DYNT - Earnings call transcript Q2 2020

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Operator

Good day ladies and gentlemen and welcome to your Dynatronics Second Quarter 2020 Earnings Conference Calls. All lines have been placed in a listen-only mode and the floor will be opened for questions and comments following the presentation. [Operator Instructions]. At this time it is my pleasure to turn the floor over to your Mr. Skyler Black, Corporate Controller. yours. is floor the Sir,

Skyler Black

our Good second morning morning, I’m the in call. announcing results Chief Brian for Investor and financial Executive David the Wirthlin, ended issued thank Black, Corporate a December you our XX, Baker, is Skyler today of Officer. With participating and Controller XXXX. Chief Relations. Officer, quarter This today’s Financial me and our President we and company's release of head press

provide financial it will and then for On report. turn Brian today’s commentary he will over financial call, David to

Following fiscal for David, Brian will questions. operator confirm remarks. lines our guidance for year the provide will XXXX phone and open the The closing

regarding performance reflect our that business. our Before the today. and actual will results this statements course our those we relating These differ and plans, forward-looking of from of cause as statements involve we that current and discussed projections to risks let begin uncertainties materially expectations, remind our financial you only, today during call view forward-looking me to make could

factors filed results recent materially and or reports those projected our SEC. the forward-looking to by included XX-K actual that our could from implied most statements other differ are Important with cause in

we to reliance place We obligation caution you not morning. on make forward-looking We update revise undue forward-looking statements or this to no undertake statements.

Brian Baker

of and his want Thank new last leader you head the Skyler. Relations. been in welcome forward Investor we Skyler, to Chief I the corporate This look to President our and two in Officer. Baker, for a is appointed responsibility. the this Brian Skyler Executive organization controller newly years contribution and key has

major pleased of December that XX, the sales achieved Hausmann, and & report For to Cronin our Bird objectives we for Solaris. in XXXX we our the are each brands; quarter

brand recognized product As our most electrotherapy reminder Solaris is portfolio. the in a

are brand quarter. to stated each sales for every teams objectives Our achieve committed

trends opportunities. Our commercial new insights improved sales provide sales teams that regarding and implementing are analytics

our we guidance delivering the $XX are when on products $XX achieve sales and between excel fiscal We remain narrowing teams to operations in track XXXX. which needed. they are and for year year Our to continue million million where fiscal our

In XXXX operating compared same by year. two compared profitability the income XX, quarter operating XXX,XXX December SG&A by In XXXX increased quarter first quarters the two the SG&A we’ve improved quarters year. and XX,XXX by to the XXX,XXX we last by prior fiscal second XXX,XXX of have fiscal reduced to the ended and of first reduced

the generated positive year. credit cash our in two in activities million quarters first operating as of quarter in of the cash flow XXX,XXX XXXX. this for December million to second $X.X line positive Our and fiscal balance XX, of $X.X flow reduced We've

quarter positive operating cash driven largely capital. by the was flow Our working net in in reductions second

operating our to continued progress to executing initiatives. All the plan in results discipline of strategic financial reflect these and

functions In plan to To key changes well cost, will our We’ve appointed our Jason coming enhance of and recently Anderson improve continue operating we year. execution profitability us administrative accelerate fiscal Minnesota reduce our the months that areas to position Chief the next we will to for Information in drive consolidate talent Officer. continue and to operational location.

technology, Dynatronics over XX family Jason strategies. business having Cronin experience knowledge Jason operations member Cronin You the of business a in the wealth Bird recall that sold and a & is may of brings to years that running XXXX.

in CIO & a Wealth as was Cronin partner of co-president Jason Bird XXXX Evercore joining Management. Before and

