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): November 10, 2020
ELECTROMED,
INC.
(Exact Name of Registrant as Specified in Its Charter)
| Minnesota | 001-34839 | 41-1732920 |
|---|---|---|
| (State or Other Jurisdiction of<br><br> <br>Incorporation) | (Commission File Number) | (I.R.S. 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 to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to 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 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 November 10, 2020, Electromed, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended September 30, 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 November 10, 2020 | 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: November 10, 2020 | By: /s/ Michael J. MacCourt | |
| Name: | Michael J. MacCourt | |
| Title: | Chief Financial Officer |
Exhibit 99.1
FORIMMEDIATE RELEASE
Electromed,Inc. Announces Fiscal 2021 First Quarter Financial Results
-- 16.4% Sequential Revenue Growth Driven by Stronger Home Care Revenue --
NewPrague, Minnesota – November 10, 2020 – 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 September 30, 2020 (“Q1 FY 2021").
Q1FY 2021 Highlights
| ● | Net<br> revenue was $8.0 million, down 3.6% compared to the three months ended September 30,<br> 2019 (“Q1 FY 2020"), primarily reflecting lower institutional revenue due<br> to the continued impact of COVID-19 on hospital purchasing activity. |
|---|---|
| ● | Net<br> revenue grew 16.4% compared to the three months ended June 30, 2020 (“Q4 FY 2020"),<br> driven by a 17.9% increase in home care. |
| --- | --- |
| ● | Gross<br> profit percentage increased to 76.8% of net revenue, compared to 76.4% for Q1 FY 2020,<br> primarily due to a greater portion of revenue coming from home care. |
| --- | --- |
| ● | Net<br> income equaled $535,000, or $0.06 per diluted share, compared to $1.0 million, or $0.12<br> per diluted share, in Q1 FY 2020. The decrease was primarily due to a $382,000 increase<br> in R&D spending on next generation platform development, lower institutional revenue<br> and higher average sales and marketing headcount compared to Q1 FY 2020. |
| --- | --- |
| ● | Cash<br> as of September 30, 2020 was $11.1 million, benefiting from $822,000 in operating cash<br> flow in Q1 FY 2021. |
| --- | --- |
Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We were pleased with our strong execution in the first quarter resulting in a 17.9% increase in home care revenue compared to the three months ended June 30, 2020, evidence of an improving environment for our therapy despite continued disruption related to the COVID-19 pandemic. Our strengthening home care business reflects increasing patient face-to-face interaction with physicians and the success of our sales team adapting quickly to a hybrid virtual and face-to-face selling approach. While the institutional side of our business remained soft due to COVID-19, we registered an uptick in hospital orders of disposable wraps compared to the three months ended, June 30, 2020.
“We continue to fund strategic investments for our long-term growth, including research and development on our next generation HFCWO therapy, hiring key sales and marketing personnel and expanding our direct-to-patient marketing to increase awareness of bronchiectasis and SmartVest® as an effective treatment. We are confident in our long-term revenue growth potential and remain committed to these strategic investments, while continuing to generate positive operating cash flow and managing the business successfully through the COVID-19 pandemic.”
Ms. Skarvan continued, “Home care referral and revenue growth improved throughout the quarter and has continued into October, though uncertainty surrounding COVID-19 persists. 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.”
Q1FY 2021 Review
Net revenue in Q1 FY 2021 decreased 3.6% to $8.0 million, from $8.3 million in Q1 FY 2020. Home care revenue was approximately $7.5 million in both Q1 FY 2021 and Q1 FY 2020. Net revenue grew 16.4% compared to the three months ended June 30, 2020 (“Q4 FY 2020"), driven by a 17.9% increase in home care. Field sales employees totaled 42, of which 35 were direct sales, at the end of Q1 FY 2021, compared to 38 at the end of Q1 FY 2020, of which 32 were direct sales. Institutional revenue decreased 55.5% to $278,000 from $625,000 in Q1 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. Distributor revenue increased 48.3% to $178,000 from $120,000 in Q1 FY 2020. International revenue increased 27.3% to $84,000 from $66,000 in Q1 FY 2020.
