DYNT - Earnings call transcript Q2 2018

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Operator

Ladies and gentlemen, greetings and welcome to the Dynatronics Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I would now like to turn the conference over to Mr. Kelvyn Cullimore. begin. may you you, Thank

Kelvyn Cullimore

Thank you the welcome to want much. Corporation Investor I Dynatronics to Conference everybody very Call.

of the We’re going December reporting is ending our of year quarter second to review XX, the XXXX results our XXXX. fiscal quarter which

the Cullimore, closed am with is our press quarter for today, earnings our we introduced, Wirthlin, Executive Officer. Financial ended today Chief XXXX the Kelvyn filed was Officer Jr., December and As After David Chief I and me the issued XX, release. market XX-Q

So such recent begin the discussion, forward-looking with forward-looking the from the a course conjunction in to and We or of on financial data as of the future risks that statements. be make annual involve performance the recent uncertainties that contained risk and regarding Form caution results including before with should differ may statements report XX-K. the any could factors our perhaps filings projected in results we the most statements in SEC, such actual reminder, company. future its financial materially this considered during most call, statements disclosures, specific Those events including management you cause company’s

six operating at questions. to results XX, December open today, for lines our will about the conclusion So quarter commentary and we’re of talk and specifically months the from going the ended the XXXX, the operator

filing of XXXX quarter acquisition to current X, important Cronin. Bird the first you on since wanted our bring of the I on most On closed First, November the XX-Q we October XX. & events

very & report Cronin are of gone acquisition to Bird pleased We well. that the has

process. division thus operating significant of Jason they the to through the manage over no operations and Mike sales part were they Culturally, Bird a continues their million. been as fit. that they to established there very as the attrition. very has integration and and no a as recall, There & of continuing as as have indeed surprises reporting The the channels expected done the the morale The manufacturing & sell sales was been $X.X serve of Cronin division employees of several company company operate far significant been in have has reps quarter had Bird past dealers. positive Co-Presidents and and distribution years. Cronin combined first a of Anderson and Cronin you strong of division As good

and investors all the As our you obtained placement The upon net automatically Bird funded we we may approval of Series recall, Preferred to private at XXXX which on our issued our annual meeting company stock and XX, preferences rights X.XX of Preferred sellers. stock of all issued priority, C to converted stock with elected institutional Preferred D The shareholders. Cronin preferred the into Certain from and Series acquisition rights. of November with of and shares Series shareholder Series D stock the of common part million the of liquidation the the Preferred. million forfeited conversion company associated Preferred common, of C Preferred not and nearly stock Series shares in conversion the the voting common D into shareholders of a thereby the redemption Series portion Preferred of Preferred, common & Series C to in dividend, including X.X convert stock proceeds C and

X.XX known as XXXX, Preferred C Preferred" million of shares outstanding. remained commonly As of this "toothless December Series XX,

steps Consistent remarks proceed expect rate to year executing million to November, cash the annualized in make and direction continues flow acquisition These of to grow to few an from we April been to to operations. we acquisitions our generate consolidated acquisition. strategy more by report $XX We will are I’ll very of in last we the Hausmann of at also a positive we which operating in have for the pleased $XX division results. believe our operate is the first two with quarter XXXX. the financial now, gave our positive executed positively and well Officer at Wirthlin, million to we in contributing but report a integration sales call approximately that like I closing, XX, provide fiscal would to ended to December turn on Financial Chief the the David

David Wirthlin

are the a Thank release you, detail color this afternoon. ended and provide December operating issued that XX, on six additional quarter will a for results was material our had press months impact XXXX. few to Kelvyn. I factors the and that There

of Bird impact significant both and in October December acquisitions XXXX. six XX, quarter and XXXX the April Hausmann ended & on the a Cronin XXXX in First, had months

results Hausmann’s the first second prior Bird quarter included and and for noted, neither year. of of comparative and fiscal second operating the our results both time quarters operating Kelvyn are operation first As are the Cronin’s & in included the in periods is included XXXX in acquired

and cost for significant fees in second SG&A the for six $XXX,XXX expenses incurred with fiscal December and accounting the in in of Bird of quarter included approximately expenses XXXX. and Cronin. a we & first were and Acquisition Second, acquisition quarters legal months connection XXXX ended XX, the the $XXX,XXX

