ELMD - Earnings call transcript Q2 2019

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Operator

Greetings, and welcome to the Electromed, Inc., Second Quarter Fiscal 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Kalle Ahl of Equity Group. you. Thank

begin. may You

Kalle Ahl

found and results everyone. the were of at can A Sherry, of Relations fiscal company's the market second XXXX copy website be release earnings financial released the the good you, Investor Electromed's section morning www.smartvest.com. quarter closed. in Thank yesterday after

those are statements need plans. As the call or this estimate, The course I participants to statement is about achievements company's remarks does and to to and subject that forward-looking be materially results or forward-looking forward-looking. the should not to believe, matter statements uncertainties different similar intent, a absence cause formality, made from and that Such of statements, plan, used performance may mean remind are their actual words projected. of are that not expect, by during risks a could, expressions contain words anticipate, identify management could but

as as performance projections future to company's February any today addition, XXXX. of In the estimates management's represent XX,

should whether please You any SEC forward-looking ask or you reliance update We statements. the forward-looking to guidance of to duty not these statements expressly otherwise. on do filings a information, We for future undertake result that new this events place company's further on refer as not undue matter.

Electromed we'll will questions. Jeremy company's results, and Financial Kathleen which financial will Officer. summary call Kathleen Joining open Skarvan, some and Chief Brock, remarks, quarter the for President a this after second Ms. from morning are XXXX of Officer; begin us Jeremy and then Chief fiscal Mr. Executive present opening the with

over call turn Now, it's pleasure to to Kathleen. my the

Kathleen Skarvan

discuss second financial fiscal XXXX results. and us Thank you, thank for quarter you joining Kalle. Electromed's to everyone, morning, Good

in growth referrals approximately an revenue. net XX% in institutional increase by the revenue in Home generated increase in XX% physicians educating to grew XX% expanded by as This quarter, care percentage growth care driven and as success revenue our sales was and in more home reflecting year-over-year, quality reimbursement our resulting by in referral referrals our to teams. team on class team greater operational reimbursement approval best sales well excellence due requirements, field ongoing our

revenue also share, home focus strategies. integrated our expanding on care continuing will market it our By grew institutional institutional support Our growth delivery by to networks.

focus market brand were hospitals treated, a gives patient. at are preferred strategies prescribed quarter's of hospital direct is quarter patients brand a home. wall and Our manage are discharge healthcare when where patients. discharging perfect expense on in that year. to the on used used slower institutional frequency our synergy, oscillation to second Often management, professionals compared our high the on default the by the than being rate SmartVest the Electromed Electromed, setting to pleased access brand who our in chest the the At making hospital revenues the SG&A prior expenses this at building focused HFCWO we the product Shifting patients grew the

quarter. in access R&D their year patient’s an over operating product was data. service few our the ability months past for adherence expenses of R&D the Our development that lower prior and period, past sales will improve innovative investment to due income team investment an to increased SmartVest primarily this enhancement the is the therapy than related

SmartVest improved this Connect we better wireless that monitoring our provide greater project if this feeling are to because prescribed utilize an are adherence. interested being patients will We will patient drive after enhancement excited about more for we supporting interface therapy are in With knowing their patients physicians believe SmartVest. patient

of this our incremental fiscal other expect similar as device expenditures on first R&D well We expenses be conclude as reflecting innovations. the to in to the second begin spending half project to year, half

ended We any productivity uptick field the calls, don't in in first were employees, we stated anticipate sales field earnings XX as and per XX quarters. the increase staff field quarter total we compared team of sequential XXXX, direct with are sales focused to to improving employee I've on productivity the sales significant our to we As approximately our next several revenue of team. previous sales expanded in quarter, X% quarter of home In care second the from $XXX,XXX average a $XXX,XXX. achieved the direct increased fiscal which

annual with to key closely CRM to sales to revenue very account five sales per better planning prescribing feedback We and and exceptional the additional steps in providers in and grow employees growth direct we service long-term demonstrating $XXX,XXX on from progress taking patients field of field, Electromed’s of sales all actions training support enhanced strategic this leadership, sales efforts consistently of travel monitoring taking are plan. SmartVest are to metric newer decisive information patients There Leadership increase hospitals, will our our our employee. remain important our elements objective utilization enhancing sales programs, and toward and tools high value and intensifying consistent are home $XXX,XXX the coming strategic referrals physicians with clinics, focusing our productivity; quarters upgraded sales be productivity delivering improve reaching to awareness wellness care to the to our core on sales strategy.

