Electromed Inc. 02.17.16
The final quarter of 2015 was a record-breaking one for Electromed Inc.
The company reported net revenues for the three-month period ending Dec. 31, 2015, of $6.26 million, a 28.3 percent or $1.38 million increase, compared with the same period of 2014. Growth in total net revenues in the second fiscal quarter of 2016 was attributable to strong results in the home care market, in which revenue increased by 21.5 percent, or $97,000, compared with the same period of fiscal 2015. Home care sales, which accounted for nearly 88 percent of revenues, increased due to a higher number of approvals, a higher conversion rate of referrals to approvals, and a higher average selling price from third party payers, such as insurance companies, Medicare and Medicaid, for the company’s SmartVest products.
The company reported net income of $1.07 million, or $0.13 per basic and diluted share, for the second quarter of fiscal 2016, compared to $0.42 million, or $0.05 per basic and diluted share, for the same period of fiscal 2015. The increase in net income was the result of increased revenue and reductions in manufacturing costs year over year. During the second quarter, Electromed also released the full valuation allowance on its net deferred tax assets, which positively affected net income by $288,000.
“We are extremely pleased with our second quarter results as we reported record quarterly net revenues and earnings before tax. Home care sales continue to be positively affected by the combination of higher quality referrals generated by our sales force and strong performance by our reimbursement organization in obtaining reimbursement for both current and older referrals," Electromed President/CEO Kathleen Skarvan said. "Our strategy to build stronger synergy between our sales and reimbursement teams is resulting in higher levels of customer service, higher quality referrals and increased proficiency in processing referrals. Our higher sales also were impacted by expanded payer contracting across the United States."
Gross margins in the second quarter of fiscal 2016 were 78.2 percent, up from 69.7 percent in the second quarter of fiscal 2015. The increase in gross profit percentage and gross profit dollars from $3.40 to $4.90 million resulted from the increases in domestic home care revenue along with lower manufacturing costs. Operating expenses, which include selling, general and administrative as well as research and development expenses, in the second quarter of fiscal 2016, were $3.65 million or 58.3 percent of revenue, compared with $2.96 million or 60.5 percent of revenue in the same period of the prior year. The increase was due to a combination of additional employees in the company’s sales and sales support departments, additional expenses related to sales incentives and bonuses based on higher revenue, consulting fees associated with information technology (IT) improvements and outsourcing certain IT services.
Operating income increased 179.3 percent to $1.25 million in the second quarter of fiscal 2016, compared with $45,000 in the same period of fiscal 2015. Net income increased 152.5 percent, to $1.07 million in the second quarter of fiscal 2016 driven by higher net revenues, the improved gross margin and a lower than normalized tax rate of 13 percent in the second quarter.
For the six months ended Dec. 31, 2015, revenue increased 16.7 percent, to $11.26 million, compared to the same period of fiscal 2015. Gross margins were 77.8 percent, up from 69.4 percent in the same period of the prior year, while net income increased to $1.41 million, or $0.17 per basic and diluted share, compared to $0.80 million or $0.10 per basic and diluted share in the same period of the prior year.
“Our engineering and manufacturing teams continued to make progress in lowering the costs of our key product which helped us to produce record gross margins. Going forward, we will realize a positive impact to operating profit with the recent Consolidated Appropriations Act, 2016 that included a two-year moratorium on the medical device excise tax starting Jan. 1," Skarvan said. "Our annualized expense, based on the first two quarters of fiscal 2016, was $264,000. We believe we have raised the range on the level of net revenues we can generate quarterly. This should, in turn, result in stronger operating income as we expect our revenues will grow more quickly than our expense base. We are increasingly confident that the market for our SmartVest will continue to grow, driven by an aging population, improved diagnostic procedures and growing confidence that HFCWO is an effective therapy for patients with compromised airway clearance.”
Electromed Inc. develops, manufactures, markets, and sells innovative products that provide airway clearance therapy, including the SmartVest Airway Clearance System and related products, to patients with compromised pulmonary function with a commitment to excellence and compassionate service. The company is based in New Prague, Minn.
