Q4 2023 Dynatronics Corporation Earnings Call
Speaker 1: Thank you for standing by. This is the conference operator.
Thank you for standing by this is the conference operator.
Speaker 1: Welcome to the Dynatronics fourth quarter results for fiscal 2023 conference call.
Welcome to the Diana Tronic fourth quarter results for fiscal 2023 conference call.
Speaker 1: As a reminder, all participants are in listen-only mode and the conference is being recorded.
As a reminder, all participants are in listen only mode and the conference is being recorded.
Speaker 1: After the presentation, there'll be an opportunity to ask questions.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May Press Star then one on your telephone keypad.
Speaker 1: To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to John Creer, Chief Executive Officer and Chief Financial Officer of Dynatronics. Please go ahead.
Should you need assistance during the conference call you May signal, an operator by pressing Star then zero I would now like to turn the conference over to John Currier, Chief Executive Officer, and Chief Financial Officer of <unk>. Please go ahead.
Speaker 2: Thank you, operator. Good morning, everyone. And thanks for joining Dynatronics call today. I am John Crewe, Chief Executive Officer and Chief Financial Officer. And with me is our President and Chief Operating Officer, Brian Baker.
Thank you operator.
Morning, everyone and thanks for joining <unk> call today, I am John <unk>, Chief Executive Officer, and Chief Financial Officer, and with me is our President and Chief Operating Officer, Brian Baker.
Speaker 2: Before we begin, I will call your attention to our Safe Harbor statement. Please note that during this call, we will make forward-looking statements regarding our current expectations, plans, projections, and financial performance relating to our business.
Before we begin I will call your attention to our safe Harbor statement.
Please note that during this call we will make forward looking statements regarding our current expectations plans projections and financial performance relating to our business.
Speaker 2: These forward-looking statements reflect our view as of today only.
These forward looking statements reflect our view as of today only.
Speaker 2: and they involve risks and uncertainties that could cause actual results to differ materially from those discussed today. Important factors that could cause actual results to differ materially from those projected or implied by our forward-looking statements are included in our most recent 10K and other reports filed with the SEC and include uncertainties and risks related to the broader economic environment on our business results.
They involve risks and uncertainties that could cause actual results to differ materially from those discussed today important factors that could cause actual results to differ materially from those projected or implied by our forward. Looking statements are included in our most recent 10-K and other reports filed with the SEC.
C and include uncertainties and risks related to the broader economic environment on our business results.
Speaker 2: We caution you not to place undue reliance on forward-looking statements we make this morning. We undertake no obligation to update or revise forward-looking statements.
We caution you not to place undue reliance on forward looking statements we make this morning.
We undertake no obligation to update or revise forward looking statements.
Speaker 2: We issued a press release this morning announcing the financial results of our fourth fiscal quarter and full year ended June 30, 2023, along with additional details of the previously announced CEO succession plan with Brian Baker. Today, I will provide a few brief opening remarks, turn the call over to Brian for additional commentary, then I will provide a detailed financial report and turn it back to Brian for closing remarks.
We issued a press release this morning announcing the financial results of our fourth fiscal quarter and full year ended June 32023, along with additional details of the previously announced CEO succession plan with Brian Baker today, I will provide a few brief opening remarks during the call.
Over to Brian for additional commentary then I will provide a detailed financial report and turn it back to Brian for closing remarks.
Speaker 2: At the conclusion, we will have the operator open the phone line for questions.
The conclusion, we will have the operator open the phone lines for questions.
Speaker 2: To begin, it is with great admiration and respect that I welcome Brian Baker back as CEO of Dynatronics, effective October 1, 2023, as part of the company's executive transition plan announced in May of this year.
But again it is with great admiration and respect that I welcome Brian Baker back as CEO of Dynatron ex effective October one 2023 as part of the company's executive transition plan announced in May of this year.
Speaker 2: I will continue as an executive consultant to Brian , the board of directors and the management team as the interim chief financial and accounting officer while we continue the search for a
I will continue as an executive consultant to Brian The board of directors and the management team as the interim Chief financial and accounting officer, while we continue the search for a permanent CFO . The company will provide the final details of the CEO transition via a press release in the next few days.
