DYNT - Earnings call transcript Q3 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Dynatronics Third Quarter 2019 Earnings Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to Mr. Chris von Jako, Chief Executive Officer. Sir, the floor is yours.

Chris von Jako

to Investor welcome and morning the call. Dynatronics Good Executive with Wirthlin, me Chris Chief von the and Chief Jako, David I'm on Officer; line Officer. Financial our is results this We press December XX, and morning of ended our announcing nine issued months third release the a XXXX. quarter fiscal financial the this Later for we file will morning, XX-Q our quarter. Today, provide commentary our of brief will I third quarter. our will it provide analysis of to over a David, And financial to turn then I performance. detailed XXXX an I financial will fiscal this of follow guidance. providing update by our up conclusion the we have At our of will lines the commentary, phone the for operator open questions.

remind Before that forward-looking we from regarding begin, that to statements could as of reflect financial uncertainties discussed performance and course let will results differ and materially forward-looking projections me of we this our involve statements view be relating plans, making risks only, and you call, cause today to These the business. those they actual expectations, current our our during our today. or undertake on to Important obligation included most factors that other reliance to from recent you statements. today the I we not XX-K undue revise by this reports in make caution forward-looking implied or those place to are our SEC. and statements results We statements materially forward-looking differ with our filed forward-looking could morning. cause actual update projected no

line the Our fiscal guidance the with in last quarter provided sales are third for XXXX quarter. of

for COGS We success. to continue platform long-term on restorative our building focus

to have in We our growth and organically Actions despite both revenue. operating flow have that acquisition. are second, scaling decline drive flow recent increased on, focused and first, business profitability for cash driving taken the cash operating the profitability, through and we

us reduce and operational we take scale for to the eliminate well the To best unproductive synergies overhead positioning business, better these believe We will within actions changes in performance practices. long-term. to are continue the burden to business. We continue generate activities, implement

have recently sites started our Jersey in at our and New that process driven site. have process Utah We same and Tennessee improvements

reduced overhead productivity the example, Tennessee, For Utah the drive and business. in empowered within and the site team leadership, to we restructured improvements

made Some improved of have standard for we process demonstration rationalization the a we of improvements evaluation previously include and discussed, product costing have inventory. new system and

us this of future. work these We more enabled are has well the fewer to positioning done get All believe with us efforts for resources.

Before I we re-emphasize the to have to standard I become recognized the turn the time over unique want opportunity to in restorative David, solutions.

and build to their to continue we a for reputation be brands our for quality, As on-time will excellent leverage delivery strong differentiated service. we customer able that are platform,

these strengths us Going help forward, position financial cost aggressively. plan we the across and to business. David will will and growth more sites now to our a provide leverage drive reduce report. across of This all consistently