Director controller also and Operations rehab, for Chain. our a a of group We are Director Supply of Sales recruiting

team. and positions my All based headcount and senior in be planned neutral individuals Minnesota with more leadership of our these are These will budget. closely in

marketing campaigns. landscape, have Sales be competitive to refresh The brands. and Hausmann focus short-term the responsibility of for assess rehab launch Director and the The Operations will will product Solaris content

responsible The to identify capital and improvements building our our controller streamline teams will working group and metrics. for improve processes, be cost standardize accounting high-performing

ease focus projects, up-to-date be will of use, landing through ordering Supply and e-commerce sourcing of a S&OP who This for customized in channel our Director store. will and portfolios. will augment innovation experience The skill launching digital on the those Chain sales platform customer processes. strategic organize new ecosystem. pages improve customers to year transact This choose This sales evolving exciting the management implementing we will our

be We and aim restorative a to solutions. recognized standard

customer organic a on company financial execute execute growth, our the and and which fiscal we report. modest on all strategy. mid-single XXXX to profitability During our build acquisition will David improve digit complexity; reduce relationships operational continue position to plan, well of provide drive now

David Wirthlin

products. Brian morning XXXX of second due decreased good $XX.X XXX,XXX in compared December quarter the Net year. the and quarter XX, for to to a to X.X% the $XX.X ended and everyone. The same therapy or rehabilitation million Thanks decrease of in million primarily physical sales sales was prior reduction

representing about reduction and the or or management for by primary product lower of same to selling quarter approximately prior expenses of primarily the $X.X to Lower expenses in the the prior sales Decrease of to million in Selling, The the XX,XXX. gross margin the consisting was decreased $X.X to to and commissions. by gross due XX.X% of of profit administrative the the our lines. XX,XXX to from same sales X% in or million lower therapy year. $XXX,XXX sales X.X% million primarily reducing fixed in quarter primarily XX.X% physical million lower compared cause $XXX,XXX sales approximately in salaries XX,XXX general for gross percentage quarter profit decrease of were of XX.X% to decreased $X.X Gross year. XX.X% $X.X the profit quarter contributed compared decrease sales driven lower

of approximately tax which quarter included $XX,XXX quarter second of the the fiscal in Net for $XXX,XXX XXXX. compared to of second loss loss year quarter of improved fiscal same was in compared Operating to for XXX,XXX the income income provisions. XXXX $XXX,XXX the quarter prior net the

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

to XXXX and based borrowed reflects pursuant million. and credit asset balance reduction is operating had cash our $X.X XX, an June from million line which accounts June $X.X $X.X XX. of flow decreases $XX a in positive the at This since working capital activities from we million We have million

Our on credit credit balance liabilities the In averaging quarter remaining December our line $X.X is line prior have we ended on our XXXX about currently we paid borrowing about transactions. $X and fully of current base. million availability of of from based all our million second XX,

summary I call our results. operating to Brian. concludes will back This turn of

Brian Baker

Thank you David.

fiscal be million $XX of for terms to year In XXXX the our to range expect in of million. net sales guidance consolidated we $XX

quarters of with Consistent volatility align two the quarters changes. to flow with historical on we between generate working XXXX expect activities to some in cash fiscal distribution operating We in expect the with trends. fiscal capital from past our years based revenue positive

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

the is which common. of a C number XXX,XXX currently due common in million X.X quarter second of conversion to The outstanding to increased shares Series preferred

of XX.X to and per We depending normally expect our preferred total share common million. of quarter The our outstanding is shares on common increase XXX,XXX currently in the outstanding number price. shares range

attended stronger key In my as greater this the continue the visit health to a to form co-partner. role to CEO, month serve. earlier as and performance customers markets access partnerships gain and We summit I president we

will Therapy American At week attending the next Meeting with meeting well of these sections events excited in month. We as key XXXX meet in Annual Orthopedic are be American also and the relationships. to Denver develop combined to as distribution Physical we customers seek Association Academy new Surgeons Orlando this

the demonstrate their directing our features recent will we most table which changes to offers post proprietary torque addition, In to design unique support techniques.