Speaker 2: company will provide the final details of the CEO transition via a press release in the next few days.
Speaker 2: Before I turn the call over to Brian , I want to take a moment and thank all our employees present and past customers, suppliers, investors, analysts, and stakeholders for your continued support and partnership during the last three plus years.
Before I turn the call over to Brian I want to take a moment and thank all of our employees present and past customers suppliers investors analysts and stakeholders for your continued support and partnership during the last three plus years.
Speaker 2: I am proud of what we have been collectively able to achieve, especially during the pandemic's extremely challenging operating environment.
I am proud of what we have been collectively able to achieve especially during the pandemic extremely challenging operating environment.
Speaker 2: I've had the pleasure to work with Brian since I joined the company in 2020. And he has the right talent, skill set and energy to lead Dyna Tronics as we move forward. I will now turn the call.
I've had the pleasure to work with Brian since I joined the company in 2020 and.
And he has the right talent skill set and energy to lead dynatron mix as we move forward.
I will now turn the call over to Brian .
Speaker 3: Thank you, John for the past 3 to 4 months. I've been speaking with our employees customers and vendor partners to assess our forward looking plans as a result of these conversations. I believe we have the opportunity to sharpen our focus on our customers needs and to offer the products they seek at competitive price.
Thank you John for the <unk>.
Three to four months I've been speaking with our employees customers and vendor partners to assess our forward looking plans as a result of these conversations I believe we have the opportunity to sharpen our focus on our customers' needs and to offer the products they take at competitive pricing.
Speaker 3: In order to enable us to do this, we have implemented significant cost reductions in all areas of the...
This will enable us to do this we have implemented significant cost reductions in all areas of the business.
Speaker 3: These were largely completed by June 30th, 2023, and we believe these cuts will improve our financial performance at the revenue levels in our guide.
These were largely completed by June 30th 2023, and we believe these catch will improve our financial performance at the revenue levels in our guidance.
Speaker 3: Our goal is to demonstrate steady improvement and operating profitability during fiscal year 2024.
Our goal is to demonstrate steady improvement in operating profitability during fiscal year 2024.
Speaker 3: We also intend to continue to manage our working capital and the line of credit that we executed on August 1st, 2023, which will provide us the operating flexibility in this regard.
We also intend to continue to manage our working capital and a line of credit that we executed on August one 2023, which will provide us the operating flexibility in this regard.
Speaker 3: While the business environment in our markets remains uncertain, I believe Dinoturnis can be more nimble in navigating both the opportunities and challenges ahead of us.
While the business environment in our markets remains uncertain.
We've done it targets can be more nimble and navigating both the opportunities and challenges ahead of us.
John will now provide a financial report.
Speaker 2: Thanks, Brian . I will now review the financial performance during the quarter and cover the year-end results.
Thanks, Brian I will now review the financial performance during the quarter and cover the year end results.
Speaker 2: The full income statement and management discussion and analysis can be found in the 10K. And I will summarize them here.
The full income statement and management's discussion and analysis can be found in the 10-K and I will summarize them here.
Speaker 2: Net sales were 8.4 million for the quarter ended June 30, 2023, compared to 11.2 million in last year's quarter.
Net sales were $8 4 million for the quarter ended June 32023.
Appeared to $11 2 million in last year's quarter.
Speaker 2: For the full fiscal year ended June 30, 2023, net sales were 40.6 million compared to 44.3 million in the prior fiscal year.
For the full fiscal year ended June 32023, net sales were $40 6 million compared to $44 3 million in the prior fiscal year.
Speaker 2: The year over year decrease is primarily due to the acquisition of a competitor by one of our larger rehabilitation product category customers, and a reduction in demand in our orthopedic soft racing category.
The year over year decrease is primarily due to the acquisition of a competitor, but one of our larger rehabilitation product category of customers and a reduction in demand in our orthopedics operation category.
Speaker 2: gross profit for the three months ended June 30, 2023, decreased to 1.2 million, or 14.7% of net sales compared to 2.6 million, or 23.4% of net sales in the same quarter of the prior year.