David Wirthlin

which to $XXX,XXX in quarter The at Cronin, of XX.X% & or selling months in rationalization products the and rehabilitation for and are quarter XXXX. full provide included but period $X.X our sales The therapy report prior year sales primarily included of of $X lower lower profit decreased in reducing direct percentage year, to or in to the XXXX at of to or months ended same primarily $X.X our The Lower XX, of by XX, channel X% due was to are and for and March closed the prior XX, in the approximately Chris. percentage in to force $XX.X change in to the sales a sales quarter a targeted to direct sales targeted physical in or year. $X.X ended $XX.X primarily the Bird selling for & of increase effect direct nine in XXXX from margin decrease the $XXX,XXX $XX.X XX, the rehabilitation our in X% XX.X% our million for offset to our The million gross initiatives sales financial period the $XX.X of to in & and products. our price the physical $X.X to selling representing the the about I nine the the on therapy year, profit of in of The lower XX.X% in compared March the cause XX, fiscal of sales March nine due included March reduction effort. in reduce compared $X.X XX.X% was the million in to development XX.X to same profit quarter or million gross or six decreased the prior of decrease March the year. The and ended fixed period and of lowering ended sales same sales channel. approximately decreased the margin ended the gross to XXXX, sales decrease of of lower decrease primarily primarily attributable months attributable Dynatronics sales rehabilitation million XXXX of therapy due Net physical $XX.X quarter was was $XXX,XXX nine included driven our research to million quarter Net quarter in XXXX product for sales will compared of effort. included Thanks, decrease average implemented of million offset nine due Bird same general quarter of Cronin results $XX.X had operating XXXX the rationalization the million from prior by million administrative in addition ended of the million profit of products $X.X includes year prior gross commissions. compared to Gross sales in to XX, direct selling transitions lower prior million now in of dealer Cronin’s year. XXXX. XX.X% lower Cronin $XXX,XXX management million in approximately same million, sales in XX.X% the million sales $XXX,XXX. increase the first only of of year. first which $X.X decreased months the decrease, for Bird decreased the to initiatives beginning an Selling, year. fiscal transitions by months implemented sales second Therefore, XX.X% the sales representing of consisting million acquisition same primary in to the a reduction margin ended salaries due product expenses gross XX.X% the $XXX,XXX flat year. nine lower the decrease or & sales acquisition contributed $XXX,XXX and the $X.X a decrease Gross million of and to percentage. the and $X to Bird fiscal months and of XX.X% the XX.X% expenses gross the first by our force March of profit versus through million primarily XX, March $X.X fiscal due compared

of the income valuation were expenses, approximately other non-cash related $XXX,XXX same stock and same of a of by March same quarter loss for to and the fixed $XXX,XXX reduced quarter lower $X.X million commissions, a other addition of general the Net the of the and in months administrative million net to prior for same severance common $XXX,XXX Bird period XXXX, in loss additional was sales offset year. decrease Net is or reduced of million XX, expenses and the million to stockholders management provision, $X.X common the $X approximately $X.X million expenses deemed Cronin March the compared $X.X improvement $X contingent expenses in expenses severance Selling, million months stockholders period and & the and XX, of related a dividends $X.X million months $X.X of research common development million improvement XXXX which year. by to million to expenses $XXX,XXX gain lower attributable for ended of $XXX,XXX, compared net $X.X SG&A to acquisition decrease XX, the in contributed a of loss March reduction compared salaries offset XX, $XX,XXX adjustment the year. loss was the selling million. loss $XXX,XXX year. net in attributable $XXX,XXX non-cash the a a to The in prior in of amortization Net amortization expenses $XX.X stockholders million in preferred $XXX,XXX of non-cash quarter March million consideration. to March a approximately and reduced the was for dividends, of loss. due of in of to $XXX,XXX the nine expenses. for loss was was XX, a XXXX for prior in nine Net X.X% reduced net ended to loss $XX.X loss and expenses XXXX $X.X in period attributable to $XXX,XXX acquisition XXXX, ended included the same period, ended decreases compared $XXX,XXX nine and $X.X including lower the development prior compared research ended Additional tax loss to million The Depreciation, million of for prior $X.X year. were quarter. decreased Depreciation, due in quarter

March As XXXX, of we $XXX,XXX. XX, of cash balances approximately had

to an $XX as of borrowed of based $X.X XXXX. million March pursuant line which XX, asset credit, million We had have we

borrowings XXXX, $X.X the million ended balance credit March our available our months This obligations. Our cost cash holdback working by management in averaging result provided efforts, net base. is line million, $X.X lease $XXX,XXX capital debt of about capital. borrowing well the was approximately and leaving XX, proactive based payments of We activities operating of nine paid and $X.X is on as currently In $XXX,XXX of in acquisition as million. current reduction

XXXX, XX, summary concludes XX, open of the operating our make results. few of we $XXX,XXX payments which we XXXX, March questions. acquisition to to final paid August. subsequent payment before remaining of will $XXX,XXX March remarks one final in a of Chris As leaving totaled paid be due deferred $XXX,XXX, This for

Chris von Jako

Thank you, David.

