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Electromed, Inc. Announces Fiscal 2018 Fourth Quarter Financial Results

September 25, 2018

NEW PRAGUE, Minn.--(BUSINESS WIRE)--Sep 25, 2018--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 June 30, 2018 (“Q4 FY 2018”).

Q4 FY 2018 Highlights

Net revenue increased 13.3% to $8.2 million from $7.3 million during the three months ended June 30, 2017 (“Q4 FY 2017”). Net revenue for the prior year comparable period included a favorable impact of $703,000 from a one-time item related to a settlement agreement with Centers for Medicare and Medicaid Services. Gross profit rose 12.2% to $6.7 million from $6.0 million in Q4 FY 2017. Operating income grew 5.1% to $1.6 million from $1.5 million in Q4 FY 2017. Net income expanded 18.2% to $1.1 million, or $0.13 per diluted share, from $946,000, or $0.11 per diluted share, in Q4 FY 2017. Cash flow from operating activities increased 48.1% to $570,000 from $385,000 in Q4 FY 2017. Field sales employees grew to 50 at the end of Q4 FY 2018 from 40 at the end of Q4 FY 2017.

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “In the fourth quarter of fiscal 2018, we delivered strong top and bottom-line growth, driven by a 14.8% year-over-year increase in home care revenue. We benefitted from investments made earlier in the year to expand our sales force, improve our reimbursement skills and processes, and advance physician awareness and education surrounding the benefits of high frequency chest wall oscillation therapy (“HFCWO”) with our SmartVest® device. As a result, this quarter we achieved a greater number of referrals, of significantly higher quality, translating into exceptional growth in approvals.”

Ms. Skarvan continued, “The incremental investments initiated in fiscal 2018 position Electromed for double-digit revenue and earnings growth over the next few years. Looking ahead, we remain focused on improving sales force productivity, enhancing our reimbursement processes, increasing HFCWO awareness and education among physicians and patients, promulgating evidence-based studies that differentiate SmartVest, developing innovative device features, and expanding our covered lives.

“Last month, we announced the first independent study suggesting that HFCWO therapy with SmartVest significantly reduces severe exacerbations and hospitalizations, and may meaningfully slow the otherwise normal progression of non-cystic fibrosis bronchiectasis. A growing body of evidence, including this study, reinforces our optimism for expanding the market for HFCWO and gaining share in the large, underpenetrated bronchiectasis market. As always, our underlying mission is to improve quality-of-life and outcomes for a greater number of patients with compromised pulmonary function, while reducing overall healthcare utilization through SmartVest airway clearance therapy.”

Q4 FY 2018 Review

Net revenue increased 13.3% to $8.2 million in Q4 FY 2018 from $7.3 million in Q4 FY 2017, primarily driven by higher home care revenue. Home care revenue rose 14.8% to $7.7 million in Q4 FY 2018 from $6.7 million in Q4 FY 2017, primarily due to growth in approvals as a result of continued improvements in our reimbursement operations that led to a greater referral to approval percentage and a higher average selling price per device. Net revenue for the prior year comparable period included a favorable impact of $703,000 from a one-time item related to a settlement agreement with Centers for Medicare and Medicaid Services.

Gross profit increased 12.2% to $6.7 million, or 81.7% of net revenue, in Q4 FY 2018 from $6.0 million, or 82.5% of net revenue, in Q4 FY 2017. The increase in gross profit resulted primarily from an increase in home care revenue.

Operating expenses, which include selling, general and administrative (“SG&A”) as well as research and development (“R&D”) expenses, totaled $5.1 million, or 62.4% of revenue, in Q4 FY 2018 compared with $4.5 million, or 61.7% of revenue, in the same period of the prior year. SG&A expenses increased 14.4% to $5.1 million in Q4 FY 2018 from $4.4 million in Q4 FY 2017, primarily due to higher payroll and compensation-related expenses and increased travel, meals and entertainment expenses which were driven by the expansion of our sales force. These increased costs were partially offset by a $406,000 refund of medical device excise taxes that was recognized during Q4 FY 2018. R&D expenses totaled $81,000 in Q4 FY 2018 compared to $65,000 in Q4 FY 2017.

Operating income increased 5.1% to $1.6 million in Q4 FY 2018 from $1.5 million in Q4 FY 2017, primarily due to increased gross profit driven by higher revenue and a refund of medical device excise taxes, which were partially offset by costs related to the expansion of our sales force.

Net income before income tax expense rose 7.6% to $1.6 million in Q4 FY 2018 from $1.5 million in Q4 FY 2017.

Net income increased 18.2% to $1.1 million, or $0.13 per diluted share, in Q4 FY 2018, from $946,000, or $0.11 per diluted share, in Q4 FY 2017. In Q4 FY 2018, income tax expense totaled $500,000, compared to $559,000 in the same period of the prior year.

Full Year FY 2018 Summary

For the twelve months ended June 30, 2018, revenue grew 11.0% to $28.7 million from $25.9 million in fiscal 2017, driven by a 13.8% increase in home care revenue. Gross margins were 79.6%, compared to 79.5% in the prior fiscal year, while net income was $1.9 million, or $0.22 per diluted share, compared to $2.2 million, or $0.26 per diluted share in fiscal 2017.

Financial Condition

Electromed’s balance sheet at June 30, 2018 included cash of $7.5 million, long-term debt including current maturities of $1.1 million, working capital of $17.5 million, and shareholders’ equity of $21.9 million.

Conference Call

Management will host a conference call on September 26, 2018 at 8:00 am CT (9:00 am ET) to discuss Q4 FY 2018 financial results and other matters.

Interested parties may participate in the call by dialing:

(877) 407-9753 (Domestic) (201) 493-6739 (International)

The conference call will also be accessible via the following link: http://www.investorcalendar.com/event/37302.

For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of Electromed’s web site at: http://investors.smartvest.com/.

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 Electromed can be found at www.smartvest.com.

Cautionary Statements

Certain statements in this 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 “believe,” “estimate,” “expect,” “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 competitive nature of our market; risks associated with expansion into international markets; changes to Medicare, Medicaid, or private insurance reimbursement policies; new drug or pharmaceutical discoveries; changes to health care laws; changes affecting the medical device industry; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; our ability to protect and expand our intellectual property portfolio; our ability to renew our line of credit or obtain additional credit as necessary; our ability to develop new sales channels for our product; and general economic and business conditions, as well as other factors described from time to time in our reports to 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 reports on Form 10-Q and Form 8-K). Investors should not consider any list of such factors to be an exhaustive statement of all of 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 release.

Financial Tables Follow:

View source version on businesswire.com:https://www.businesswire.com/news/home/20180925006120/en/

CONTACT: Electromed, Inc.

Jeremy Brock, 952-758-9299

Chief Financial Officer

investorrelations@electromed.com

or

The Equity Group Inc.

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