Gross profit for the three months ended June 32023 decreased to $1 2 million or 14, 7% of net sales compared to $2 6 million or 23, 4% of net sales in the same quarter of the prior year Q4 of fiscal year 'twenty three.
Speaker 2: Q4 of fiscal year 23, gross profit reduction of 1.4 million, compared to Q4 of fiscal year 22 was driven equally by reduction in revenue and the result of a lower product margin on the reduced revenue level.
Gross profit reduction of $1 4 million compared to Q4 of fiscal year 'twenty two was driven equally by a reduction in revenue and the result of lower product margin on the reduced revenue levels Q.
Speaker 2: Q4 included additional inventory reserves of $0.2 million compared to the prior period.
Q4 included additional inventory reserves of 0.2 million compared to the prior period.
Speaker 2: Gross profit for the full fiscal year ended June 30, 2023 with 10.2 million, or 25% of net sales, compared to 10.7 million or 24.1% of net sales in fiscal year 2022. The year-over-year decrease in gross profit was primarily attributable to a reduction in sales related to the revenue disruption previously discussed.
Gross profit for the full fiscal year ended June 32023 was $10 2 million or 25% of net sales compared to $10 7 million or 24, 1% of net sales in fiscal year 2022.
The year over year decrease in gross profit was primarily attributable to a reduction in sales related to the revenue disruption previously discussed the <unk>.
Speaker 2: improvement in the gross margin as a percentage of net sales year over year was driven by net price realization.
Movement in the gross margin as a percentage of net sales year over year was driven by net price realization.
Speaker 2: selling, general and administrative expenses were $3.6 million for the three months ended June 30, 2020.
General and administrative expenses were $3 6 million for the three months ended June 32023.
Speaker 2: a decrease of $0.5 million from $4.1 million in last year's period. SG&A would have been $0.9 million lower compared to the prior year before including the effective severance expenses of $0.2 million and other one-time specific charges of $0.2 million. For the full fiscal year, SG&A was down $0.4 million compared to the prior year, due primarily to lower salaries and benefits.
A decrease of 0.5 million from $4 1 million in last year's period.
SG&A would have been 0.9 million lower compared to the prior year before including the effect of severance expenses of 0.2 million and other one time specific charges of 0.2 million for.
For the full fiscal year, SG&A was down zero point $4 million compared to the prior year due primarily to lower salaries and benefits.
Speaker 2: at an income was zero for the three months ended June 30 2023. A decrease of 0.1 million from other expense of 0.1 million in last year's period.
Other income was zero for the three months ended June 32023.
A decrease of 0.1 million from other expense of 0.1 million in last year's period.
Speaker 2: For the full fiscal year, other income was zero compared to other income of 0.9 million for the fiscal year 2022. The decrease in other income is due to the absence of the employee retention credit in the current year.
For the full fiscal year other income was zero compared to other income of zero point $9 million for the fiscal year 2020 to.
The decrease in other income is due to the absence of the employee retention credit in the current year.
Speaker 2: Net loss was 2.4 million for the three months ended June 30, 2023, compared to a loss of 1.6 million in the same quarter of last year.
Net loss was $2 4 million for the three months ended June 32023.
Compared to a loss of $1 6 million in the same quarter of last year the.
Speaker 2: Q4 net loss included 0.2 million of additional COGS related to inventory reserves and 0.4 million of SG&A related to severance and other one-time costs for total quarterly costs of 0.6 million.
Q4, net loss included <unk> 2 million of additional Cogs related to inventory reserves and Gerald <unk> 4 million of SG&A related to severance and other one time costs for total quarterly cost of zero point $6 million.
Speaker 2: Net loss was 5.0 million for the full fiscal year and the June 30, 2023, compared to a net loss of 4.0 million in the prior year.
Net loss was 5.1 million for the full fiscal year ended June 32023, compared to a net loss of 4.1 million in the prior year.
Speaker 2: We expect our outstanding shares to increase in the range of 240,000 per quarter, depending on our share.
