Exhibit 99.1
FOR IMMEDIATE RELEASE
Contact
Kathleen Skarvan
Chief Executive Officer
Electromed, Inc.
952-758-9299
kskarvan@electromed.com
Electromed, Inc. Reports Higher First Quarter Revenues and Profits
New Prague, Minnesota – November 12, 2014 - Electromed, Inc. (NYSE MKT: ELMD) today announced financial results for the three-month period ended September 30, 2014. Net revenues for the first quarter of fiscal 2015 rose approximately 40% to $4.8 million, compared to $3.4 million in the first quarter of fiscal 2014. The Company reported net income of $378,000, or $0.05 cents per basic and diluted share, for the first quarter of fiscal 2015, compared to a net loss of $335,000, or ($0.04) cents per basic and diluted share, for the same period of fiscal 2014.
Kathleen Skarvan, Electromed’s chief executive officer, commented, “The first quarter results are further evidence that we have made significant progress on our strategy to strengthen and grow the Company’s core business, as demonstrated by our strong revenue growth which resulted in improved profitability and cash flow.”
Growth in total net revenues was attributable to strong results in the home care market where sales increased by approximately 35%, or $1.0 million, compared to the same period of fiscal 2014. Home care sales increased due to continued improvements in the Company’s reimbursement operations, including new third party payer contracts and process improvements, which led to faster approval cycle times, higher average selling price and greater referral to approval percentage. International sales increased by 168%, or $250,000, due primarily to the favorable timing of orders placed by international distributors. Institutional sales increased 25%, or $105,000, compared to the first quarter of fiscal 2014.
Gross margins in the first quarter of fiscal 2015 improved to 69.1% from 68.9% in the first quarter of fiscal 2014 as stronger revenues offset the higher manufacturing costs for the SmartVest SQL™ product as compared to the predecessor product, SV2100™. Over time, the Company expects to bring manufacturing costs for the SQL product roughly in line with previous products. Operating expenses, which include selling, general and administrative (SG&A) and research and development (R&D), declined to 61% of sales compared with 86% of sales in the first quarter of fiscal 2014. The decline resulted from the higher level of net sales in the first quarter of fiscal 2015. Operating expenses rose slightly due to higher sales commission expense and additional personnel in the reimbursement area, offset by a reduction in R&D expenses.
The Company generated $945,000 of cash flow from operations in the first quarter and finished the quarter with over $2.2 million of cash on hand.
“The fundamentals of the quarter are encouraging, including the market’s acceptance of our newest generation device, the SQL, and I believe there are opportunities for us to expand our market share,” said Skarvan. “Amidst the challenging reimbursement environment, we have streamlined our reimbursement and enhanced the customer services processes and are having more referrals approved resulting in higher net revenues. We are continuing to upgrade our sales team to maximize their productivity and effectiveness and improve domestic home care lead generation, our highest opportunity for sales growth.
Electromed, Inc.
Results for the Three-Months Ended September 30, 2014
Page 2
I am very pleased with the way the Electromed team is delivering against our operating plan and our progress toward delivering profitable growth that is sustainable beyond fiscal 2015.”
About Electromed, Inc.
Electromed, Inc. manufactures, markets, and sells products that provide airway clearance therapy, including the SmartVest® Airway Clearance System and related products, to patients with compromised pulmonary function. Further information about the Company can be found at www.electromed.com.
Cautionary Statements
Certain statements found in this release may constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect the speaker’s current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact. Forward-looking statements can generally be identified by the words “believe,” “expect,” “anticipate” or “intend” or similar words.Forward-looking statements made in this release include the Company’s beliefs regarding the impact of industry trends and legislation on revenue and the Company’s revenue growth and cost control strategies. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known and unknown, associated with such statements. Examples of risks and uncertainties for Electromed include, but are not limited to, the impact of emerging and existing competitors, the effect of new legislation on our industry and business, the effectiveness of our sales and marketing and cost control initiatives, changes to reimbursement programs,as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including our Annual Report on Form 10-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:
-more-
Electromed, Inc.
