8-K
Electromed, Inc. (ELMD)
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): February 8, 2022
ELECTROMED,
INC.
(Exact Name of Registrant as Specified in Its Charter)
| Minnesota | 001-34839 | 41-1732920 |
|---|---|---|
| (State<br> or Other Jurisdiction of<br><br> <br>Incorporation) | (Commission File<br> Number) | (I.R.S.<br> Employer Identification<br><br> <br>Number) |
500Sixth Avenue NW
NewPrague, MN 56071
(Address of Principal Executive Offices)(Zip Code)
(952)758-9299
(Registrant’s Telephone Number, Including Area Code)
NotApplicable
(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<br> to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12<br> under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to<br> Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to<br> 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<br> 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 2.02 | Results of Operations and Financial Condition. |
|---|
On February 8, 2022, Electromed, Inc. issued a press release announcing its financial results for the fiscal quarter ended December 31, 2021. The full text of the press release is attached as Exhibit 99.1.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits:
| Exhibit Number | Description | Method of Filing |
|---|---|---|
| 99.1 | Press Release dated February 8, 2022 | Furnished Electronically |
| 104 | Cover Page Interactive Data File (embedded in the cover page and formatted in inline XBRL) | 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: February 8, 2022 | By: /s/ Michael J. MacCourt | |
| Name: | Michael J. MacCourt | |
| Title: | Chief Financial Officer |
Exhibit 99.1
Electromed, Inc. Announces Second Quarter Financial Results
-- Record quarterly net revenues of $10.2 million while continuing to execute key strategic growth initiatives --
New Prague, Minnesota – February 8, 2022 – Electromed, Inc. (“Electromed” or the “Company”) (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced financial results for its fiscal 2022 second quarter ended December 31, 2021. Management will host a conference call at 5:00 p.m. Eastern Time today to discuss the results.
Fiscal Second Quarter2022 Highlights
| ● | Record net revenues of $10.2 million, compared with $9.5 million in the same period a year ago, driven by home care revenues of $9.4 million. |
|---|---|
| ● | Gross profit was 76.9% of net revenues, a decrease from 79.2% of net revenues in the same period a year ago, primarily due to increased raw material and shipping costs. |
| --- | --- |
| ● | Operating income decreased to $1.1 million from $1.6 in million in the same period a year ago, reflecting increased costs associated with strategic growth initiatives. |
| --- | --- |
| ● | Net income was $0.8 million, or $0.10 per diluted share, compared to $1.2 million, or $0.13 per diluted share, in the same period a year ago. |
| --- | --- |
| ● | $10.5 million in cash on hand at the end of the quarter, with $0.5 million operating cash flow during the quarter. |
| --- | --- |
| ● | Repurchased 55,687 common shares for a gross purchase price of $663,000. |
| --- | --- |
“I’m very pleased to report our second consecutive quarter of record revenue, driven by strong results in our flagship home care segment, with 14.2% growth in home care revenue in the first six months of our fiscal year compared to the same period in the prior year. Despite difficult macroeconomic conditions and another surge in the COVID-19 pandemic, the team clearly executed at a high level, and we believe these results demonstrate the benefits of our strategic growth initiatives,” said Kathleen Skarvan, Electromed’s Chief Executive Officer. “We will continue to move ahead with these strategic initiatives, which include expanding our sales force, raising awareness through increased direct-to-consumer marketing and enhancing the system infrastructure necessary to support our anticipated sales growth. We also advanced the development of our next-generation SmartVest, which we intend to be smaller, lighter and easier for patients to use. I am excited about our progress on all these fronts, and we believe that these investments will drive our future growth into an underserved market.”
Fiscal Second Quarter 2022 Results
Net revenues in the second quarter of our fiscal year ending June 30, 2022 (“fiscal 2022”) increased 7.9% to $10.2 million, from $9.5 million in the second quarter of our fiscal year ended June 20, 2021 (“fiscal 2021”), driven largely by the home care revenue increase of 5.6% to $9.4 million. The increase in home care revenue was primarily due to increased sales representative productivity and an increase in direct sales representatives. Field sales employees totaled 48 at the end of the second quarter of fiscal 2022, 39 of which were direct sales representatives, compared to 45 field sales employees and 38 direct sales representatives at the end of the second quarter of fiscal 2021. Sales force productivity remained strong during the quarter, with annualized home care revenue per direct sales representative at $951,000, above the Company’s targeted range of $800,000 to $900,000. Institutional revenue increased 7.8% to $333,000 in the second quarter of fiscal 2022, as hospitals returned to more normal purchasing activity compared to the prior period which was heavily impacted by COVID-19. Distributor revenue increased significantly year-over-year, growing 159.7% to $387,000 in the second quarter of fiscal 2022. International revenue declined 8.1% to $124,000 in the second quarter of fiscal 2022.