President sales and institutions hospitals, newest execution improved the the growing of COPD’s the years. thank Electromed the team's strategic referrals the our the sales sales share with people. taking to on with or Affordable basis. of among Sales we and penalties. top with of end March. avoid over our secure growing candidates to therapy keeps to want economic home with our I've To to from practitioners and driving respect With out ensure on for the Fibrosis to reps of strong the with to efforts I announce take focus experienced Act month been next for last our of NCFB. interviewing Care past overlap intend dedication accept committed Vice current our engagement, pleased our most currently John John our our the sales referrals HFCWO hope of Working more of the smooth to to patients We am strategic care we readmission Sales, to of avoiding productivity to contributions overseeing his Kowalczyk. directly director aligning incentives with advantage with SmartVest patients Bronchiectasis SmartVest. under penalties and by our Non-Cystic growing a accounts are is transition, interim We to home leadership, intensifying high of sales President readmission regional Vice the Regarding serve resignation from agreed This initiatives and and three focus prescribers team managers hospitals by on of well program care market sales institutions awareness

Considering sales a hospitals patient hospital, the view, to targeted high a isn't is our believe call care penalties. us. achieves a number outcomes and patient, discharge. hospitals team NCFB increase repositioning points more a cost reps our of higher building are productivity as for way. health at of strategy potential channel has gaining increasingly the better the strategy, accounts the avoid in new this for the hospital everyone. better In This through sales setting SmartVest time We include but in better better of to prescribing long-term acceptance readmission to of for sales have better meaningful dedicate most prescriptions we resources our funnel the for system, strengthened encourage SmartVest for is It and patients to

sales And of five our growth territories. to growth Our drive market remain pillars to and productivity sales improve our share team to in our blocking greenfield gains we on believe further places sales strategy and By and strategic unchanged. each improve. sales prescribing will biggest over The high accounts with emphasis its tackling maturation the through clinics visit expect we productivity frequency opportunities, team strategy. consistent our core under of prioritizing

pulmonologist adult quality bronchiectasis high increase First, referrals segment. in

in Second, class enhance provide best care. support reimbursement customer to

over earnings few evidence reiterate Third, growth. next leverage we utilization of support initiatives care growth revenue the And the on market as containment. to improved through share and our SmartVest. features. double device we clinical to develop Fourth, conclusion, home anticipate evaluate In digit continuously cost years, and for grow strategic expectations institutional our innovative fifth, execute increase

the represents that population at under market or approximately in United study XXXX A research diagnosed million than registry as using diagnosed based data the that part were plan. we more registered published $X have study U.S. that XX,XXX approximately population treatment been is XX% data of study from individuals indicated Medicare the estimate are of bronchiectasis their evidence. prescribed We growing on We clinical States. estimated prescribed NCFB believe and significant the Using of conservatively XX% of fortunate clinical within U.S. that XXX,XXX HFCWO. in Medicare patients bronchiectasis opportunity, in a the HFCWO,

the in Medicare is million as XX% could HFCWO for I been for HFCWO applying XX,XXX U.S. to reside with larger estimated awareness will the of out from estimated We industry to patients that organizations. Clinical within X.X the an peers, diagnosis with benefit SmartVest an stands standard HFCWO [ph], Medicare we Moreover the rise believe of mentioned penetration a also We of continues Yet far prescribed to of believe just HFCWO fewer XXX,XXX patients the By effective of according in our from treated merits care the patients. like bronchiectasis diagnosed approximately today. have believe bronchiectasis therapy. build bronchiectasis Study approximately under Weicker prevalence as population boats as Electromed therapy NCFB. of device all which complex

are counterparts nimbler In SmartVest. than our to on we focused addition XXX% being

go long-term Jeremy will detailed quality of with I end All Electromed’s dedication will results. customer a of our time, resources and us and patients that, our day we drive device it create shareholders. spirit serving success turn the to At financial allow of over our our Jeremy? and for believe to care value possible. to With future the our the the highest and discussion energy patients for to

