance reflects a decrease of $1.2 million for Q1 fiscal year 2026. The decrease in cash for the quarter was driven primarily by share repurchases of $1 million of ElectraMed common stock. In conclusion, we are excited by the strong financial start to the fiscal year and continue to see opportunity to deliver on our objectives of double-digit top-line growth and expanded operating leverage for fiscal year 2026. With that, we'd like to move to the Q&A portion of the call. Operator, please open the call to

questions. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed and you would like

to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Your first question comes from Kyle Bosa with Roth Capital Partners. Please

go ahead. Great, thanks. Hey, Jim and Brad, great results here again. Thanks for taking my question. Maybe starting with, Jim, you mentioned, you know, like 55% of eligible patients haven't been prescribed a vest yet, so obviously a significant opportunity here. are you seeing that in your growth profile so I guess how much of your growth is coming from kind of improved awareness new users versus existing prescribers that's a great question

and and thanks for asking it Kyle and hope you're well you know we feel like adding sales reps which we've been doing pretty consistently year over year is part of our secret sauce we still really believe that this is largely a clinical sale, but I think this is a terrific time and place for bronchiectasis. You know, during this quarter, so our fiscal 2026 Q2, you know, as I mentioned in my prepared remarks, we've attended, you know, multiple trade shows. We're starting to see more and more people, you know, physicians on podiums speaking about bronchiectasis, treatment paradigms. You know, we have a new entrant in the market, as you know, on the pharmaceutical side who's invested a lot of money on market awareness, both for patients as well as physicians, which really augments what we've been doing. And so I think there's just a great deal of awareness. So I think we're getting some tailwinds from that. But I also think that we're continuing to gain market share as a single product company that's focused on this space.

Got it. And in our checks, it kind of seems like there's quite a significant opportunity in treating patients earlier and, you know, as their disease progresses. I think one doctor mentioned that a lot of patients many times are finally getting treated for the disease once the house is already kind of burned down, which you sort of alluded to in your comment. And, of course, being able to treat earlier hinges on reimbursement and indications for use and, of course, building awareness and maybe market development efforts are pretty cost prohibitive to try to treat earlier. But I guess, do you envision pathways to being able to treat the broader patient population, you know, from a reimbursement standpoint, you're not having to do a scan, et cetera? Or it just seems like that, you know, patients could benefit from this before kind of crashing.

No, we totally agree with you. I think that is part of the education campaign. And, you know, one of the things that I mentioned in my prepared remarks was the manuscript, which we're looking to get published. And, you know, the shameful thing is that, you know, when we took a look at the NTM registry data, you know, 50% of the patients qualified. So all the things that you just mentioned, having a CT scan, having a daily productive cough for six months, and having tried and failed something, they qualified for that, and yet they weren't put on the HFCWO therapy sooner. And so we think that manuscript and making more awareness of clearing the airways sooner and the fact that many of these patients already meet reimbursement guidelines I think is going to be a real benefit. I don't think that the reimbursement criteria for HFCWO, whether it's our device or anyone else's, is going to change. I just think that the prescribing physicians are going to be a lot more open to putting patients on the therapy sooner rather than later. And I think that's a big benefit, not only to the patients, but also to the space in general.

And I think in the deck, you call out 22% of home care qualified referral volume coming from neuromuscular. Anything to call out there in terms of additional opportunities for growth?

Oh, definitely. I mean, there's a lot of ICD-10 codes right now, Kyle, that there will be a reimbursement for HFCWO. the challenge is that the reimbursement guidelines aren't as clear as they are for bronchiectasis. And, you know, as I've mentioned time and time again, there's still this just great unmet need. You know, there's basically 800,000 patients across the country today that have the disease, have been diagnosed with it, but they're not on, you know, SmartFest therapy. And so we want to unlock that market opportunity. And that doesn't even include the additional 4.1 million people who have bronchiectasis COPD overlap that have not been diagnosed. And so I think if we can unlock that iceberg of opportunity, you know, we're going to take advantage of that. That's just in the bronchiectasis space, but there's other, you know, diseases like cystic fibrosis and there's neuromuscular diseases, you know, that patients can benefit from this technology. And so we're going to be, you know, as we pivot into calendar year 26, one of the things that we're going to be doing with our sales reps is really having them bear down on some of those more prevalent disease states where, you know, we can get reimbursed for the technology.

Got it. And maybe just one more nice growth in the hospital channel. Do you have dedicated reps for the hospital or are your direct reps and maybe even distributors going after this channel?