same not that million acquisition $XX.X of quarter prior sales in that XXXX in the million. year-over-year quarter margin in year-over-year contributed gross XX% the contributed XXXX project by fiscal the the of attributable second million Dynatronics $X.X XXXX. legacy operations reduced two months to XX.X% sales of to contributed a attributable that million. decrease months legacy & operations were percentage. in sales Dynatronics partially XX, months net from Third, came growth to and order million, These million $X.X the These compared or same the in Dynatronics acquisition quarter approximately was decrease million decreased period Cronin legacy ended determined operations, XX.X% the and related and the increase XX, & quarter offset These increase were of incurred XXXX million Cronin December the December sales, development XX, margin Cronin. offset compared $XXX,XXX partially net six $X to six loss to for ended was Bird expenses million, $X.X gross and the gross the of of a six prior XXXX $X.X drivers & of customers. months million by quarter inclusion acquisitions Cronin for to Hausmann $XXX,XXX attributable attributable million million gross quarter due ended or $XXX,XXX to ended expenses in $X.X in gross primary ended for related Dynatronics including December increased in net $X.X & and compared margin drivers a Net legacy in in at had months stock much XXXX. research to XX, to freight of both due due Selling, expenses abandonment legacy were of XXX,XXX XXXX. second and a operations, $XXX,XXX the six incurred primarily December ended increases dividends months from December XX.X% in $X.X same did $XXX,XXX Preferred and Bird ended single six December shares the margins a Hausmann in XX, attributable sales XX.X% contributed Preferred primarily million XX.X% to was or for XX, XX.X% non-cash to additional Bird increase that to in a to SG&A expenses year-over-year attributable These were quarter operations, $XXX,XXX profit operations, to improvement accretion of for $XXX,XXX XXXX. for million in Hausmann year. $XXX,XXX increased of of third compared half profit by in six of profit of months year-over-year percentage the a other months in sales driven margin year. development loss sales as the lower common representing we SG&A to six the and $X.X $XXX,XXX December the in lower XXXX $XXX,XXX in Bird income in to to ended income quarter million & SG&A quarter The primarily and The commissions million the of inclusion legacy and and costs Gross approximately on reduced to XX.X% XX.X% XXXX to year sales expenses increases increased for decrease $XXX,XXX October ended higher December the from a approximately $X.X reduced the with and The gross April were approximately million months operations attributable general Bird gross Cronin. sales included approximately December XXXX dividends months was six for $X.X from discounts not for XX.X% offset to the to expenses. primarily attributable increase primarily Preferred was prior the of or came the for same contributed profit quarter in approximately loss the of of offset Hausmann lower December margin expenses past Series expenses & compared from and Dynatronics B percentage acquisition. year. increased primarily $XXX,XXX offset primarily gross $X.X fiscal in December gross XX, sales XXXX $XXX,XXX approximately due Series mostly net for connection million, freight. margins in XX, D December expenses approximately is primary the to profit million the we associated $X.X the XXXX. over months the net XXXX, issued XXX.X% fiscal The in in $XX.X of XXXX. charged primarily were in decrease offset million from the compared connection quarter the net SG&A XX, XXXX $X.X from repeat The representing to with of expenses ended Dynatronics & growth XXXX $X.X decline for income decreased that XXXX $X.X was the $XXX,XXX increases thirds XX, $X.X the ended by net Hausmann quarter for the approximately December The That and XXXX did The The XX, year-over-year $X.X $XXX,XXX Preferred administrative the $XX.X difference, Dynatronics SG&A expenses Net quarter were of for Series compared Cronin offset research due XXXX margin our to XX, and in Hausmann of $X.X the million, year-over-year partially the The operations, $XXX,XXX and months current $X.X in after to Preferred profit $XXX,XXX compared of in analysis sales Bird the to commissions. Research higher to approximately December by C expenses. Bird improvement acquisition. is gross operations. XX.X% to approximately increased $XXX,XXX $X.X added in by $X.X additional in ended development December six sales. operations $X.X stock order was $XXX,XXX $XX.X year. of a million, million Net SG&A percentage. Preferred million and legacy to the approximately gross increased by XX, operations, Net second with $XX lower attributable of C of increase a sales, or million $XX,XXX and and is percentage million included of partially in higher Net $XXX,XXX issued Bird XX.X% gross $XXX,XXX ended was in Cronin XX, higher issued expenses research ended offset Bird margin The well from our the Gross acquisition Hausmann lower for SG&A Preferred ended with $X.X decrease invoiced Cronin Cronin loss operations, by single and million XXXX administrative months in approximately to and & operations were sales, the repeat of in a associated profit income & deemed quarter. for XXXX. $XXX,XXX of approximately current about SG&A The & of approximately contributed quarter for also Series quarter approximately in in abandon. & and R&D by for in or approximately XX, year-over-year six of The Selling, the ended inclusion year. quarter XXXX due of prior the in the $XXX,XXX of December the same and during to for the Hausmann sales, stockholders acquisition The to Hausmann ended R&D These approximately warrants XX.X% December December million of quarter sales of the a million the $X.X expenses $X.X development the decrease on fiscal about XX, same acquisition in the Hausmann net $X.X December the the quarter income million expenses approximately of contributed approximately Bird December half quarter from for of all in the the project the six increases common and $XXX,XXX XXXX or and and quarter approximately ended the Bird quarter sales, XX.X% lower $X.X to same million all second to prior $X.X with related XXXX million in in Bird quarter or to of compared to the approximately was $X.X reduced and the and & of to higher partially are period the million second six months decrease $XXX,XXX in Hausmann approximately million XX, Cronin. quarter compared XXXX. general Hausmann quarter in XXXX increases the $XXX,XXX for Series XX.X% $XX,XXX A to prior in by XXXX. to and lower increased of the increased shares reduced the Cronin margin the for profit primarily six or operations the to increases or gross the as XX. ended paid year. $XXX,XXX the decrease in was XX, from quarter. other of connection primary attributable in gross offset Cronin six which increased million in higher period Hausmann

