DYNT - Earnings call 1 2024 | Dynatronics Corporation

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Operator

Good morning, ladies and gentlemen, and welcome to Dynatronics First Quarter Fiscal Year 2024 Earnings Call. It is now my pleasure to turn the floor over to your host, Brian Baker, the company's Chief Executive Officer. Brian, the floor is yours.

Brian Baker

Thank you, operator. Good morning, everyone, and welcome to Dynatronics First Quarter Earnings Call. With me today is Gabe Ellwein, our new Chief Financial Officer; and John Krier, our former CEO and CFO.

turn to over statement. review I'll introduce Gabe begin, and himself our we the to call to Before safe harbor

Gabe Ellwein

you, Gabe Dynatronics. is Brian. Financial Thank of Officer Ellwein, Chief This

the Let by vendor trusted opportunity join believe leading and me Dynatronics Dynatronics look positions reputation with building in customer products Directors participate them company. thanking which for and to with quality start to analysts the for Board a shareholders, Brian the relationships has employees, the of I strong for community. us relationships, forward success. and I and dedicated and well established to our investment

to Turning statement. safe our harbor

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

Brian Baker

provide commentary, On ended Thank President over announcing XXXX. for turn a press results release to first of I'll report. XX, today's financial of call, financial initial you, Chief issued September Gabe. we is then morning, Dynatronics. This Brian Baker, a it quarter This Officer and John some the I'll Executive our

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

business. XXXX, and we to EBITDA profitability September ended report the expectations sales are for delivered we achieved For our the pleased quarter XX, that

to profit continue committed stated objectives our and teams Our sales be goals. meeting to

strengthen and Our to with commercial been team goal the has the to improving loyalty will to of Dynatronics brands. work customer relationships hard continue customer

teams represent Our material, of financials only. in to freight X ] labor. find and use quarter [ These reductions earlier operations efficient continue cost

in and reflect on discipline our year XXXX operating the However, our priorities. results fiscal continued progress plan strategic

commitment to Our thank team's business to And our every want dedication daily been employee in outgoing further the to business. has key I the achieving goals.

report, John final recognize the call Before moment it financial as I I for on a to today's turn to October earnings transitioned to that call he out over and X. XXth the and John take role of deliver want represents CEO

to has financial management over he team the myself, for as it welcome the John. However, Gabe new And to you, report. the I'll the and turn of Board to Directors team we Thank why support CFO. the continued you

John A. Krier

Thank moving all employees the you, Dynatronics the the watching deliver I'm I success of to proud results, Brian. work look the have of you, management these forward and forward. team to quarter first and led

customers The XX.X% the $X.X our due profit in in net prior seek and sales sales efficiencies competitor compares million to I 'XX. million to product analysis $X.X and year-over-year to sales that $XX.X is rehabilitation in was will income our the the decrease acquisition in $X.X As be in percentage the a larger fiscal discussed here. Net management first or of lower and product of or margin, for period net one in continue the year low of reduction fiscal the Orthopedic by levels. in we of some was Soft reminder, reduction sales decrease XX-Q. a demand as the million of gross quarter discussion The net profit 'XX X/X at were Bracing sales summarize full found net to XX.X% a X/X revenue year. a the net and by primarily for statement driven of quarter financials key year the sales compared previously of can the as million by category. Gross of we same category

Selling, administrative reduction the to to led spread The year XX, with quarter a XXXX. by XX, expenses. or fiscal reduction quarter selling, expenses expenses the million across was $X.X professional and of million million in $X.X in in compared remainder ended $X.X million that was general loss of the of other for compares period net and million for ended QX September decreased September same $X.X XXXX, million the salaries $X.X million of to and administrative year Net benefits general XXXX. XX.X% loss 'XX a $X.X for $X.X fiscal overall

