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 9, 2021
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)
Not
Applicable
(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 9, 2021, Electromed, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended December 31, 2020. 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 9, 2021 | Furnished<br> 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<br> 9, 2021 | By:<br> /s/ Michael J. MacCourt | |
| Name: | Michael J. MacCourt | |
| Title: | Chief Financial Officer |
Exhibit 99.1
FORIMMEDIATE RELEASE
Electromed,Inc. Announces Fiscal 2021 Second Quarter Financial Results
-- 11.1% Net Revenue Growth, Driven by a 16.1% Increase in Home Care Revenue --
NewPrague, Minnesota – February 9, 2021 – 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, 2020 (“Q2 FY 2021”).
Q2FY 2021 Highlights
| ● | Net revenue increased 11.1% to $9.5 million, compared to $8.5 million during the three months ended December 31, 2019 (“Q2 FY 2020”), driven by a 16.1% increase in home care revenue. |
|---|---|
| ● | Gross profit percentage increased to 79.2% of net revenue, compared to 78.1% in Q2 FY 2020, primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care. |
| --- | --- |
| ● | Net<br> income equaled $1.2 million, or $0.13 per diluted share, compared to $1.2 million, or<br> $0.14 per diluted share, in Q2 FY 2020, and reflects increased strategic investments<br> in both R&D and SG&A. |
| --- | --- |
| ● | Cash<br> as of December 31, 2020 was $11.7 million, benefiting from $669,000 in operating cash<br> flow in Q2 FY 2021. |
| --- | --- |
Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “In the second quarter we continued to adapt successfully to healthcare system disruption caused by the COVID-19 pandemic. Our strong execution of a hybrid virtual and face-to-face selling approach combined with the ability for prescribers to more easily provide care via the provisional CMS waiver drove a 16.1% increase in home care revenue compared to the prior year period. The home care success more than offset the ongoing challenges to the other markets of our business negatively impacted by the pandemic, most clearly seen in the year over year decline in the institutional market. However, compared to the first quarter of our current fiscal year our business benefited from increased face-to-face interaction between patients and physicians and improved access to clinics for our sales staff.”
Ms. Skarvan concluded, “We are encouraged by this quarter’s strong financial results and pleased with our sales team’s execution and ability to adapt to ever changing conditions in the market due to the COVID-19 pandemic. While we continue to operate within the constraints of a pandemic, we are cautiously optimistic about our prospects for continued revenue growth in the second half of fiscal 2021. Against this backdrop, we continue to fund strategic investments for our long-term growth, including research and development on our next generation device for HFCWO therapy and expanding our direct-to-patient marketing to increase awareness of bronchiectasis and SmartVest® as an effective treatment. During this pandemic, our priority continues to be the health, safety and well-being of our teammates, clinicians and patients, while executing on our strategy to gain greater share of the large, underpenetrated bronchiectasis market. We are well positioned to succeed given our strong balance sheet, excellent cash flow profile and differentiated SmartVest® Airway Clearance System.”
Q2FY 2021 Review
Net revenue in Q2 FY 2021 increased 11.1% to $9.5 million, from $8.5 million in Q2 FY 2020. Home care revenue increased 16.1% to $8.9 million in Q2 FY 2021 from $7.7 million in Q2 FY 2020. Field sales employees totaled 45, of which 38 were direct sales, at the end of Q2 FY 2021, compared to 40 at the end of Q2 FY 2020, of which 34 were direct sales. Institutional revenue decreased 37.4% to $309,000 from $494,000 in Q2 FY 2020, primarily due to a decrease in the volume of devices and disposable wraps sold due to COVID-19’s continued impact on hospital purchasing activity. Home care distributor revenue increased 13.7% to $149,000 from $131,000 in Q2 FY 2020. International revenue decreased 46.6% to $135,000 from $253,000 in Q2 FY 2020.
Gross profit in Q2 FY 2021 totaled $7.5 million, or 79.2% of net revenue, compared to $6.7 million, or 78.1% of net revenue, in Q2 FY 2020. The increase in gross profit percentage was primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care.
Selling, general and administrative (“SG&A”) expenses in Q2 FY 2021 increased 9.5% to $5.4 million from $5.0 million in Q2 FY 2020. The increase in SG&A spending was primarily due to increased payroll and compensation-related expenses associated with higher incentive payments on stronger home care revenue and higher average sales and marketing headcount, as well as increased direct-to-consumer marketing expenses, partially offset by lower travel, meals and entertainment expenses. As a percentage of revenue, SG&A expenses were 57.2%, compared to 58.1% in Q2 FY 2020. Research and development expenses increased to $507,000 from $143,000 in Q2 FY 2020, primarily due to the development of a next generation platform. As a percentage of revenue, R&D expenses were 5.3% compared to 1.7% in Q2 FY 2020.