We expect our outstanding shares to increase in the range of 240000 per quarter, depending on our share price as of September 22, 2023, the number of common shares outstanding was approximately $4 3 million.
Speaker 2: As of September 22, 2023, the number of common shares outstanding was approximately 4.3 million.
Speaker 2: As of June 30, 2023, net cash was $0.6 million compared to $0.7 million on June 30, 2022.
As of June 32023, net cash was 0.6 million compared to 0.7 million on June 32022.
Speaker 2: As a reminder, Dynatronics executed a new working capital based line of credit on August 1, 2023. As of September 15, 2023, our line of credit balance was approximately 1.8 million. Additional line of credit availability was approximately 2.6 million, on a borrowing base of approximately 4.4 million.
As a reminder, dynatron ex executed a new working capital based line of credit on August one 2023.
As of September 15, 2023, our line of credit balance was approximately 1.8 million.
Additional line of credit availability was approximately $2 6 million on a borrowing base of approximately $4 4 million.
Speaker 2: Proceeds from the line of credit enabled the company to reduce the accounts payable balance by approximately 2.0 million as of September 15, 2023, compared to the period ended June 30, 2023.
<unk> from the line of credit enabled the company to reduce the accounts payable balance by approximately 2.1 million as of September 15, 2023 compared to the period ended June 32023.
Speaker 2: This concludes our summary of financial results. I will now turn the call back to Brian .
This concludes our summary of financial results I will now turn the call back to Brian .
Thank you John .
Speaker 3: In terms of guidance for fiscal year 2024, we expect net revenue to be in the range of 34 to 37M.
In terms of guidance for fiscal year 2024, we expect net revenue to be in the range of 34 to 37 million the.
Speaker 3: the distribution of the revenue is expected to align with historical trends. We're not providing gross margin.
The distribution of the revenue is expected to align with historical trends.
We're not providing gross margin guidance at this time.
Operator: Thank you for standing by. This is the conference operator.
Speaker 3: Given the recent reductions in revenue and costs, we'd like to have more data before considering reinstituting such guidance.
Given the recent reductions in revenue and cost we'd like to have more data before considering re instituting such guidance.
Operator: Welcome to the Dynatronics fourth quarter results for fiscal 2023 conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero.
Speaker 3: S G N A is anticipated to be in the range of 29 to 33 percent of net sales for the fiscal year.
SG&A as a catch up payment to be in the range of 29% to 33% of net sales for the fiscal year.
Speaker 3: Outstanding shares currently 4.3 million as of September 22nd, 2023 will generally increase approximately 240,000 shares per quarter, depending on our share price.
Outstanding shares currently $4 3 million as of September 20.
2023, well, China only increased approximately 240000 shares per quarter, depending on our share price.
Speaker 3: In summary, my focus for the current fiscal year is to strengthen our customer relationships as we improve our operating profitability and financial flexibility.
In summary, my focus for the current fiscal year is to strengthen our customer relationships as we improve our operating profitability and financial flexibility.
John Krier: I would now like to turn the conference over to John Krier, Chief Executive Officer and Chief Financial Officer of Dynatronics. Please go ahead. Thank you operator.
Speaker 3: We appreciate and thank our investor base and employees for their ongoing support. I will now turn it over to the.
We appreciate and thank our investor base and employees for their ongoing support.
John Krier: Good morning everyone and thanks for joining Dynatronics call today. I am John Krier, Chief Executive Officer and Chief Financial Officer and with me is our President and Chief Operating Officer Brian Baker. Before we begin, I will call your attention to our safe harbor statement. Please note that during this call, we will make forward-looking statements regarding our current expectations, plans, projections, and financial performance relating to our business. These forward-looking statements reflect our view as of today only and they involve risks and uncertainty that could cause actual results to differ materially from those discussed today.
Now I'll turn it over to the operator for questions.