Results for the Three-Months Ended September 30, 2014
Page 3
Electromed, Inc. and Subsidiary
Condensed Consolidated Balance Sheets
| | | September 30,
2014 | | | June 30,
2014 | |
| Assets | | (Unaudited) | | | | |
| Current Assets | | | | | | | | |
| Cash and cash equivalents | | $ | 2,280,126 | | | $ | 1,502,702 | |
| Accounts receivable (net of allowances for doubtful accounts of $45,000) | | | 6,361,689 | | | | 6,487,267 | |
| Inventories | | | 2,243,198 | | | | 2,235,496 | |
| Prepaid expenses and other current assets | | | 485,674 | | | | 397,853 | |
| Total current assets | | | 11,370,687 | | | | 10,623,318 | |
| Property and equipment, net | | | 3,944,975 | | | | 3,935,802 | |
| Finite-life intangible assets, net | | | 899,559 | | | | 930,451 | |
| Other assets | | | 299,902 | | | | 302,595 | |
| Total assets | | $ | 16,515,123 | | | $ | 15,792,166 | |
| | | | | | | | | |
| Liabilities and Equity | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Current maturities of long-term debt | | $ | 47,003 | | | $ | 46,375 | |
| Accounts payable | | | 781,823 | | | | 380,582 | |
| Accrued compensation | | | 447,354 | | | | 391,040 | |
| Warranty reserve | | | 720,000 | | | | 700,000 | |
| Other accrued liabilities | | | 166,497 | | | | 302,482 | |
| Total current liabilities | | | 2,162,677 | | | | 1,820,479 | |
| Long-term debt, less current maturities | | | 1,239,333 | | | | 1,251,192 | |
| Total liabilities | | | 3,402,010 | | | | 3,071,671 | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Equity | | | | | | | | |
| Common stock, $0.01 par value; authorized: 13,000,000 shares; | | | | | | | | |
| 8,114,252 issued and outstanding | | | 81,143 | | | | 81,143 | |
| Additional paid-in capital | | | 13,232,256 | | | | 13,217,166 | |
| Accumulated deficit | | | (200,286 | ) | | | (577,814 | ) |
| Total equity | | | 13,113,113 | | | | 12,720,495 | |
| Total liabilities and equity | | $ | 16,515,123 | | | $ | 15,792,166 | |
Electromed, Inc.
Results for the Three-Months Ended September 30, 2014
Page 4
Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Operations (Unaudited)
| | | For the Three Months Ended
September 30, | |
| | | 2014 | | | 2013 | |
| | | | | | | |
| Net revenues | | $ | 4,770,539 | | | $ | 3,418,178 | |
| Cost of revenues | | | 1,475,797 | | | | 1,062,346 | |
| Gross profit | | | 3,294,742 | | | | 2,355,832 | |
| | | | | | | | | |
| Operating expenses | | | | | | | | |
| Selling, general and administrative | | | 2,821,495 | | | | 2,723,927 | |
| Research and development | | | 75,265 | | | | 209,108 | |
| Total operating expenses | | | 2,896,760 | | | | 2,933,035 | |
| Operating income (loss) | | | 397,982 | | | | (577,203 | ) |
| Interest expense, net of interest income of $1,212 and $7,398 respectively | | | 20,453 | | | | 15,202 | |
| Net income (loss) before income taxes | | | 377,529 | | | | (592,405 | ) |
| | | | | | | | | |
| Income tax benefit | | | — | | | | 257,000 | |
| Net income (loss) | | $ | 377,529 | | | $ | (335,405 | ) |
| | | | | | | | | |
| Earnings (loss) per share: | | | | | | | | |
| Basic and diluted | | $ | 0.05 | | | $ | (0.04 | ) |
| | | | | | | | | |
| Weighted-average common shares outstanding: | | | | | | | | |
| Basic | | | 8,114,252 | | | | 8,114,252 | |
| Diluted | | | 8,114,252 | | | | 8,114,252 | |
Electromed, Inc.
Results for the Three-Months Ended September 30, 2014
Page 5
Electromed, Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows (Unaudited)
| | | For the Three Months Ended September 30, | |
| | | 2014 | | | 2013 | |
| Cash Flows From Operating Activities | | | | | | | | |
| Net income (loss) | | $ | 377,529 | | | $ | (335,405 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | | | | |
| Depreciation | | | 155,341 | | | | 122,923 | |
| Amortization of finite-life intangible assets | | | 30,892 | | | | 31,619 | |
| Amortization of debt issuance costs | | | 4,942 | | | | 2,314 | |
| Share-based compensation expense | | | 15,089 | | | | 39,460 | |
| Loss on disposal of property and equipment | | | 18,824 | | | | 18,134 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 125,578 | | | | 1,024,688 | |
| Inventories | | | (7,702 | ) | | | (52,628 | ) |
| Prepaid expenses and other assets | | | (90,070 | ) | | | (270,260 | ) |
| Accounts payable and accrued liabilities | | | 314,901 | | | | 161,138 | |
| Net cash provided by operating activities | | | 945,324 | | | | 741,983 | |
| | | | | | | | | |
| Cash Flows From Investing Activities | | | | | | | | |
| Expenditures for property and equipment | | | (156,669 | ) | | | (148,915 | ) |
| | | | | | | | | |
| Cash Flows From Financing Activities | | | | | | | | |
| Principal payments on long-term debt including capital lease obligations | | | (11,231 | ) | | | (19,250 | ) |
| | | | | | | | | |
| Net increase in cash and cash equivalents | | | 777,424 | | | | 573,818 | |
| | | | | | | | | |
| Cash and cash equivalents | | | | | | | | |
| Beginning of period | | | 1,502,702 | | | | 503,564 | |
| End of period | | $ | 2,280,126 | | | $ | 1,077,382 | |