Net income before income taxes totaled $1.6 million in Q2 FY 2021, compared to $1.6 million in Q2 FY 2020, and reflects increased strategic investments in both R&D and SG&A.
Net income was $1.2 million, or $0.13 per diluted share, compared to $1.2 million, or $0.14 per diluted share, in Q2 FY 2020. In Q2 FY 2021, income tax expense totaled $389,000, compared to an income tax expense of $419,000 in the same period of the prior year.
Year-to-DateFY 2021 Summary
For the six months ended December 31, 2020, net revenue grew 3.9% to $17.5 million, from $16.8 million in the same period of fiscal 2020. The revenue increase was primarily due to growth in our home care market, partially offset by lower institutional revenue. Gross profit percentage was 78.1%, compared to 77.3% in the prior fiscal year period. The gross margin percentage increase was primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care. Net income was approximately $1.7 million, or $0.19 per diluted share, compared to approximately $2.2 million, or $0.25 per diluted share, in the first six months of fiscal 2020. The net income decrease was primarily due to increased strategic investments in R&D and SG&A.
FinancialCondition
The Company’s balance sheet at December 31, 2020 included cash of $11.7 million, accounts receivable of $15.4 million, no debt, working capital of $27.4 million, and shareholders’ equity of $32.3 million.
ConferenceCall
Management will host a conference call on Tuesday, February 9, 2021 at 4:00 pm CT (5:00 pm ET) to discuss Q2 FY 2021 financial results and other matters.
Interested parties may participate in the call by dialing:
| ● | (877)<br> 407-9753 (Domestic) |
|---|---|
| ● | (201)<br> 493-6739 (International) |
| --- | --- |
The conference call also will be accessible via the following link:
https://78449.themediaframe.com/dataconf/productusers/elctr/mediaframe/43323/indexl.html
For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of the Company’s web site at: http://investors.smartvest.com/
AboutElectromed, Inc.
Electromed, Inc. manufactures, makes, 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.
CautionaryStatements
Certainstatements in this press release constitute forward-looking statements as defined in the U.S. Private Securities Litigation ReformAct of 1995. Forward-looking statements can generally be identified by words such as “believe,” “intend,”“may,” “potential,” “should,” “will,” and similar expressions, including the negativeof 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. Examplesof risks and uncertainties for the Company include, but are not limited to, the duration, extent and severity of the COVID-19pandemic, including its effects on our business, operations and employees as well as its impact on our customers and distributionchannels and on economies and markets more generally; the competitive nature of our market; changes to Medicare, Medicaid, orprivate insurance reimbursement policies; changes to state and federal health care laws; changes affecting the medical deviceindustry; our ability to develop new sales channels for our products such as the Home Care distributor channel; our need to maintainregulatory compliance and to gain future regulatory approvals and clearances; new drug or pharmaceutical discoveries; generaleconomic and business conditions; our ability to renew our line of credit or obtain additional credit as necessary; our abilityto protect and expand our intellectual property portfolio; the risks associated with expansion into international markets, aswell as other factors we may describe from time to time in the Company’s reports filed with the Securities and ExchangeCommission (including the Company’s most recent Annual Report on Form 10-K, as amended from time to time, and subsequentQuarterly Reports on Form 10-Q and Current Reports on Form 8-K). Investors should not consider any list of such factors to bean exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into accountwhen 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 newinformation or future events.
| Contacts: | |
|---|---|
| Electromed, Inc. | The Equity Group Inc. |
| Mike<br> MacCourt, Chief Financial Officer | Kalle<br> Ahl, CFA |
| (952)<br> 758-9299 | (212)<br> 836-9614 |
| investorrelations@electromed.com | kahl@equityny.com |
| Devin<br> Sullivan | |
| (212)<br> 836-9608 | |
| dsullivan@equityny.com |
Financial Tables Follow:
Electromed,Inc.
CondensedBalance Sheets
| June 30, 2020 | |||
|---|---|---|---|
| Assets | |||
| Current Assets | |||
| Cash | 11,742,115 | $ | 10,479,150 |
| Accounts receivable (net of allowances for doubtful accounts of 45,000) | 15,395,124 | 12,940,677 | |
| Contract assets | 696,993 | 902,619 | |
| Inventories, net | 2,603,495 | 3,084,620 | |
| Prepaid expenses and other current assets | 381,763 | 353,318 | |
| Income tax receivable | 76,271 | 262,155 | |
| Total current assets | 30,895,761 | 28,022,539 | |
| Property and equipment, net | 3,583,374 | 3,788,469 | |
| Finite-life intangible assets, net | 622,697 | 598,389 | |
| Other assets | 43,792 | 80,166 | |
| Deferred income taxes | 678,000 | 755,000 | |
| Total assets | 35,823,624 | $ | 33,244,563 |
| Liabilities and Shareholders’ Equity | |||
| Current Liabilities | |||
| Current maturities of other long-term liabilities | 40,455 | $ | 72,328 |
| Accounts payable | 722,905 | 555,510 | |
| Accrued compensation | 1,823,742 | 1,404,497 | |
| Warranty reserve | 770,000 | 740,000 | |
| Other accrued liabilities | 128,859 | 214,045 | |
| Total current liabilities | 3,485,961 | 2,986,380 | |
| Other long-term liabilities | 3,929 | 8,868 | |
| Total liabilities | 3,489,890 | 2,995,248 | |
| Commitments and Contingencies | |||
| Shareholders’ Equity | |||
| Common stock, 0.01 par value per share, 13,000,000 shares authorized; 8,635,045 and 8,567,834 shares issued and outstanding, respectively | 86,350 | 85,678 | |
| Additional paid-in capital | 16,825,192 | 16,480,134 | |
| Retained earnings | 15,422,192 | 13,683,503 | |
| Total shareholders’ equity | 32,333,734 | 30,249,315 | |
| Total liabilities and shareholders’ equity | 35,823,624 | $ | 33,244,563 |
All values are in US Dollars.