We our that price. increase outstanding depending approximately anticipate XXX,XXX per shares share quarter will on

change of As of net XX, The million to on million $X.X the million. was X.X cash $X.X XXXX. June September was XX, approximately shares no on September XXXX, number common the XX, outstanding reported approximately XXXX, balance

to for million The accrued September approximately expenses of borrowing million of operating expenses million from reduce $X.X and approximately accounts line a proceeds first approximately year of prepaid availability the line credit $X.X used Cash As of $X.X $X.X of of on the 'XX. our was quarter base by by used payable company activities fiscal was and million. the $X.X XXXX, fund million, XX, million. line credit balance of credit was additional and $X.X

overall net positive XXXX to of $XX,XXX. results. summary for quarter cash our in June financial was and compared The change the a operating the XX, concludes This position

Brian Baker

you, John. Thank

expected in million. of net distribution sales with In terms be of to The revenue year trends. historical XXXX, to for of fiscal $XX reaffirming is align guidance range $XX million are we the our to

margin at gross time. this providing not are guidance We

be and investors we net guidance. Given their for the XX% costs, in to relationships now ongoing for the our operator like improve XX% revenue our the our and We operating for before and the customer thank is employees as to data range support. I'll fiscal reinstituting over year. In considering profitability we'd expectations flexibility. to turn financial year summary, current for of our in and to our SG&A have it to reductions more questions. strengthen is sales anticipated fiscal such focus of appreciate

Operator

The Lake Instructions] Markets. Brooks is first [Operator O'Neil Street Capital from question from

Brooks O'Neil

John, as I'm with the I working you, going move looking in forward. I'm we you wish you forward well to And future. but miss to Brian,

I So of just have a couple quick questions.

you chain know up first let's built is over say, during The the anticipation bit or are a sure current salable issues you do accounts the little one and market a it's which relatively in in you're the making of last, be progress I level feel been that you Do have more, you environment? has bringing maybe could high inventory at the down feel acceptable that to inventory items service in that supply pandemic. good still year

Brian Baker

the back current where be I how go to a at your what and support probably with balances, responding probably kind the John we question think of right think of by reminder with to were indicating had that provide start you in at can Yes, the inventory give I historically we levels would and need with inventory business is a in where we're we revenue view that what to on on right position, we're we've inventory reserves with as Brooks, I'll the current we inventory and history down pretty where in will helpful to got the demand. good for an we're that the think do our through. excess the to higher are inventories got sellable business. And levels, inventories, the it a question level inventory. it and on books the then an have the that we shelves the but more all to obsolete a place your we've believe reasonable that they is sell support We've just

John A. Krier

Brooks year at of for inventory. $XX we ago, add we were back But Thanks, roughly million little Brian. of a a [indiscernible]. color we just If go about and appreciate to bit

of You is this see sheet what performance. balance give and $X and inventories we on right work you of that similar with year the revenue at that Brian get at that a a this the morning expect level last all team we level, over the million inventory the those this led released to that about sense

Brooks O'Neil

comment focuses outlook then the And Brian, were or know, curious, high-quality in just while new or to remain the we to new I'm a if, introduce products. And priority? with your you I new over you're year items exciting don't been But pipeline? things to last very That's be what position next of over John, has regard might I do going Great. any to a see about that year the whatever. the more, in know one helpful. chatting is trying

Brian Baker

us, to customers. our It Brooks, right the a that for products priority does providing to we're sure remain make

that we're we the had next products As believe we we'll focusing role, get a But say, portfolio. with I've dozen be enhance started we've this our our adding X months. Again, focusing customers that off XX we need to that the we're just into probably reengaged on lot coming of customers. based a over, launch the opportunities to to the half back current product largest ones with And got we of first. good on to product the on first opportunity highest conversations to we're need having portfolio good our products

find ours yes, to So innovate a to to support focus that continue new of is customers. and our short, in products

Operator

is Jeff Cohen question from next from The Thalmann. Ladenburg

Jeffrey Cohen

some quarters? $X.X thinking from usage there over my I the million ]. So cash questions you're of few the [ about how coming Could that about talk you utilization two were QX end. in the know

Brian Baker

Jeff, details is that I'd to John this do about Sure. utilization. some Brian. like is let just What provide to