Jeremy Brock

you, everyone. Thank Kathleen. morning, Good

$XXX,XXX driven the second an and year travel, is million This Home $X.X in SG&A care compared team. expansion approvals quarter-to-quarter to from the in Research income year XX% second number employees and $XXX,XXX XX.X% area million, gross XX.X% from and XXXX. the second period our second $X year. $XXX,XXX expenses, revenue. XX.X% and as compared business. discussed due of revenue. prior the in meals $XXX,XXX Our net to second before the related of SG&A both XXXX by $X.X our million home expected more profit from to field by primarily increased profit in totaled XX.X% $X.X quarter We quarter market. the in fiscal the as product to Gross same for $XX,XXX revenue $X.X income the the XX.X% driven fiscal of and an $X.X of expenses processes. of $X.X quarter the XXXX strategy. revenue Electromed XXXX. or in quarter due and quarter growth of care growth $XXX,XXX the related sales with $X.X XXXX, $XXX,XXX driven fiscal to development increased fiscal quarter quarter higher increased team Operating XX.X% of strategic XXXX $XXX,XXX prior our by of revenue home profit we increased be percentage by the the sales in project growth $XXX,XXX fiscal device was prior a R&D decrease in $X XXXX to quarter totaled which referrals growth totaled although anticipate primarily primarily increased or a well of expense second increased of in quarter, organic payroll tax the $XXX,XXX period revenue million of revenue million of the can And increase XX.X% second digit of improved prior to compensation net in in same primarily second or care in operating Institutional from in period, expenses, which in $XXX,XXX revenue net for quarter from revenue a fiscal in expenses million by double previously. sales nature a not of entertainment price that expenses the to institutional gross expenses increase per of income reimbursement in prior our second higher of Operating fiscal higher fiscal to due mainly fiscal tax from lower execute driven prior quarter the XXXX quarter. in year. gross R&D XXXX expenses, include as compared to million of of resulted the expansion in $XXX,XXX driven the quarter. variability revenue. fiscal Kathleen to increase The in net million sales increased revenue to of increased to was in to expense, compared which expenses the XXXX, due profit in International year revenue selling decreased in as The the the or of from income fiscal revenue development second totaled in to year offset the than Net XXXX the million XX.X%

of stock year of effective Our the expense approximately the deferred assets to tax the a quarter approximately of XXth. tax tax rate quarter in expense prior income on act. included expense tax the prior fiscal are vested $XXX,XXX the Estimated of and Estimated this discrete XX.X% as liabilities expected tax that certain second options did remeasuring was at fully they as year periods second reverse rate period. discrete quarter income XXXX expired to November include same expense in unexercised deferred deferred based under future result on which tax $XXX,XXX the a a tax in related

fiscal $X.XX $XXX,XXX quarter quarter net diluted in second per $X.XX diluted to of $XXX,XXX or share in or share compared per second XXXX. XXXX Our totaled the income fiscal of the

to flow. cash balance moving the and operating Now sheet

included balance $XX.X no equivalents million long-term $X.X $XX.X cash XXXX capital Our of million. stakeholders' million, equity at debt, and December cash and sheet XX, working of of

XXth. to Cash approximately quarter in loan, pay-off from $X.X $XXX,XXX approximately that balloon appeals. from $XXX,XXX the in receipts of did fiscal to settlement matured claims flow Cash compared second quarter operations fiscal December the in to of year the of $X benefit the quarter which operations we on Medicare were payment million related XXXX. quarter in second During XXXX prior flow older from totaled from term a our the of make million did of

our very support position strategies. to to a Finally, pleased continue debt cash and free we are growth Electromed’s long-term be building to in be to reserves

that For the capital cash as year. would require foreseeable we future, our we plans our retain plan to increased later this firm spending