I hear it. Yeah, no, great question. You know, we don't have distributors that are going after this channel for us. Predominantly, as you know, our model is direct to patient. And in the case of hospitals, you know, we've been really, probably for the last couple of years, very deliberate about investing in the space. We feel like this is a gateway for getting the patients on the technology in the hospital when they present there, as I mentioned in my prepared remarks. And then, you know, if they get discharged, we want them on our technology going to the home. So we've got three sales reps that are focused on that channel right now. You know, we are looking to judiciously add reps in that space. You know, the sales cycle is very different in the hospital market versus the home market. You know, the home market, it's a capitated rental model. It's pretty easy. not easy, but, you know, when our sales reps are calling on a clinic and they're engaging with a physician, they can work with that physician in identifying patients that would benefit from our technology. In the case of the hospital, you know, it's really a capital sale. And so, you know, the time to revenue can, in some instances, be years based on the buying cycle of the facility. So we, you know, we're getting a lot of interest as hospitals are updating their fleets and as their capital budgets accommodate, you know, them buying high-frequency chest wall oscillation devices. We also have a contract with Vizient, which represents, you know, half the health systems across the country. So we feel like we're really well positioned with some of the dynamics in the market right now, coupled with the fact that, you know, we have a best-in-class technology that we think the hospitals would benefit from and their staff, because it's very intuitive to use, and the patients that we would put on the product.

Thank you. Great results. I will jump back into you.

Thanks, Kyle.

Your next question comes from Ben Hainor with Lake Street Capital Markets. Please go ahead.

Good afternoon, guys. Thanks for taking the questions.

First off, for me, just following up on kind of the hospital discussion there,

you know, knowing that there's a longer sales cycle, you know, also implies that you kind of know the pipeline that you have out there. How great, how good is your visibility there? And should investors kind of think about, you know, this million dollar-ish a quarter as kind of a new baseline for that area of the business?

that's a great question and um thanks for being on the call so you know from our standpoint um ben you know that's why we're not putting all of our eggs into that basket you know we our primary focus as a company is still going to be on the home care segment and that's you know calling on clinics and calling on pulmonologists within those clinics because we feel like that still has not been unlocked. The hospital business is a little unpredictable because you're really at the whim of operating budgets within the hospitals. You're at the whims of standardization committees. You know, you have a lot more decision makers in the fold, but we do think by putting focus there and, you know, in doing so in areas where we feel like fleets are being upgraded or people are investing in new equipment, that we should be able to continue to have certainly 20% plus growth in that segment. How it comes, that's a little bit less predictable, but we think when the dust settles year over year for a fiscal year, we should be growing that market certainly at a higher rate than what our home care business growth is, albeit on a very small basis.

got it so if you're in the mix there you've got a good chance of something falling out

yeah we feel we've you know we've got a great product and you know we're not going to cover the entire landscape with only a few people but that's also giving us a lot of knowledge you know as we look to expand in that market you know much like with our home reps we just don't you know we've seen companies add a lot of fuel to an opportunity only for it not to materialize and then they have to back off, and we think the approach that we're taking is the right one, but if, you know, if we see the algorithm where we can add more reps sooner rather than later,

we'll certainly, you know, be doing that. Got it, and then on the, kind of, on the subject of the new pharmaceutical option, and you discussed it a bit here already, but, you know, how do you see kind of the stance of clinicians that evolving their treatment algorithms, you know, to get people on the drug, you know, obviously the infection you got to clear and bring more folks

to your device? Now, Ben, that's a great question. Look, they've brought a lot of awareness to bronchiectasis, which has been fantastic. But what the drug doesn't do is it doesn't clear the mucus. And so that's really where we come into play. And as I mentioned with our triple down on bronchiectasis campaign, you know, first and foremost, for the patient to be able to breathe easier, you've got to remove that mucus, which is the fuel for a future infection. You know, these patients already have bronchiectasis. It's chronic, it's irreversible. And so, you know, as mucus builds up within their airways, we want to clear that out. You know, if they do have an infection, the paradigm today is they get treated with an antibiotic, and then the drug is really to help minimize future inflammation. But it doesn't cure the disease. And so, you know, we think it's complementary to what we do. And as far as the prescribing habits, I think, you know, for prescribing physicians, they're excited about it. You know, if they have a patient that has, you know, exacerbations routinely, you know, maybe they'll look to prescribe this. I think there's some that are on the sidelines just kind of taking a wait-and-see approach. I think the other challenge with the drug, though, is it's a very expensive proposition, both from the payer's standpoint. You know, it's $85,000 per patient per year. Our technology, on the other hand, is, you know, over $10,000 for life, you know, and these are patients who have a chronic illness. So it's early innings relative to the drug, but they have created a lot of awareness, and to date, they don't have reimbursement from either CMS or from commercial payers. So we'll see. So maybe the way to think about

it is the drug is maybe some really expensive snow tires, but there are still other things that you need to be cognizant of when you're driving in the snow. So that's a very good

analogy. Local Minnesota. There we go.

I think that's all. I'm thinking of the questions, gentlemen.

Pleasure. Thanks for being on the call.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Jim Kenneth for any closing remarks. Well,

thank you all for joining today's call. I would think that you should be pleased with how ElectraMet is really executing with precision across all areas of our business. We're growing revenues, profits, expanding our commercial footprint, and we're investing in strategic initiatives that position us for long-term success. And I mentioned some of those on the call today, including the manufacturing optimization program that we just concluded. We've also implemented a new CRM system, which we're very excited about. And we remain committed to delivering value to our patients, providers, and our shareholders. And we're excited about the opportunities that lie ahead. So thank you all, and appreciate you being on the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.