the as approximately associated months six offset Preferred the mostly paid for compared common Cronin ended $XXX,XXX $XXX,XXX in the ended connection XXXX XXXX stock associated in six attributable discounts period net partially in shares issued shares increased and the holders million $XXX,XXX non-cash by Preferred December December dividends the shares of higher stock income loss warrants XXXX. The due accretion to & C Bird $XXX,XXX approximately the as of of Preferred loss stock dividends increase net XX, XX, with common Series $X.X of ended compared the year net For holders with in deemed XX, and common past months to in an prior the the in well is same increase to with issuance six to acquisition. in additional attributable year of additional $XXX,XXX to to months December

had leaving than averaging approximately million make December but operating million million borrowing we is million $X remarks of More pursuant our questions. based XX, borrowings base we our $X line recently, we approximately That available will XXXX cash. $X.X asset-based of which XX, $X.X balance December had borrowed summarizes $XX for credit XXXX. had of the of million credit more in Kelvyn on some final million. As $X.X to open line of We an as results. before

Kelvyn Cullimore

major Thanks, a of is David. and proceeding Hausmann & integration quarters those several The acquisitions and Cronin completion the been the well. have for of focus past the operations Bird

continue our at our goal potential target companies ability numerous with year. one and to lease acquisition about to discussions optimistic calendar hold and We remain per achieve

for fiscal forward & to XXXX, with range to for expect Hausmann XXXX and all be XXXX, to of fiscal three inclusion continue $XX of for $XX Cronin Looking Bird in the XXXX fiscal of year of quarters million. consolidated revenues we

topline We’ve target for businesses. acquired the margin We slightly consolidated digits. SG&A response our have company XXXX and the fiscal for visibility continue in through the better gross growth mid-single to we in on now expected adjusted

consolidated SG&A We revenues in going-forward expect and margin million about of range, charges. $X.X and to be non-cash be XX% of or our XX% X% to including sales the about gross

quarter there ended & historically Cronin As we is divisions, explained September has year. revenues been historically XX. quarter in call the our our significantly through some strongest certain not seasonality have of varied the last quarterly to Bird Hausmann

for XX. XX. has weakest has in quarter March quarter December the been typically quarter quarter Hausmann Dynatronics Dynatronics fiscal Lastly traditionally The and strongest second ended ended been both our

million would were there in of we no sales million per combined conservatively to businesses XX an Looking if XX seasonality. model at the quarter three average

that on closer side and quarter XX. ended range being ended the XX anticipate quarter on March average June would we the for However, for the of low

gross while XX% margins averaging more the gross will quarters with around margins Our and impacted be also still seasonality the for by the profit higher productive expected year.

