Electromed, Inc. announces 4Q2021 and full year results

Electromed, Inc., a leader in innovative airway clearance technologies, today announced financial results for the three months (“Q4 FY 2021”) and full year (“FY 2021”) ended June 30, 2021.

Q4 FY 2021 Financial Highlights

• Net revenue increased 37.7% to $9.5 million, from $6.9 million for the three months ended June 30, 2020 (“Q4 FY 2020”), driven by 33.6% home care revenue growth and 90.6% growth in institutional sales.
• Operating income totaled $0.7 million, compared to $1.3 million in Q4 FY 2020. The prior year period included $0.9 million of government stimulus income from the Provider Relief Fund established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).
• Net income was $0.4 million, or $0.04 per diluted share, compared to $1.3 million, or $0.15 per diluted share, in Q4 FY 2020.
• Repurchased $1.1 million of common stock under new $3.0 million share repurchase program.
• Cash as of June 30, 2021 was $11.9 million, benefiting from $0.8 million in operating cash flow in Q4 FY 2021 and offset by the repurchase of approximately $1.1 million of common stock at an average price of $10.79 per share.

FY 2021 Financial Highlights

• Net revenue increased 10.1% to $35.8 million from $32.5 million during the fiscal year ended June 30, 2020 (“FY 2020”), driven by 12.5% home care revenue growth.
• Operating income totaled $3.1 million, compared to $5.1 million in FY 2020. The prior year period included $0.9 million of government stimulus income from the Provider Relief Fund established under the CARES Act.
• Net income totaled $2.4 million, or $0.27 per diluted share, compared to $4.2 million, or $0.47 per diluted share, in FY 2020.
• Cash increased by $1.4 million during fiscal 2021, benefitting from $3.1 million in operating cash flow.

FY 2021 Strategic Investments to Enhance Future Growth

• Increased investment in commercial expansion, including Marketing & Clinical Field Support.
• Increased investment in direct-to-consumer and digital marketing.
• Conducted a comprehensive research study focused on bronchiectasis and HFCWO market to strengthen respective growth strategies for sales team expansion and clinical study opportunities, and assist in identifying new market development strategies.
• Increased spending on research and development for next generation product.
• Made key infrastructure investments, including implementing a new revenue cycle management system.
• Advanced clinical studies to further demonstrate the benefits of SmartVest® Airway Clearance devices.

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “We delivered exceptional results, including double-digit revenue growth and strong cash flows, in the fiscal 2021 fourth quarter and fiscal 2021 full year, notwithstanding the industry-wide disruption in patient visits and sales representative access caused by the COVID-19 pandemic. These results reflect investments we are making in our commercial organization, marketing and brand recognition, next generation product development, and new clinical studies to further validate the benefit of our technology in improving patient care. Indeed, our entire team performed well to ensure that our SmartVest® Airway Clearance devices reached patients in need of high frequency chest wall oscillation despite the pandemic.”

Fiscal 2022 Strategic Priorities
Ms. Skarvan continued, “We enter fiscal 2022 encouraged by the ongoing nationwide deployment of vaccinations and the extension of the provisional waiver from the Centers for Medicare & Medicaid Services. Our strong fiscal 2021 results, as well as the large and underpenetrated bronchiectasis market, reinforce our confidence in the strategic growth investments we are making and our ability to continue generating sustainable profitable growth, improved operating margins and enhanced shareholder value.”

Q4 FY 2021 Review
Net revenue in Q4 FY 2021 increased 37.7% to $9.5 million, from $6.9 million in Q4 FY 2020, primarily driven by higher home care revenue. Home care revenue increased 33.6% to $8.5 million from $6.3 million in Q4 FY 2020, primarily due to an increase in referrals and approvals as patient clinic visits and face-to-face access for the Company’s sales representative increased substantially from COVID-19 driven limitations in the prior fiscal year. Field sales employees totaled 46, of which 37 were direct sales, at the end of Q4 FY 2021, compared to 44 at the end of Q4 FY 2020, of which 37 were direct sales. In July 2021 the Company added three new direct sales representatives and one new regional manager. Sales force productivity continued to improve during the quarter, with annualized home care revenue per direct sales rep at $906,000, above the targeted range of $750,000 to $850,000.

