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): May 11, 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 May 11, 2021, Electromed, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended March 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 May 11, 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: May 11, 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 Third Quarter Financial Results
-- Second Consecutive Quarter of Year over Year Growth, Continuing Profitability & Positive Cash Flow while Investing in Key Strategic Initiatives --
NewPrague, Minnesota – May 11, 2021 – Electromed, Inc. (“Electromed” or the “Company”) (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced its financial results for the three months ended March 31, 2021 (“Q3 FY 2021”).
Q3FY 2021 Highlights
| ● | Net<br> revenue increased 0.5% to $8.8 million, compared to $8.7 million during the three months<br> ended March 31, 2020 (“Q3 FY 2020”), driven by a 4.2% increase in home care<br> revenue. |
|---|---|
| ● | Gross<br> profit percentage increased to 76.3% of net revenue, compared to 75.4% in Q3 FY 2020,<br> primarily due to a higher mix of home care revenue and a favorable mix of Medicare within<br> home care. |
| --- | --- |
| ● | Net<br> income equaled $224,000, or $0.03 per diluted share, compared to $653,000,<br> or $0.07 per diluted share, in Q3 FY 2020, and reflects increased strategic investments<br> in both R&D and SG&A. |
| --- | --- |
| ● | Cash<br> as of March 31, 2021 was $12.5 million, benefiting from $834,000 in operating<br> cash flow in Q3 FY 2021. |
| --- | --- |
Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “Although this winter’s resurgence of new COVID-19 cases and hospitalizations dampened our home care revenue in January and February, we noted a sharp rebound in March, during which we achieved record monthly referrals and revenue. In March, we benefited from increased patient visits to clinics and greater access for our sales representatives as restrictions were further lifted and vaccines started to become more widely administered throughout the country. In our institutional segment, which had the greatest overall impact from the pandemic, we registered 43.4% sequential revenue growth, another positive indication that hospitals are increasing their non-COVID-19 patient census and our sales representatives are gaining greater hospital access.”
Ms. Skarvan concluded, “While we continue to operate within the constraints of a pandemic, the ongoing nationwide deployment of vaccinations, the extension of the provisional waiver from the Centers for Medicare & Medicaid Services, and our strong operating performance in March gives us optimism that positive operating performance will continue in the fourth quarter. Even during these uncertain times, our solid cash flow generation capacity and strong balance sheet enable us to invest in Electromed’s future. We continue to make strategic investments in research and development, sales, marketing, and infrastructure to position Electromed for profitable long-term growth and to support our goal of enhancing patients’ quality of life one breathat a time with our differentiated SmartVest® Airway Clearance System.”
Q3FY 2021 Review
Net revenue in Q3 FY 2021 increased 0.5% to $8.8 million, from $8.7 million in Q3 FY 2020. Home care revenue increased 4.2% to $8.2 million in Q3 FY 2021 from $7.8 million in Q3 FY 2020, primarily due to an increase in referrals and approvals. Field sales employees totaled 48, of which 39 were direct sales, at the end of Q3 FY 2021, compared to 44 at the end of Q3 FY 2020, of which 37 were direct sales. We commenced recruiting for four additional direct field sales employees in April. Institutional revenue decreased 27.3% to $443,000 from $609,000 in Q3 FY 2020, primarily due to the continued impact of COVID-19 on hospital purchasing activity. Home care distributor revenue decreased 36.0% to $105,000 from $164,000 in Q3 FY 2020. International revenue decreased 44.5% to $76,000 from $137,000 in Q3 FY 2020.
Gross profit in Q3 FY 2021 totaled $6.7 million, or 76.3% of net revenue, compared to $6.6 million, or 75.4% of net revenue, in Q3 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 Q3 FY 2021 increased 14.4% to $6.1 million from $5.3 million in Q3 FY 2020. The increase in SG&A spending was primarily due to increased payroll and compensation-related expenses associated with higher average number of sales and marketing personnel, greater temporary resources to assist with systems infrastructure investments and increased incentive payments on higher home care revenue. The Company also incurred higher discretionary marketing expenses related to a direct-to-consumer marketing campaign and a comprehensive market research project, as well as higher professional fees. These increased expenses were partially offset by lower travel, meals and entertainment expenses. As a percentage of revenue, SG&A expenses were 68.9%, compared to 60.5% in Q3 FY 2020.