& XXX,XXX first In in abandoned R&D to and year of months, addition of resulted XXX,XXX Hausmann related as fiscal transaction-related to Cronin, for in well Bird the expense costs the project. half the our pretax XXX,XXX incurring and the despite six as profits during

continue to comparative relative year. prior We expect profits and operating the flow to cash company to periods the in of improve

to the margins accounting resources the improve of margins additional sales within fiscal finding provide of We’ve to costs. a marketing reduce their we remainder also and the corporate our hired our the have ways our During end we marketing of focusing streamline restructured controller on planning and are legacy We to divisions resources to better more and and as finance department. attention analyst and well operating financial to gross all that XXXX profit to and management analyze reporting and supervision improve bring attention Dynatronics company. as efforts recently operating restructure company,

growth acquisitions domestic is the do this organic the sales We provide shareholders primarily with Dynatronics and support to line to for building designed our and should you sales. products of who safe serving call. provide. at focused effective enhancing open growth from We’ll is our committed business is and through have now dialed which The that team shareholder in appreciate those value. take which of to questions management All customers on our

the So operator. we’ll time turn the to

Operator

Instructions] first line Ladenburg Thank Our Cohen go you. from Thalmann. ahead. of comes Please Jeffrey question [Operator the from

Jeffrey Cohen

hear can okay. David, you Hi, and Kelvyn me

Kelvyn Cullimore

fine, you can hear Jeff. We

Jeffrey Cohen

couple quarter. I a nice a on just questions. Congratulations guess of Wonderful.

addition are as commentary you some to commentary firstly, rates that So Hausmann regarding the or or divisions? far & growth or revenues Bird you or either do consolidate Do the addition Cronin. both of David, forward the acquisitions you will expected far from talk from as revenues I you how both as as and or about for guess

David Wirthlin

down. break to it intend don’t We

not to We’re year-over-year, the in do break term. providing now intend some of because but explanation it down the longer commentary we

Jeffrey Cohen

of if the excel charge kind the XXXX, Okay. stated fiscal from does as Is Got over one-time kind be that quarter to it. that this gets And say? then margins, that you'd for approximately you as of XX% so for XX. you far look you how back accurate targeting year

David Wirthlin

R&D not goods in Well, cost expenses, charge the of in is one-time sold.

margin. So it won’t gross impact

Jeffrey Cohen

far as XXXX. as XX sounds like a number good purposes fiscal But estimation you for Okay. for

David Wirthlin

Yes.

Jeffrey Cohen

to advanced Okay. I out Got would that to Solaris it. looks pipeline bit lastly, in you modalities balance and quarter and And the over particular of second you a play and year? over little or lastly or how how its guess contribution the this the expect about could talk that

Kelvyn Cullimore

similar in past. are trends been the to what have The they

end Our modality including focus six therapeutic of of line to is we to XX, this on category Solaris. the about months sales modality product growth and the our higher Zimmer added seen X% margin for we’ve grow of third our our products And have ended December XXXX. to

Jeffrey Cohen

then may. it. Okay. And one I more if Got

year quarter ex-U.S. how look far quarters the that Lastly, look might contribution revenues. to over the revenue, as second as did total over and I how for subsequent

David Wirthlin

revenues focus, International our not X% than less big a of is it sales. is

Jeffrey Cohen

to further any or agreements there territories? some Are invigorate have to efforts Okay. or underway that with other arrangement

Kelvyn Cullimore

We for continue the efforts. opportunities it’s have. to and of mean, don’t but marketing our major look not I focus sales we

Jeffrey Cohen

it from moment. Wonderful. Okay. it. does That Thanks. me at Got the

Kelvyn Cullimore

Thanks Jeff.

Operator

it [Operator gentlemen, we further you. at time. to floor queue no management Instructions] questions comments. for this Ladies have to the like any I’d over back and closing Thank turn in appears

Kelvyn Cullimore

we call the company. to call your very conclude being our in the in you will continued appreciate stay everybody much. interest and We That appreciate will today. continue Thank on And touch. we

Operator

does and for teleconference Ladies gentlemen, this today. our you. Thank conclude

You may And disconnect time. Thank this participation. for you at now lines day. wonderful your your a have

Kelvyn Cullimore, Jr.	Chief Executive Officer
David Wirthlin	Chief Financial Officer
Jeffrey Cohen	Ladenburg Thalmann

Dynatronics (DYNT) 13 Feb 182018 Q2 Earnings call transcript