Institutional revenue increased 90.6% to $520,000 from $273,000 in Q4 FY 2020, primarily due to an increase in volume of devices and garments sold as hospitals returned to more normal purchasing activity.

Gross profit in Q4 FY 2021 increased 24.0% to $6.9 million, or 73.2% of net revenue, from $5.6 million, or 81.3% of net revenue, in Q4 FY 2020. The increase in gross profit dollars was primarily due to the increase in home care revenue. The decrease in gross profit percentage was due to higher warranty costs related to an increase in the product components included in the warranty reserve calculation, costs associated with the discontinuation of the Company’s SV2100 device in the United States, a lower mix of home care revenue as compared to the prior year period, and some limited product input cost increases. Electromed expects gross margin percentage to be in the mid to high 70% range moving forward, which is consistent with our historical gross margin performance range.

Selling, general and administrative (“SG&A”) expenses in Q4 FY 2021 increased by $1.2 million to $6.0 million from $4.8 million in Q4 FY 2020. The increase in SG&A spending was primarily due to increased investments in sales and marketing headcount, higher compensation costs related to stronger revenue performance, and increased direct-to-consumer marketing. As a percentage of revenue, SG&A expenses were 62.9% compared to 69.7% in the same period in the prior year. Research and development expenses decreased to $326,000 from $415,000 in Q4 FY 2020. The Company continued to invest in its next generation device at a rate consistent with past recent quarters and expects to launch the product in the first half of fiscal 2023 following FDA 510(k) clearance.

Operating income totaled $0.7 million, compared to $1.3 million in Q4 FY 2020. The prior year period included $0.9 million of government stimulus from the Provider Relief Fund established under the CARES Act which was intended to offset losses in revenue and expenses Medicare fee-for-service providers incurred due to the impacts of the COVID-19 pandemic. The decline in operating income for Q4 FY 2021 was driven primarily by increased strategic investments in SG&A, offset by higher gross margin dollars resulting from the stronger home care revenue performance.

Net income before income taxes totaled $0.7 million compared to $1.3 million in Q4 FY 2020.

Net income was $0.4 million, or $.04 per diluted share, compared to $1.3 million, or $0.15 per diluted share, in Q4 FY 2020. In Q4 FY 2021, income tax expense totaled $250,000, compared to an income tax benefit of $9,000 in the same period of the prior year. The prior year period included a discrete tax benefit of $343,000 that was recognized as a result of the exercise of outstanding stock options.

FY 2021 Summary
For the fiscal year ended June 30, 2021, revenue grew 10.1% to $35.8 million, from $32.5 million in FY 2020, driven by a 12.5% increase in home care revenue and 30.9% increase in distributor revenue, which more than offset a 22.6% decrease in institutional revenue and 8.4% decline in international revenue. Gross margins were 76.4%, compared to 77.6% in the prior fiscal year, while net income was $2.4 million, or $0.27 per diluted share, compared to $4.2 million, or $0.47 per diluted share, in FY 2020. The Company’s cash increased by $1.4 million, driven by $3.1 million of operating cash flow, partially offset by $1.1 million of cash used to repurchase shares during the year.

Balance Sheet and Share Repurchase Program
The Company’s balance sheet as of June 30, 2021 included cash of $11.9 million, accounts receivable of $17.0 million, no debt, working capital of $27.1 million, and shareholders’ equity of $32.4 million.

In May 2021, Electromed’s Board of Directors approved a new $3.0 million share repurchase program. During Q4 FY 2021, the Company repurchased approximately $1.1 million of common stock under the program, and will continue to evaluate opportunities to repurchase shares in fiscal year 2022. Business Wire