Gross profit in the second quarter of fiscal 2022 increased to $7.9 million, or 76.9% of net revenues, from $7.5 million, or 79.2% of net revenues, in the second quarter of fiscal 2021. The increase in gross profit this quarter was primarily due to stronger home care and distributor revenue. The decrease in gross profit percentage this quarter was primarily due to increased raw material costs and increased shipping costs. We expect raw material and shipping costs will continue to increase for the remainder of fiscal 2022.
Operating income totaled $1.1 million in the second quarter of fiscal 2022, compared to $1.6 million in the second quarter of fiscal 2021, reflecting increased strategic investments in SG&A partially offset by stronger revenue performance.
Net income for the second quarter of fiscal 2022 was $838,000, or $0.10 per diluted share, compared to $1.2 million or $0.13 per diluted share in the second quarter of fiscal 2021.
As of December 31, 2021, Electromed had $10.5 million in cash, $19.1 million in accounts receivable, working capital of $27.8 million and total shareholders’ equity of $33.5 million.
Webcast and Conference Call Information
Electromed will host a conference call at 5:00 p.m. Eastern Time today, February 8, 2022. Interested parties may participate in the call by dialing (877) 407-0789 (Domestic) or (201) 689-8562 (International).
The call will be webcast live and will be available for replay in the Investor Relations section of Electromed’s web site at http://investors.smartvest.com/ and directly via the following link:
https://viavid.webcasts.com/starthere.jsp?ei=1527326&tp_key=687bbfaf18.
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 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,” “future,” “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.
Contacts
Electromed, Inc. Mike MacCourt, Chief Financial Officer (952) 758-9299
investorrelations@electromed.com
Mike Cavanaugh, Investor Relations ICR Westwicke (617) 877-9641 mike.cavanaugh@westwicke.com
Financial Tables Follow
Electromed, Inc.Condensed Balance Sheets
| June 30, 2021 | |||
|---|---|---|---|
| Assets | |||
| Current Assets | |||
| Cash | 10,470,000 | $ | 11,889,000 |
| Accounts receivable (net of allowances for doubtful accounts of 45,000) | 19,114,000 | 17,032,000 | |
| Contract assets | 282,000 | 393,000 | |
| Inventories, net | 1,790,000 | 2,114,000 | |
| Prepaid expenses and other current assets | 716,000 | 276,000 | |
| Income tax receivable | 78,000 | - | |
| Total current assets | 32,450,000 | 31,704,000 | |
| Property and equipment, net | 4,027,000 | 3,605,000 | |
| Finite-life intangible assets, net | 617,000 | 663,000 | |
| Other assets | 98,000 | 88,000 | |
| Deferred income taxes | 1,012,000 | 1,049,000 | |
| Total assets | 38,204,000 | $ | 37,109,000 |
| Liabilities and Shareholders’ Equity | |||
| Current Liabilities | |||
| Current maturities of other long-term liabilities | 51,000 | $ | 33,000 |
| Accounts payable | 1,295,000 | 685,000 | |
| Accrued compensation | 2,061,000 | 2,474,000 | |
| Income tax payable | - | 288,000 | |
| Warranty reserve | 940,000 | 940,000 | |
| Other accrued liabilities | 323,000 | 219,000 | |
| Total current liabilities | 4,670,000 | 4,639,000 | |
| Other long-term liabilities | 47,000 | 54,000 | |
| Total liabilities | 4,717,000 | 4,693,000 | |
| Commitments and Contingencies | |||
| Shareholders’ Equity | |||
| Common stock, 0.01<br>par value per share, 13,000,000 shares authorized; 8,533,339 and 8,533,209 shares issued and outstanding, respectively | 85,000 | 85,000 | |
| Additional paid-in capital | 17,865,000 | 17,409,000 | |
| Retained earnings | 15,537,000 | 14,922,000 | |
| Total shareholders’ equity | 33,487,000 | 32,416,000 | |
| Total liabilities and shareholders’ equity | 38,204,000 | $ | 37,109,000 |
All values are in US Dollars.