Specifically, we New this as to ground are in here Prague the billion a expansion early potential break contemplating spring. with project

concluded we plan mapped need favorable deal. this very a objectives. very have us our that we out yet We give on carefully not terms would future support growth infrastructure to But the have

we please? give the to conference of next expect portion objectives direction update confident the business. to this We remain with an could our and remarks. focused on concludes able And Q&A this the these be you call, on Operator call. Overall, my start we of

Operator

no Please we And at Yes Sterling to thank Advisors. conference that the back over Josh question. Instructions] are closing Skarvan would you. from got remarks. [Operator I'm There just from for this I [ph] a turn to Actually, sorry, Peters proceed, Kathleen Josh. time. is questions like

Unidentified Analyst

Kathleen you sales morning, Congratulations Good to Jeremy. with growth. and on the speak Good this morning.

Kathleen Skarvan

to from Good Josh. you, Thank hear you.

Unidentified Analyst

what a to nice might of I it know certainly you be are sense uptick, that But there. talked next in a can very of about wanted evaluate hard over look like this without the past sales insights I quick Yes. of last have business do from we giving could any just trends question ask seasonality seasonal the get about that the what other in couple help to kind quarters a to the explicitly guidance? quarter. real

Kathleen Skarvan

question. that for Josh, you, Thank

time us or it tracing to the revenue potentially anywhere exacerbations. less of due to you to have that does when challenge that provide six for visiting course, lumpy the this appeals or or have variables that can then in business. actually know You're to understanding vacations we we Medicare, find correct with people based is an a to absolutely fewer if situation. know in referral seasonality weeks. doctors of bit that eight we quite booking this revenue. Then prescriptions that bit And true to of approval book to many other summertime can throw approval us in in difficult on commercial two of about taking have that from business. get a there be spoken that, we is that regarding and we And But range a it off Certainly, the seems happen

look revenue third fourth quarter or had and think some though, you that year traditional of at half you our would if increases. traditionally, I see has the second

And a for, so that's I long story. answer, of apologize bit winded a a is which complex but it

Unidentified Analyst

or I'll Okay, type here. And well, What there? let the that then expansion you other that that context does on in considering you question help are are adding New journey Prague, go, you what helps you space manufacturing expansion and we along as of office contemplating? there the Are any space? one

Jeremy Brock

for Thanks Josh. the question. Hi,

layout we've terms Regarding A to and office base the objectives. for that eliminated a of that the our to mapped little from reimbursement favorable will our color reimbursement we have the and for stated, lease currently the addition a square proximity XX,XXX is by that building team. project to more home feet. that square very going we team current the infrastructure carefully the move talking will requires that least us us as this we're is about, X,XXX the feet future occupied We'll topic, be actually under need is addition, square out building eliminate believe foot space rent. And of of on need feet XX,XXX about allow square in what space financial of support $XXX,XXX of the which growth

the to which we're rent as residual area, also this a the a give will has economy strong and quick as us that well. seeing Prague period from building a project value New expense to payback Minneapolis, compared the So very favorable

entire financial haven't we finalized mostly call. office and will space Again, the very for further that and the again common building. on the be the the good of we you I is this deal conference areas combine deal and for it'll company So update give next a think terms

Unidentified Analyst

very Okay, thank you much.

Operator

question next Our Partners. your question. Summers is Value with Andy from Summers Instructions] [Operator with proceed Please

Andy Summers

morning, and Kathleen Good Jeremy.

Kathleen Skarvan

Andy. Hi, are How you today?