Moving onto our guidance.

in $XX.X million to $XX.X narrowing expected year to sales approximately XXXX consolidated million. are We fiscal full our

revenue of XXXX. growth and While our XXXX on which lines. will between further XXXX, guidance pruning XXXX we operating intend lead year-over-year focusing fiscal model fiscal process profitability, the and to of analyst flat after to product cash We we providing may the continue report recommend we flow be

XXXX. remain However, expect operations we product in cash from consolidated optimistic in certain flow lines. generate we fiscal positive quarter, our operations Consistent with last about growth to

charges. non-cash be fiscal the for million sales approximately sales We of in XX% X.X% about expect of current be SG&A $X.X XX% the to including gross in to margin range and year, or

demonstrated our approximately team adjust ability of to we have outstanding revenue million. of as the Our X.X the to The in has XXXX, reductions shares quickly experienced. March response number expenses was common XX,

Contracting to outstanding our at any of the and and exposure in potential based a conference. build very of to quarter vendors, expect our successful & our the meeting and continue approximately and and on meet Vegas April. current marketplace. XXX,XXX Independent professionals, per I Las attended three sales is the the to these showcased with I of the does meeting not stock partners be in this Co-Op was industry. in increased also all I and by great We This spend XXXX American brands include in guidance the National Nashville brand for shares gave price. events distribution with impact Surgeons pleased Exhibition We featuring I attended during current customers. brands Medical of Distribution National and during operations acquisitions. a vendors we the time to at Again, marquee March. our our the customers in Show in Trade Orlando orthopedic Orthopedic our Academy number us continue was Convention

Musculoskeletal community. XXth Francisco presented continue the Oppenheimer Conference. to build proactively the We conferences Canaccord three We Annual the the also investor JPMorgan San in at the Healthcare meetings Annual quarter with in and Conference, We our including story the ROTH XXst conducted relationships Conference, and January. share Conference investor during during Healthcare

We initiated investor community continue great to efforts. to April. research We're through Group these coverage also gain in pleased the Maxim exposure equity the that

five defined mission, the including presented During plan vision. we updated and of our quarter, an Directors our Board values, to years

mission. deliver We company optimal to are combined We accelerate to committed restorative health. our products

continue I As what I first my end competition. to CEO, approach the they as of sets from the reminded be year apart

drive plan service. & excellent Our quarters, our customer are products, brands, differentiators Dynatronics, In market quality and and delivery, high U.S.-made include strong part thoughtfully structure consistent Hausmann, on-time more Cronin, coming two our Bird streamlining across we the We consistently post the of plan restorative our we that acquisitions. synergies greater accomplish by to in and all maintain divisional aggressively. to our this sites

synergies we and through topline appreciate our will progress this make with ongoing the plan just thank progressed for drive also as business. employees base revenue only plan to this has the and our XXXX. so through investor We seek process aggressively period. strategic out growth completion further This as and discuss begun across of to we We as transitional calendar support we their

now We commitment our questions. the products it optimal accelerate over continue to I restorative partnering to with turn operator our by will providing customers to for health.

Operator

question for Go Instructions] Our Maxim ahead Thank open [Operator comes Anthony you. Group. The Anthony. floor first from with is Vendetti questions. now

Anthony Vendetti

I little bit you was products. thought portfolio of the you. more discovered going Chris, Thank that just as done. Have don't process I make part the if products sense your wondering that a was talk largely forward? on about pruning could Yes, you

Chris von Jako

the Morning for Anthony. question. Thanks

So, think in as general but in least we the product but know we the legacy across done to pruning as the continue from business it we've all rationalization there in brands. at that continue looking pretty you general, good far the at look where I there, we're at business

Anthony Vendetti

distribution, then network go the in goal it terms And sense I so and third-party distributors you that to areas? Okay. direct is dealer makes where dealer of or essential just network certain sometimes a Is forth. have lot the and of in know

Chris von Jako

important over dealer from moved last direct small especially that made And have network. in direct some year, we've and direct a sales been Well, network the a targeted we've and for we've underperforming sure, some a force at more sales and force the to looking changes the is dealer there we certain areas. cases, under

Anthony Vendetti

Okay.