Research and development (“R&D”) expenses in Q3 FY 2021 totaled $407,000, compared to $392,000 in Q3 FY 2020, and include expenses for the development of a next generation platform. As a percentage of revenue, R&D expenses were 4.6% compared to 4.5% in Q3 FY 2020.
Net income before income taxes totaled in Q3 FY 2021 $253,000 in Q3 FY 2021, compared to $947,000 in Q3 FY 2020, and reflects increased strategic investments in both R&D and SG&A.
Net income was $224,000, or $0.03 per diluted share in Q3 FY 2021, compared to $653,000, or $0.07 per diluted share, in Q3 FY 2020. In Q3 FY 2021, income tax expense totaled $29,000, compared to an income tax expense of $294,000 in the same period of the prior year.
Year-to-DateFY 2021 Summary
For the nine months ended March 31, 2021, net revenue grew 2.7% to $26.3 million, from $25.6 million in the same period of our fiscal year ended June 30, 2020 (“FY 2020”). The revenue increase was primarily due to growth in the Company’s home care market, partially offset by lower institutional and international revenue. Gross profit percentage was 77.5%, compared to 76.6% 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 $2.0 million, or $0.22 per diluted share, compared to $2.9 million, or $0.33 per diluted share, in the first nine months of FY 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 March 31, 2021 included cash of $12.5 million, accounts receivable of $16.2 million, no debt, working capital of $28.1 million, and shareholders’ equity of $32.9 million.
ConferenceCall
Management will host a conference call on Tuesday, May 11, 2021 at 4:00 pm CT (5:00 pm ET) to discuss Q3 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/44645/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; andthe risks associated with our planned sales force expansion, as well as other factors we may describe from time to time in theCompany’s reports filed with the Securities and Exchange Commission (including the Company’s most recent Annual Reporton Form 10-K, as amended from time to time, and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K). Investorsshould not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurateassumptions investors should take into account when making investment decisions. Shareholders and other readers should not placeundue 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. | 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<br> 30, 2020 | |||
|---|---|---|---|
| Assets | |||
| Current<br> Assets | |||
| Cash | 12,500,688 | $ | 10,479,150 |
| Accounts<br> receivable (net of allowances for doubtful accounts of 45,000) | 16,236,661 | 12,940,677 | |
| Contract<br> assets | 557,531 | 902,619 | |
| Inventories,<br> net | 2,256,012 | 3,084,620 | |
| Prepaid<br> expenses and other current assets | 483,399 | 353,318 | |
| Income<br> tax receivable | 253,891 | 262,155 | |
| Total<br> current assets | 32,288,182 | 28,022,539 | |
| Property<br> and equipment, net | 3,526,935 | 3,788,469 | |
| Finite-life<br> intangible assets, net | 602,430 | 598,389 | |
| Other<br> assets | 100,016 | 80,166 | |
| Deferred<br> income taxes | 653,000 | 755,000 | |
| Total<br> assets | 37,170,563 | $ | 33,244,563 |
| Liabilities<br> and Shareholders’ Equity | |||
| Current<br> Liabilities | |||
| Current<br> maturities of other long-term liabilities | 40,681 | $ | 72,328 |
| Accounts<br> payable | 1,023,603 | 555,510 | |
| Accrued<br> compensation | 2,273,415 | 1,404,497 | |
| Warranty<br> reserve | 740,000 | 740,000 | |
| Other<br> accrued liabilities | 160,551 | 214,045 | |
| Total<br> current liabilities | 4,238,250 | 2,986,380 | |
| Other<br> long-term liabilities | 59,702 | 8,868 | |
| Total<br> liabilities | 4,297,952 | 2,995,248 | |
| Commitments<br> and Contingencies | |||
| Shareholders’<br> Equity | |||
| Common<br> stock, 0.01 par value per share, 13,000,000 shares authorized; 8,637,420 and 8,567,834 shares issued and outstanding, respectively | 86,374 | 85,678 | |
| Additional<br> paid-in capital | 17,140,274 | 16,480,134 | |
| Retained<br> earnings | 15,645,963 | 13,683,503 | |
| Total<br> shareholders’ equity | 32,872,611 | 30,249,315 | |
| Total<br> liabilities and shareholders’ equity | 37,170,563 | $ | 33,244,563 |
All values are in US Dollars.