Gross profit dollars in Q1 FY 2021 decreased 3.1% to $6.1 million, or 76.8% of net revenue, from $6.3 million, or 76.4% of net revenue, in Q1 FY 2020. The decrease in gross profit dollars was primarily due to the decrease in institutional revenue driven by the COVID-19 pandemic. The increase in gross profit percentage was driven by a greater portion of revenue coming from home care.
Selling, general and administrative (“SG&A”) expenses in Q1 FY 2021 increased by $109,000 to $5.0 million from $4.9 million in Q1 FY 2020. The increase in SG&A spending was primarily due to increased payroll expenses associated with higher average sales and marketing headcount and increased direct-to-consumer marketing, partially offset by lower travel, meals and entertainment expenses. As a percentage of revenue, SG&A expenses were 62.5% compared to 59.0% in Q1 FY 2020. Research and development expenses increased to $481,000 from $99,000 in Q1 FY 2020, in connection with the development of a next generation platform. As a percentage of revenue, R&D expenses were 6.0% compared to 1.2% in Q1 FY 2020.
Net income before income taxes totaled $672,000 compared to $1.4 million in Q1 FY 2020. The net income before income taxes decrease compared to Q1 FY2020 was primarily due to a $382,000 increase in R&D spending on development of a next generation platform, lower institutional revenue and higher average sales and marketing headcount compared to Q1 FY 2020.
Net income was $535,000, or $0.06 per diluted share, compared to $1.0 million, or $0.12 per diluted share, in Q1 FY 2020. In Q1 FY 2021, income tax expense totaled $137,000, compared to an income tax expense of $374,000 in the same period of the prior year. During Q1 FY 2021, a discrete tax benefit of $39,000 was recognized as a result of the exercise of outstanding stock options.
FinancialCondition
The Company’s balance sheet at September 30, 2020 included cash of $11.1 million, accounts receivable of $13.6 million, no debt, working capital of $25.8 million, and shareholders’ equity of $30.9 million.
ConferenceCall
Management will host a conference call on Tuesday, November 10, 2020 at 4:00 pm CT (5:00 pm ET) to discuss Q1 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/41298/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 MacCourt, Chief Financial Officer | Kalle Ahl, CFA |
| (952) 758-9299 | (212) 836-9614 |
| investorrelations@electromed.com | kahl@equityny.com |
| Devin Sullivan | |
| (212) 836-9608 | |
| dsullivan@equityny.com |
Financial Tables Follow:
Electromed,Inc.
CondensedBalance Sheets
| June 30, 2020 | |||
|---|---|---|---|
| Assets | **** | ||
| Current<br> Assets | |||
| Cash | 11,143,181 | $ | 10,479,150 |
| Accounts<br> receivable (net of allowances for doubtful accounts of 45,000) | 13,624,505 | 12,940,677 | |
| Contract<br> assets | 799,121 | 902,619 | |
| Inventories,<br> net | 3,065,043 | 3,084,620 | |
| Prepaid<br> expenses and other current assets | 487,361 | 353,318 | |
| Income<br> tax receivable | 218,225 | 262,155 | |
| Total<br> current assets | 29,337,436 | 28,022,539 | |
| Property<br> and equipment, net | 3,666,101 | 3,788,469 | |
| Finite-life<br> intangible assets, net | 626,747 | 598,389 | |
| Other<br> assets | 60,508 | 80,166 | |
| Deferred<br> income taxes | 700,000 | 755,000 | |
| Total<br> assets | 34,390,792 | $ | 33,244,563 |
| Liabilities<br> and Shareholders’ Equity | |||
| Current<br> Liabilities | |||
| Current<br> maturities of other long-term liabilities | 55,324 | $ | 72,328 |
| Accounts<br> payable | 766,197 | 555,510 | |
| Accrued<br> compensation | 1,761,523 | 1,404,497 | |
| Warranty<br> reserve | 750,000 | 740,000 | |
| Other<br> accrued liabilities | 195,731 | 214,045 | |
| Total<br> current liabilities | 3,528,775 | 2,986,380 | |
| Other<br> long-term liabilities | 6,001 | 8,868 | |
| Total<br> liabilities | 3,534,776 | 2,995,248 | |
| Commitments<br> and Contingencies | |||
| Shareholders’<br> Equity | |||
| Common<br> stock, 0.01 par value per share, 13,000,000 shares authorized; 8,606,180 and 8,567,834 shares issued and outstanding, respectively | 86,062 | 85,678 | |
| Additional<br> paid-in capital | 16,551,189 | 16,480,134 | |
| Retained<br> earnings | 14,218,765 | 13,683,503 | |
| Total<br> shareholders’ equity | 30,856,016 | 30,249,315 | |
| Total<br> liabilities and shareholders’ equity | 34,390,792 | $ | 33,244,563 |
All values are in US Dollars.