coming We the the Corporate relationships Xth We'll story Access annual Roth at and weeks. several in also also investor community. be We share attended to investor continue Event in our conferences presenting December. build with Utah the

current a organic lay continuation fiscal reminder for the growth scale the enable will revenue strategy and is going M&A foundation our to mid-single position As for company foundation to forward. digit of year business. operational the This the the our focus

investment the employees their and and community ongoing for our support. appreciate We thank investors,

We customers to providing solutions. effectively innovative by are restorative committed serving our

I will questions. the now turn for over to operator it

Operator

Our you. Please your from state comes [Operator is Thank your question floor for Instructions] The Cohen Ladenburg. now of questions. question. Jeffrey open first

Jeffrey Cohen

Hello, you? are How and hi David. Brian

Brian Baker

are How Jeff? good. Yes, you

Jeffrey Cohen

morning. Good

So sense could over you the kind movement of up give quarter, speaking, generally on just a FTEs down? us have plus you past or a seen quarter

Brian Baker

FTEs?

Jeffrey Cohen

Full Yes. time employees.

Brian Baker

XXX Yes. low I don't in have the exact number range. but we're the

David Wirthlin

XXX Yes, I little think above right that probably are bit now. right Jeff XXX we around a

Jeffrey Cohen

It perfect. like the are the right it, sounds trends Okay. going speaking way. generally Got in

good kind idea taking holding any digit about So talk estimate commencing you model? through of account under the trying Do to get Not end to kind think a growth. acquisitions, M&A of just into that's calendar year and better March/June, XXXX? of mid-single

Brian Baker

recently meeting those the Yes. we've fiscal million for about to narrowed year $XX million, If $XX guidance XXXX we to at good look we XXXX. and feel that year fiscal numbers

Looking after the beyond to the positioning single-digit next guidance well providing but move talk this fiscal year the into year. fiscal don't this for the we fiscal next are we say we're modest that company I'd that yet year to growth

Jeffrey Cohen

to the years margins think Okay. Looking possibly back at Got it your half you it. previously carries margins? over better we do like Brian your also And look that the thought. than

through versus read does do QX that try much then margins? the to too be of that you into could on carry lumpy? or expect mid-single the expected -- that do digit you to kind cadence upwards QX Don't can and So it growth

Brian Baker

Yes.

our feel we add don't and need plenty cost. we're think of think about we've our products. are pretty capacity with margin our operational We where in distributing good at plants got We any where fixed we the On foundation. we to

we speaking have details the the as could We're any increase. see sales think gross see to will start sales So on an that not we contribute think the that as effect margin. we really on increase what volume in we

Jeffrey Cohen

is? mentioned about like more us you're it. table, manufactured? there also of and innovation out going see. What getting far was Solaris? I'm it the to and looks which do encouraged Got conferences and innovation supposed some trade talk What could other that a bit little Okay. torque the the related It to What it's it's Where on on about could was shows to it to as bit? you little that as a talk

Brian Baker

technology from therapist the applying am anchors proprietary is Yes, That unique table we Hausmann do the the is to patient this a stretching does inventor. he's place Jeff technique, with licensed having torque technique that stretching as to able in torque that the patient first. It's branded which about product. What a a so it the table it the product speaking is I anchored.

in them treatment the force so therapist patient's and can start has to pull the on imagine to patient to [indiscernible] on of table keep some the and I normal they're got place. it opposing You a kind put on

and the table system torque fun therapists product technology. at it didn't why look think this provides it's The Jeff this [indiscernible] anchoring when really it's of I of a kind

this to we're and pretty that product something this showing So Denver. be week sections it's we're about in going in launching buying excited

we're way the desired that that at start with product place they treatment doing we want for quicker. are we're things in a is looking innovation, refreshing The it’s Other the menu putting therapist the quick looking product. easier so that product get that that Solaris at to

they other their they and Solaris patients started So move the can on on treatment treat product. have after

Jeffrey Cohen

Got it.