Any costs. to think Okay. other opportunities cut you

cut at that light, at R&D SG&A else this seems you're costs there anything You expect relatively to to around said stay XX%, point? is doing

Chris von Jako

an opportunities you organization as we're Tennessee and always Well, the and leadership, we the products for I'll improvements. restructured facilities; Utah company activities family-run the mentioned team include centers companies created reduced selling excellence. I combining productivity remarks give opening And site example looking and of to to efficient. my overhead, opportunities empower on more was and know Anthony. from the drive in moving Other that, three make to the

which our improve So Tennessee during efficiency to the quarter, approximately activities manufacturing our we Minnesota site, by moved from certain $XXX,XXX. will

these and creating at efficient streamlined looking structure. things always at we're So and looking more

Anthony Vendetti

innovation, know Okay. expense. the did is you this there right is Or wow, obvious you R&D there I lastly on something up that need tick went this said, point? not is to portfolio though entire product at even now? it's when at guess, a Is significant anything we have anything down line, you the there that anything looked

Chris von Jako

R&D move take and has specifically able goes, therapy to deemphasized while being innovation market. think it, I model and line. be Well, of to this advantage in far as allowed the more the We we effective rehabilitation as to our outsourcing us the have still physical more

contracting well companies through our over utilize we looking always may coming efforts, product they our agreements but up but and soft products, but that at us small we we're always they improvements evaluating be So new time. look to believe as side, at And have constantly add exclusive R&D are to as distribution. we on then distribution improvements, channel goods we're

Anthony Vendetti

queue. the in Thanks. I’ll back Appreciate Okay, hop great. it.

Chris von Jako

Thanks, Anthony.

Operator

ahead, from Jeffrey. have [Operator with Instructions] a We Jeffrey Ladenburg. question Cohen Go

Jeffrey Cohen

and Hey, Chris you? David, how are

Chris von Jako

Thanks for… Jeff. Thanks, Good.

David Wirthlin

Hi, Jeff.

Chris von Jako

on. Thanks for being

Jeffrey Cohen

you you some So please? say -- And about you Did commentary refresh me before guidance that XX.X% XX.X%. about talked then XXXX. to you can made

David Wirthlin

Yeah.

what to on flat forecasting, be results. we'll we're fourth based But year-over-year. guidance we our our we revenue is, said updated an after expecting basically quarter initial So give give

Jeffrey Cohen

Okay.

line, bottom So about plan could on XX%, side? line the the talk quarters is line Top XX%. the what five top and margin to to bottom draw essentially right? up XX% where same, line to margin in get is you on you Could

David Wirthlin

XXXX year for to We -- expect this fiscal of the gross margins fiscal XX%. be rest for

always We ways point. giving formal not on guidance any that at this that. improve are We're looking at to

Jeffrey Cohen

Yes, two Okay. not cash But would cash margin more gets that growth based flow, but deposit increase our a standpoint? on flat you and guidance. that X% from is on percent our

David Wirthlin

Yes.

Chris von Jako

you hear Jeff? said, yes. David that, Did

Jeffrey Cohen

Okay, perfect.

it does for That Okay. guys. me. Thanks,

Chris von Jako

Thanks Jeff.

David Wirthlin

Jeff. Thanks,

Operator

there appears further over to floor management, back to And turn the questions. no further questions the queue. be Instructions] in [Operator I'll no

Chris von Jako

Dynatronics. All right. your for in Thank and you interest your questions

any questions If Investor you Operator, them have further please to direct our you the Relations Ogilvie. may Jim end contact, call

Operator

Thank today's you. This conclude We you participation. for your thank does teleconference.

have and disconnect may You day. a wonderful

Dynatronics (DYNT) 14 May 192019 Q3 Earnings call transcript