Electromed,Inc.
CondensedStatements of Operations
(Unaudited)
| **** | Three Months Ended September 30, | |||
|---|---|---|---|---|
| **** | 2020 | 2019 | ||
| Net revenues | $ | 8,004,171 | $ | 8,302,498 |
| Cost of revenues | 1,855,950 | 1,960,150 | ||
| Gross profit | 6,148,221 | 6,342,348 | ||
| Operating expenses | ||||
| Selling,<br> general and administrative | 5,004,179 | 4,894,806 | ||
| Research<br> and development | 481,059 | 98,937 | ||
| Total operating expenses | 5,485,238 | 4,993,743 | ||
| Operating income | 662,983 | 1,348,605 | ||
| Interest<br> income, net | 9,279 | 39,951 | ||
| Net income before income taxes | 672,262 | 1,388,556 | ||
| Income<br> tax expense | 137,000 | 374,000 | ||
| Net income | $ | 535,262 | $ | 1,014,556 |
| Income per share: | ||||
| Basic | $ | 0.06 | $ | 0.12 |
| Diluted | $ | 0.06 | $ | 0.12 |
| Weighted-average common<br> shares outstanding: | ||||
| Basic | 8,550,824 | 8,379,505 | ||
| Diluted | 8,964,937 | 8,651,891 |
Electromed,Inc.
CondensedStatements of Cash Flows
(Unaudited)
| **** | Three Months Ended September 30, | **** | ||||
|---|---|---|---|---|---|---|
| **** | 2020 | **** | 2019 | **** | ||
| Cash<br> Flows From Operating Activities | ||||||
| Net<br> income | $ | 535,262 | $ | 1,014,556 | ||
| Adjustments<br> to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation | 131,818 | 150,938 | ||||
| Amortization<br> of finite-life intangible assets | 31,609 | 29,963 | ||||
| Share-based<br> compensation expense | 191,103 | 209,954 | ||||
| Deferred<br> income taxes | 55,000 | 3,000 | ||||
| Loss<br> on disposal of property and equipment | 92 | 975 | ||||
| Changes<br> in operating assets and liabilities: | ||||||
| Accounts<br> receivable | (683,828 | ) | 41,299 | |||
| Contract<br> assets | 103,498 | (11,966 | ) | |||
| Inventories | 26,934 | (118,519 | ) | |||
| Prepaid<br> expenses and other assets | (114,385 | ) | (102,147 | ) | ||
| Income<br> tax receivable | 43,930 | (50,489 | ) | |||
| Income<br> tax payable | — | (288,511 | ) | |||
| Accounts<br> payable and accrued liabilities | 500,917 | (250,011 | ) | |||
| Net cash provided by operating activities | 821,950 | 629,042 | ||||
| Cash<br> Flows From Investing Activities | ||||||
| Expenditures<br> for property and equipment | (15,771 | ) | (404,773 | ) | ||
| Expenditures<br> for finite-life intangible assets | (65,735 | ) | (10,707 | ) | ||
| Net cash used in investing activities | (81,506 | ) | (415,480 | ) | ||
| Cash<br> Flows From Financing Activities | ||||||
| Issuance<br> of common stock upon exercise of options | — | 13,040 | ||||
| Taxes<br> paid on stock options exercised, net | (76,413 | ) | — | |||
| Net cash provided by (used in) financing activities | (76,413 | ) | 13,040 | |||
| Net increase in cash | 664,031 | 226,602 | ||||
| Cash | ||||||
| Beginning<br> of period | 10,479,150 | 7,807,928 | ||||
| End<br> of period | $ | 11,143,181 | $ | 8,034,530 |