John A. Krier

your Yes. voice again Absolutely. Jeff. morning, to Good hear this

cash we used by did if operating the on you look the in So cash million increase utilization, but [ quarter, actually activities, at $X.X we $XX,XXX ].

to in inventory payable exclusive accrued million. was to expenses prepare the tune that way accounts funding just prepaid and the primary really amount advances was as remainder our understand of $X suppliers the of the the the we under of expenses is future. other So that to with prepaid fund demand And almost being to driver that reducing

still also similar a cash and we're be important getting to business profitability, good continuing quarter, that's manage to to for one going first just here quarter. us So the result is in It this at performance. to

Jeffrey Cohen

about Could talk to bit of you're we balance represent where margins a QX then for you you? And how could the the balance the does get little about by it. a Got year? of 'XX, thinking for Okay. floor

Brian Baker

right I don't settling want We as now we're Jeff, anything to to some can some still I'll there's believe get costs away comments. are earlier reduce we yes, we if provide I until some into have opportunities data, about think know you'd to detail, -- that else additional want of that. any in but great affect relates John, to where because don't that still on stay we have and But cost. how looking volume unknowns our how terms guidance that We're to margin. it from back at in. revenue to providing trying And come

John A. Krier

Yes.

I performance. of points think point. think, Jeff, of good in is make recent our Where some about a do the margin we our you how terms data and quarter

So margin was under for last the similar quarter actually just to at where year. XX% we fiscal our finished

typically our decline Now we less of with X/X one QX or and from is and by X/X prior highest saw quarter, less QX efficiency revenue driven in quarters just what the utilization driven was our plants. in by along year our

would down history quarters, of looking yet, we're at a see and history data the a at looked tend then We be if in would I don't -- bit if were to point be couple why little giving revenue knowing is it inferences somewhere But next the data. we maybe and be little QX okay, history, we're guidance. be if not revenue, this range, that bit. draw is and less QX simply that's this higher margin know some to from But would to need down will say, drawing the more which likely might be upon. I we what in So

Jeffrey Cohen

I discipline into customers it. the and little your there commend that's talk talk your QX. if on the for bit in line and being the about Got And one SG&A Okay. may. about that channels leveraged a then marketplace. I Could on you more, out how you that

Brian Baker

with done SG&A. for thanks, work recognizing Jeff, the we've No, that

that I that leverage don't to I in see I want growth to put that. revenue start structure additional as expenses know we that don't cost anything you think we're the we've start business, way we can leverage that and SG&A as if think got John, that that's happen come the through. that we OpEx, growth to lot need to going we a there's the see We to to add get. in think the of

John A. Krier

in XX% Yes. as overall only our QX to would The net was adding sub guidance. mean, I look I Brian's a thing if of say, lower point, sales being percentage at SG&A you the than

and some our expected revenue operating discipline of way quarters this I accurate, likely which with revenue typically little in seasonality on only So will as try Brian it couple very is But to and the in just to support be very is our QX we revenue of labor it goal adjust described up a and come for the lower bit because think labor it is and flexible with level. profitability at clear QX. pool

Operator

question from Capital. The Scott next Henry Instructions] from is [Operator ROTH

Scott Henry

Just a couple of questions.

XX-Q available, the it website is First, didn't on yet. I see your

John A. Krier

this out holiday for being John. by It is Day. It observed yet. Scott, is Veterans out be there tomorrow Monday the not with will

So ] you XX-Q can on [ expect Monday.

Scott Henry

back But not I to XXXX. get working do then a we to for hoping do gears, know category John, XXXX, enjoyed and year you'd a maybe more you do Shifting growth with you. take be think the when guess, what losing any you want so going share? we give I'm by Good to that I whole I would physical we well, don't -- category mean, to to organic as you see about luck then, and/or still you ask Or of share? think start as -- always you about about you kind when think the traditional therapy. And be think guidance, growing and that's orthopedics where

Brian Baker

Yes.