Electromed, Inc.Condensed Statements of Operations (Unaudited)
| Three Months Ended<br> December 31, | Six Months Ended<br> December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Net<br> revenues | $ | 10,248,000 | $ | 9,496,000 | $ | 20,249,000 | $ | 17,500,000 |
| Cost<br> of revenues | 2,368,000 | 1,971,000 | 4,668,000 | 3,827,000 | ||||
| Gross profit | 7,880,000 | 7,525,000 | 15,581,000 | 13,673,000 | ||||
| Operating<br> expenses | ||||||||
| Selling,<br> general and administrative | 6,475,000 | 5,435,000 | 13,262,000 | 10,439,000 | ||||
| Research<br> and development | 329,000 | 507,000 | 705,000 | 989,000 | ||||
| Total operating expenses | 6,804,000 | 5,942,000 | 13,967,000 | 11,428,000 | ||||
| Operating income | 1,076,000 | 1,583,000 | 1,614,000 | 2,245,000 | ||||
| Interest<br> income, net | 6,000 | 10,000 | 15,000 | 19,000 | ||||
| Net income before income taxes | 1,082,000 | 1,593,000 | 1,629,000 | 2,264,000 | ||||
| Income<br> tax expense | 244,000 | 389,000 | 352,000 | 526,000 | ||||
| Net income | $ | 838,000 | $ | 1,204,000 | $ | 1,277,000 | $ | 1,738,000 |
| Income<br> per share: | ||||||||
| Basic | $ | 0.10 | $ | 0.14 | $ | 0.15 | $ | 0.20 |
| Diluted | $ | 0.10 | $ | 0.13 | $ | 0.15 | $ | 0.19 |
| Weighted-average<br> common shares outstanding: | ||||||||
| Basic | 8,478,394 | 8,570,313 | 8,501,041 | 8,560,590 | ||||
| Diluted | 8,760,946 | 8,924,861 | 8,788,194 | 8,926,182 |
Electromed, Inc.
Condensed Statements of Cash Flows (Unaudited)
| Six Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Cash Flows From Operating Activities | ||||||
| Net income | $ | 1,277,000 | $ | 1,738,000 | ||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||
| Depreciation | 221,000 | 250,000 | ||||
| Amortization of finite-life intangible assets | 79,000 | 65,000 | ||||
| Share-based compensation expense | 526,000 | 430,000 | ||||
| Deferred income taxes | 37,000 | 77,000 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (2,082,000 | ) | (2,454,000 | ) | ||
| Contract assets | 111,000 | 206,000 | ||||
| Inventories | 334,000 | 490,000 | ||||
| Prepaid expenses and other assets | (265,000 | ) | 8,000 | |||
| Income tax receivable | (366,000 | ) | 186,000 | |||
| Accounts payable and accrued liabilities | 22,000 | 495,000 | ||||
| Net **** cash (used in) provided **** by **** operating **** activities **** | (106,000 | ) | 1,491,000 | |||
| Cash Flows From Investing Activities | ||||||
| Expenditures for property and equipment | (511,000 | ) | (54,000 | ) | ||
| Expenditures for finite-life intangible assets | (69,000 | ) | (90,000 | ) | ||
| Net cash used in investing activities | (580,000 | ) | (144,000 | ) | ||
| Cash Flows From Financing Activities | ||||||
| Issuance of common stock upon exercise of options | - | 46,000 | ||||
| Taxes paid on net share settlement of stock option exercises | (70,000 | ) | (130,000 | ) | ||
| Repurchase of common stock | (663,000 | ) | - | |||
| Net cash used in provided by financing activities | (733,000 | ) | (84,000 | ) | ||
| Net (decrease) increase in cash | (1,419,000 | ) | 1,263,000 | |||
| Cash | ||||||
| Beginning of period | 11,889,000 | 10,479,000 | ||||
| End of period | $ | 10,470,000 | $ | 11,742,000 |