Andy Summers

couple may. I'm thank if I questions you. well, A quick

performance business, you the business go five of Firstly, new that in institutional have years? improved. you the there three Head to next Can could a your over where since about really Sales talk has

Kathleen Skarvan

happy little about bit a more be I'd Yes, to that. talk

to and of mentioned the SmartVest critical our a frequency institutional for one comments all high their wall funnel the hospitals a As think are we the the able like too great is are well. patients patients as recognizing hospital value I therapy opportunity us chest as in bronchiectasis we in in through -- care units like

respiratory more people they the penalties. So of the readmission healthy with us. we phenotype share -- to we on on readmission phenotype home from home end and people a revenue of that not -- clear have are as of can send market overall, helps stay well. of gain the But as the that be Do bronchiectasis care for programs which will they as and lungs, care. can them being really to catching the now course. far idea hopefully out or hospital in double it readmitted keep COPD as well putting COPD is with hospital growth hospitals identify those this think we the for can But pneumonia is see continue penalty here as Could COPD to digit higher these

potential. that's think I

Andy Summers

revenue or somewhat it? growth, revenue I the that it institutional think a your home correctly is about care thinking the of growth right not way that am indicator leading So is for to about

Kathleen Skarvan

a The hospital the way is being there, could the perfect have hospitals think opportunity are then that then discharging. growth to as this talk it, actually they that in about see the right said SmartVest. how and more more discharging make work gives the with more then for we about those Andy. of brand value used that those we in more Well us synergy -- our where sure to I the we using be them think that for physicians physicians so be also that could do we standard and the then care it, more have help exposure diagnosing patients access to bronchiectasis of and first, on

in we're very said So my I about opportunity. the comments as excited

Andy Summers

see But that then And the additional this fruit. that the look great. those initiatives sales appreciate for out if question business the years the and initiatives. to over EBIT Okay on What me, as of we potential the do you next assume period. bear last I time for three over five margin do productivity color provided you

over your the You have sort if but five where do next historically, of you three to pay-off? been going mid-teens initiatives see years this

Jeremy Brock

in Hi and revenue get that Jeremy. the without And the the when having making in same numbers. future think mid-teens getting we depending at back I we increase time, at we Andy, belief on the the is and look the I of we're at the investments leverage to invest that meet expenses they current growth add can other given to we mid-teen it think have opportunities those our any that other investments ex. those can and that it's any time

Andy Summers

Okay, thank you very much.

Jeremy Brock

Andy. you, Thank

Operator

with your [Operator instructions] Please Private is proceed Our Investor. Najim from Salim next question. [ph], question

Unidentified Analyst

Good morning.

increased I equipment that update on So has opportunity for get home opportunity sales. the and in just conversations a I in continuing quick to have as been and wanted past channel medical the also guess XX-K, that an an it's just the having exploring identified distributor question

Kathleen Skarvan

question. Thank you, that asking [ph] Salim for

a will the involved share have It's may share expand be certainly more with regard parts we market think medical of or to to and material our worth or distributors it territories standpoint. our equipment brand in being definitely we regions speak that that to brand We do as strong our in beneficial something country particularly that with of longer actively term exploring been in conversations not from has where and able those are home you. growth and handful about be we might a how for something when

the that’s at question are this and where thank point. So we for you

Unidentified Analyst

market? opportunity market for on I is the if follow or a care Maybe end is may, those the distributors to institutional home the that, with it for

Kathleen Skarvan

market, those do discharge well distributors home the a as often we relationships those for relationships care serving home with oxygen now have medical patient targeting would portable Right non-invasive and are or with be hospitals ventilation. equipment exclusively

those market. but beneficial, And be could be relationships the home for so care again would

Unidentified Analyst

you. Thank

Kathleen Skarvan

Thank you.

Operator

[Operator are There Kathleen remarks. call more Skarvan Instructions] turn to over like I questions back this would at for time, closing no the to

Kathleen Skarvan

our May release Thank to you back We our you we financial day. quarter in all a call forward when third for fiscal participating this on reporting look morning. results. to good Have XXXX

Operator

Thank concludes conference. this you today’s

your participation. disconnect time thank at may your You lines this and for you

Electromed (ELMD) 13 Feb 192019 Q2 Earnings call transcript