items inventory way believe Orthopedic & -- we those we in is their in space. I'll how sew manage X therapy pointed we line. those a how that Eagan, from break the lower into to I then Bird Orthopedic facility large believe answers, you the and and requirements. our think, with manage operation out with the so product an support Bracing, our efficient a We the in cut the or business able -- Scott, and And operational items. with Minnesota Cronin we view out items business core with here in support units core two overseas that competency rehab that demand are our we large customers process our got physical manufacturing and what starting we volume to And our through source we have with Bracing competency

as And a we so talk can we continue leverage to we our competencies to those expand start how about relationship. core customers to

going to that's come growth Orthopedic So organic where I with think the is Bracing.

of have growth with the really And capital business, sales think to to very our there product new is and the requirements. we be end we demand from distributors we users as way launch of see side these rehab support the going into mentioned some Going is to we're launches. what to we're get I coming where have I I the additional earlier, because full good going targeted a product portfolio now think some relationships I that dealers some pull-through their products, new access able these And organic perspective. think that

that additional New product a Jersey we switch they we'll the get to new products that existing start So demand demand these at from over but as produce our site, not on competitor only to we get will products, line. our

I fiscal So fiscal in and opportunity for that's see growth going year this terms into of year 'XX. what into

Scott Henry

or when about X%. growing year growth? And on category fast is lower, think I a all appreciate are of little segments. or you I mean, I maybe the X% growing, when But a those what they're about the -- think maybe how mean color X% kind they you

Brian Baker

the right this percentage it's I can't Yes. relate now, next growth for opportunity, you're I that Scott. into where if [ too back don't terms growth into ] of Talking of you specific year. in I asking think soon year the in see

Scott Henry

either. values get maybe? market How I the aggressive their get of role don't you that or that Do know a taking around what Well, how growing to I lot CEO and think a now aggressive trying of X% thinks gap a think about, acquisition Is not there? -- you you and private among do? -- closing? Brian, are Dynatronics it would the Just the what you're again. or there's the do to aggressive and X%, the Okay. What but how Or it's of the more times, environment sense players opportunities? company's they to worth disconnect like

Brian Baker

are believe strategy. going that still our be acquisitions part growth I the to Right. of

timing it's we potential when think the looking deals. more I at of start

is business, will be to I allow think we're the on right dynamic acquisitions. let's profitable. there's now, once that our stabilize opportunistic get then more And and business stabilized let's in focus the company the different profitable and us we're a

think I it's a right now, So of just matter timing Scott.

Scott Henry

to get a bad rise happens you look companies up time. because continuously. -- and businesses then of and all good worse, the pose I always there's then below and lot level just days, water days And Now you sink at something get a they the question, above better, and end and

an quarters, to water the just time. yes, get to to statement you bigger that acquisition to the you got but Dynatronics good maybe Sometimes, bad and relative to How to be there'll think scale. quarters little scale, get meaning maybe need just do stay above to a do level about you get all

Brian Baker

with Yes. got where fit where bad you're how the good coming are you've I look scale. and from of is that comments, and business they into quarters, and quarters from And coming in see opportunities how those at your there to and kind may Scott. help

really So be be our ahead to want there a execute positioned good opportunities far we're something. to to opportunity, able if we're too keeping open what eyes get to well myself say and of going don't against the to are. I was

sight our sure things business that focus currently on that we a debt. don't there's stabilize right it, get work get to grow opportunity not those that and we're opportunity But team. the and we're say it is, the want immediate don't for what the profitable, doing seriously into open our right we to making service keeping I'll find is what strategic -- revenue, have how And opportunities kind assessing lose We is what I we're of that's focus that to is. the our detail. running we're to of want now, So that taking and eyes if

Operator

over no There for floor closing the like in to are turn queue. would John the back comments. any I questions further now to

John A. Krier

success forward years and and your am operator, be to for and this quarters organization to thank Dynatronics. watching to the you the you, pleased I in in the look and all come. interest supporting Brian, Thank Gabe in transition of

have great direct please ir@dynatronics.com. questions, If any further to them you Have a day.

Operator

Thank has conference you. ended. your you and this disconnect we thank The your participation. Please now lines at for time,

Dynatronics (DYNT) 9 Nov 232024 Q1 Earnings call transcript