Electromed,Inc.
CondensedStatements of Operations
(Unaudited)
| Three Months Ended <br><br> March 31, | Nine Months Ended<br> <br>March 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| Net<br> revenues | $ | 8,786,972 | $ | 8,743,897 | $ | 26,287,217 | $ | 25,593,337 |
| Cost<br> of revenues | 2,086,120 | 2,150,347 | 5,912,900 | 5,981,931 | ||||
| Gross<br> profit | 6,700,852 | 6,593,550 | 20,374,317 | 19,611,406 | ||||
| Operating<br> expenses | ||||||||
| Selling,<br> general and administrative | 6,050,666 | 5,288,485 | 16,489,871 | 15,148,344 | ||||
| Research<br> and development | 407,199 | 391,962 | 1,395,755 | 634,376 | ||||
| Total<br> operating expenses | 6,457,865 | 5,680,447 | 17,885,626 | 15,782,720 | ||||
| Operating<br> income | 242,987 | 913,103 | 2,488,691 | 3,828,686 | ||||
| Interest<br> income, net | 9,784 | 34,171 | 28,769 | 111,200 | ||||
| Net<br> income before income taxes | 252,771 | 947,274 | 2,517,460 | 3,939,886 | ||||
| Income<br> tax expense | 29,000 | 294,000 | 555,000 | 1,087,000 | ||||
| Net<br> income | $ | 223,771 | $ | 653,274 | $ | 1,962,460 | $ | 2,852,886 |
| Income<br> per share: | ||||||||
| Basic | $ | 0.03 | $ | 0.08 | $ | 0.23 | $ | 0.34 |
| Diluted | $ | 0.03 | $ | 0.07 | $ | 0.22 | $ | 0.33 |
| Weighted-average<br> common shares outstanding: | ||||||||
| Basic | 8,576,523 | 8,403,154 | 8,565,839 | 8,390,916 | ||||
| Diluted | 8,907,045 | 8,880,794 | 8,921,494 | 8,759,493 |
Electromed,Inc.
CondensedStatements of Cash Flows
(Unaudited)
| Nine Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Cash Flows From Operating Activities | ||||||
| Net income | $ | 1,962,460 | $ | 2,852,886 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation | 358,660 | 469,784 | ||||
| Amortization of finite-life intangible assets | 98,785 | 90,863 | ||||
| Share-based compensation expense | 755,999 | 676,558 | ||||
| Deferred income taxes | 102,000 | 27,000 | ||||
| Loss on disposal of property and equipment | - | 1,294 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | (3,295,984 | ) | (530,360 | ) | ||
| Contract assets | 345,088 | (150,995 | ) | |||
| Inventories | 838,747 | (13,852 | ) | |||
| Prepaid expenses and other assets | (68,616 | ) | 50,329 | |||
| Income tax receivable | 8,264 | (409,064 | ) | |||
| Income tax payable | - | (288,511 | ) | |||
| Accounts payable and accrued liabilities | 1,219,429 | 136,361 | ||||
| Net cash provided by operating activities | 2,324,832 | 2,912,293 | ||||
| Cash Flows From Investing Activities | ||||||
| Expenditures for property and equipment | (105,472 | ) | (752,875 | ) | ||
| Expenditures for finite-life intangible assets | (102,659 | ) | (97,460 | ) | ||
| Net cash used in investing activities | (208,131 | ) | (850,335 | ) | ||
| Cash Flows From Financing Activities | ||||||
| Issuance of common stock upon exercise of options | 45,669 | 63,423 | ||||
| Taxes paid on net share settlement of stock option exercises | (140,832 | ) | - | |||
| Net cash provided by (used in) financing activities | (95,163 | ) | 63,423 | |||
| Net increase in cash | 2,021,538 | 2,125,381 | ||||
| Cash | ||||||
| Beginning of period | 10,479,150 | 7,807,928 | ||||
| End of period | $ | 12,500,688 | $ | 9,933,309 |