The company reported net revenues for the three-month period ending Dec. 31, 2015, of $6.26 million, a 28.3 percent or $1.38 million increase, compared with the same period of 2014. Growth in total net revenues in the second fiscal quarter of 2016 was attributable to strong results in the home care market, in which revenue increased by 21.5 percent, or $97,000, compared with the same period of fiscal 2015. Home care sales, which accounted for nearly 88 percent of revenues, increased due to a higher number of approvals, a higher conversion rate of referrals to approvals, and a higher average selling price from third party payers, such as insurance companies, Medicare and Medicaid, for the company’s SmartVest products.
The company reported net income of $1.07 million, or $0.13 per basic and diluted share, for the second quarter of fiscal 2016, compared to $0.42 million, or $0.05 per basic and diluted share, for the same period of fiscal 2015. The increase in net income was the result of increased revenue and reductions in manufacturing costs year over year. During the second quarter, Electromed also released the full valuation allowance on its net deferred tax assets, which positively affected net income by $288,000.
“We are extremely pleased with our second quarter results as we reported record quarterly net revenues and earnings before tax. Home care sales continue to be positively affected by the combination of higher quality referrals generated by our sales force and strong performance by our reimbursement organization in obtaining reimbursement for both current and older referrals," Electromed President/CEO Kathleen Skarvan said. "Our strategy to build stronger synergy between our sales and reimbursement teams is resulting in higher levels of customer service, higher quality referrals and increased proficiency in processing referrals. Our higher sales also were impacted by expanded payer contracting across the United States."
Gross margins in the second quarter of fiscal 2016 were 78.2 percent, up from 69.7 percent in the second quarter of fiscal 2015. The increase in gross profit percentage and gross profit dollars from $3.40 to $4.90 million resulted from the increases in domestic home care revenue along with lower manufacturing costs. Operating expenses, which include selling, general and administrative as well as research and development expenses, in the second quarter of fiscal 2016, were $3.65 million or 58.3 percent of revenue, compared with $2.96 million or 60.5 percent of revenue in the same period of the prior year. The increase was due to a combination of additional employees in the company’s sales and sales support departments, additional expenses related to sales incentives and bonuses based on higher revenue, consulting fees associated with information technology (IT) improvements and outsourcing certain IT services.
Operating income increased 179.3 percent to $1.25 million in the second quarter of fiscal 2016, compared with $45,000 in the same period of fiscal 2015. Net income increased 152.5 percent, to $1.07 million in the second quarter of fiscal 2016 driven by higher net revenues, the improved gross margin and a lower than normalized tax rate of 13 percent in the second quarter.
For the six months ended Dec. 31, 2015, revenue increased 16.7 percent, to $11.26 million, compared to the same period of fiscal 2015. Gross margins were 77.8 percent, up from 69.4 percent in the same period of the prior year, while net income increased to $1.41 million, or $0.17 per basic and diluted share, compared to $0.80 million or $0.10 per basic and diluted share in the same period of the prior year.
“Our engineering and manufacturing teams continued to make progress in lowering the costs of our key product which helped us to produce record gross margins. Going forward, we will realize a positive impact to operating profit with the recent Consolidated Appropriations Act, 2016 that included a two-year moratorium on the medical device excise tax starting Jan. 1," Skarvan said. "Our annualized expense, based on the first two quarters of fiscal 2016, was $264,000. We believe we have raised the range on the level of net revenues we can generate quarterly. This should, in turn, result in stronger operating income as we expect our revenues will grow more quickly than our expense base. We are increasingly confident that the market for our SmartVest will continue to grow, driven by an aging population, improved diagnostic procedures and growing confidence that HFCWO is an effective therapy for patients with compromised airway clearance.”
Electromed Inc. develops, manufactures, markets, and sells innovative products that provide airway clearance therapy, including the SmartVest Airway Clearance System and related products, to patients with compromised pulmonary function with a commitment to excellence and compassionate service. The company is based in New Prague, Minn.