Okay. looking had. I That's questions just other that the I'm perfect. at

So production XXXX for outlook, of correct? operations your the fiscal entirety of cash from is

David Wirthlin

Yes.

year. Our flow for going cash positive the we're that is to be guidance

We're positive volatility do cash months. As in six some the we we've have expect but first to to to $X.X we mentioned flow. generate going generated in continue million quarters the

Jeffrey Cohen

over lastly as Brian, months just bit little as what's past picture a about of there, on trends far the far [indiscernible] as front M&A pricing, big then speaking talk And etc. availability what could kind valuations of or seeing you're you Thanks. entities out Okay. as the

Brian Baker

targets new explore maintain will get at right but believe oriented the we to Jeff. are valuation those for to then the those do from pipeline have businesses timing come and for occasionally mindset and owners targets really it's Sure. pretty strong targets We in do acquisition maintain that sell really value when we we a moving worth of assessing the those forward do a with right time. We the we communication the

Jeffrey Cohen

Okay. Thanks for the taking questions.

Brian Baker

All right. Thanks Jeff.

Operator

of Vendetti Maxim your Our question. comes Anthony next state from Please Group. question

Anthony Vendetti

what Brian I that's outsourced a a outsourcing to just the right going, was years are products talk Yes. How many of still manufacturer? wondering how contract you about bit now little producing? percent can

Brian Baker

we of qualification need of over outsourcing portion manufacturer. good Today Thanks the making percent of on Anthony. and we'll what far as they're almost question. morning pushing that line that progress completely Good for what The on we're as qualified. start start the manufacturing contract planning we'll what front. of plan contract to gone demand our manufacturer the We've through electrotherapy with and really a

and and as that from really strategic that we're manufactured working sourced So We we're at product other I'd on say some same lines It's from really historically manufacturers. on outsourcing do that that's are planned with sourcing what schedule that's we track do product we've sourcing new. as on the nothing we’ve product. far products overseas and where other

Anthony Vendetti

move contribute margins of contract fully outsourced? would that to that you an line line completely margin particular will to you what when electrotherapy that the me goal. Can gross And the when the manufacturing on be product give margin, it's obviously idea long-term

Brian Baker

will our that It to will good what not earnings something of really that effect be it's but not that to the to six see differences or have think we effect the do next that see and so will margin Anthony. say that specific is over to think P&L We're talking on we start only move on margin what in we as through a well. come going we'll gross start months

Anthony Vendetti

initial then a and constant unnecessary talk about just How product the Can duplicative of Are with together quarter? you many is and products done process products three you've you you calling the this I calling an you did and that's the put divisions. you still as process? where it's ongoing or know said had largely now and at? this Okay call some line reviewing

Brian Baker

and what rationalization we affect use some products line looking inventory. in we opportunity management. is it what over I'll an to are how carrying the we will quite for were through the which our [indiscernible] us have just We well we been And really look example that you not they're duplicate necessarily We've move [inventory any management and we're There project within rid four them but way months. to reduce target] because say use should our duplicates or get Anthony payments] that everything like portfolio models give over in because revenue we'll just to choose to We're kind sharing will. duplicate lifecycle went profitable at three then time. of had on at working project those opportunities where ongoing of as to towards next that else will product [board SKUs. be at to done [stores] looked an set few and portfolio. product didn't with Yes, the that if

Anthony Vendetti

Okay. Brian. Thanks I appreciate Great. it.

Brian Baker

Anthony. Thanks

Operator

over There be questions appear no Brian time. will Baker to further at closing this I now turn to comments. the for conference

Brian Baker

and questions the your interest for Dynatronics. you in Thank for

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

Operator

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

have disconnect and your may this You a great time lines day. at

Dynatronics (DYNT) 11 Feb 202020 Q2 Earnings call transcript