Electromed,Inc.
CondensedStatements of Operations
(Unaudited)
| Three Months Ended <br> December 31, | Six Months Ended <br> December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |||||
| Net revenues | $ | 9,496,073 | $ | 8,546,942 | $ | 17,500,245 | $ | 16,849,440 |
| Cost of revenues | 1,970,830 | 1,871,434 | 3,826,780 | 3,831,584 | ||||
| Gross profit | 7,525,243 | 6,675,508 | 13,673,465 | 13,017,856 | ||||
| Operating expenses | ||||||||
| Selling, general and administrative | 5,435,025 | 4,965,053 | 10,439,205 | 9,859,858 | ||||
| Research and development | 507,497 | 143,477 | 988,556 | 242,414 | ||||
| Total operating expenses | 5,942,522 | 5,108,530 | 11,427,761 | 10,102,272 | ||||
| Operating income | 1,582,721 | 1,566,978 | 2,245,704 | 2,915,584 | ||||
| Interest income, net | 9,706 | 37,078 | 18,985 | 77,028 | ||||
| Net income before income taxes | 1,592,427 | 1,604,056 | 2,264,689 | 2,992,612 | ||||
| Income tax expense | 389,000 | 419,000 | 526,000 | 793,000 | ||||
| Net income | $ | 1,203,427 | $ | 1,185,056 | $ | 1,738,689 | $ | 2,199,612 |
| Income per share: | ||||||||
| Basic | $ | 0.14 | $ | 0.14 | $ | 0.20 | $ | 0.26 |
| Diluted | $ | 0.13 | $ | 0.14 | $ | 0.19 | $ | 0.25 |
| Weighted-average common shares outstanding: | ||||||||
| Basic | 8,570,313 | 8,390,125 | 8,560,590 | 8,384,807 | ||||
| Diluted | 8,924,861 | 8,759,143 | 8,926,182 | 8,698,168 |
Electromed,Inc.
CondensedStatements of Cash Flows
(Unaudited)
| Six Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2020 | 2019 | |||||
| Cash Flows From Operating Activities | ||||||
| Net income | $ | 1,738,689 | $ | 2,199,612 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation | 250,489 | 318,982 | ||||
| Amortization of finite-life intangible assets | 65,074 | 60,219 | ||||
| Share-based compensation expense | 429,776 | 444,258 | ||||
| Deferred income taxes | 77,000 | 18,000 | ||||
| Loss on disposal of property and equipment | — | 1,294 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (2,454,447 | ) | 41,822 | |||
| Contract assets | 205,626 | (194,963 | ) | |||
| Inventories | 490,430 | (19,448 | ) | |||
| Prepaid expenses and other assets | 7,929 | 76,213 | ||||
| Income tax receivable | 185,884 | (206,489 | ) | |||
| Income tax payable | — | (288,511 | ) | |||
| Accounts payable and accrued liabilities | 494,429 | (427,390 | ) | |||
| Net cash provided by operating activities | 1,490,879 | 2,023,599 | ||||
| Cash Flows From Investing Activities | ||||||
| Expenditures for property and equipment | (53,778 | ) | (669,842 | ) | ||
| Expenditures for finite-life intangible assets | (90,090 | ) | (30,899 | ) | ||
| Net cash used in investing activities | (143,868 | ) | (700,741 | ) | ||
| Cash Flows From Financing Activities | ||||||
| Issuance of common stock upon exercise of options | 45,669 | 75,936 | ||||
| Taxes paid on net share settlement of stock option exercises | (129,715 | ) | — | |||
| Net cash provided by (used in) financing activities | (84,046 | ) | 75,936 | |||
| Net increase in cash | 1,262,965 | 1,398,794 | ||||
| Cash | ||||||
| Beginning of period | 10,479,150 | 7,807,928 | ||||
| End of period | $ | 11,742,115 | $ | 9,206,722 |