Speaker 1: Thank you. We will now begin the question and answer session. To join the question queue, you may press star then 1 on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request. If you are using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
John Krier: Important factors that could cause actual results to differ materially from those projected or implied by our forward-looking statements are included in our most recent 10K and other reports filed with the SEC and include uncertainties and risks related to the broader economic environment on our business results. We caution you not to place undue reliance on forward-looking statements we make this morning. We undertake no obligation to update or revise forward-looking statements. We issued a press release this morning announcing the financial results of our fourth fiscal quarter and four-year ended June 30, 2023 along with additional details of the previously announced TEO Succession Plan with Brian Baker. Today, I will provide a few brief opening remarks during the call over to Brian for additional commentary, then I will provide a detailed financial report and turn it back to Brian for closing remarks.
Speaker 1: To withdraw your question, please press star, then 2. We'll pause for a moment as callers join the...
We will pause for a moment as callers join the queue.
Speaker 1: Our first question comes from Aaron Wookmere of Lake Street Capital Markets. Please go ahead.
Our first question comes from Aaron <unk> of Lake Street Capital markets. Please go ahead.
Speaker 4: Hey, good morning guys. This is an on the line for Brooke this morning. So I just want to start us off talking about the demand in general. You know, you mentioned a little bit about a reduction demand in orthopedics, but just in general, and overall terms of product mix. You know, has there been a significant change from Q3 and how has the macro environment sort of affected your operations?
Hey, Good morning, guys. This is Dan on the line for Brooks This morning.
So I just want to start us off talking about the demand and generally you know you mentioned a little bit about a reduction in demand in orthopedics, but just in general in overall terms of product mix. You know has there been a significant change there from from Q3 and how is the macro environment sort of affected your operations.
Speaker 2: Good morning Aaron, this is John and I'll start with that. Our overall mix of our product categories is still pretty consistent. When you look at it quarter over quarter and where we ended the year, it's roughly 45% in our orthopedic bracing category and 55% of our revenues in the rehabilitation product categories.
Good morning, Erin This is John and I'll start with that you know what our overall mix of our product categories is still pretty consistent when you look at it quarter over quarter, and where we ended the year, it's roughly 45% in our orthopedic bracing category and 55% of our revenues in the rehabilitation product categories. We've talked about this a little bit last quarter that the overall market.
Speaker 2: We talked about this a little bit last quarter that the overall market demand in our categories is in that low single digits, one, two to three percent year over year growth. We've certainly seen pricing become more of an issue in the recent term, but the general demand out there is steady. And as we continue to reorganize the business and position ourselves going forward, we think that demand will be consistent.
Demand in our categories is in that low single digits, one 2% to 3% year over year growth. We've certainly seen you know pricing become more of an issue in the recent term, but the general demand out there is steady and as we continue to reorganize the business and position ourselves going forward, we think that demand will be consistent.
John Krier: At the conclusion, we will have the operator open the phone line for questions.
Speaker 4: Yeah, yeah. Okay. That's helpful. And then as you sort of think about new product activity, you know, you released 8 or 9 products since early 2021. Are there any specific highlights that you'd offer that might give us some encouragement about the future and your opportunity to grow on this next year? You know, how are these current products being accepted? If you just give some more color there, that'd be great. Thank you.
Yeah, Yeah. Okay. That's helpful. And then as you sort of think about new product activity you know.
John Krier: To begin, it is with great admiration and respect that I welcome Brian Baker back as CEO of Dinatronics Effective October 1, 2023, as part of the company's Executive Transition Plan announced in May of this year. I will continue as an Executive Consultant to Brian, the Board of Directors, and the Management Team as the Interim Chief Financial and Accounting Officer while we continue the search for a permanent CFO. The company will provide the final details of the CEO transition via a press release in the next few days.
You released eight or nine products. Since early 2021 are there any specific college.
But you'd offer that might give us some encouragement about the future and your opportunity to grow in this next year you know.
How are these current products being accepted if you just give some more color there that'd be great. Thank you.
Speaker 3: Yeah, this is Brian . I'll jump in on this. As far as new products go, we're still tracking about 6% of our overall revenue for related to new products. And we are getting some feedback from our customers or some modifications that we can do to existing products or a few additions that we can add to our product portfolio and with these changes or new additions, we're seeing some new opportunity.
Yeah. This is Brian I'll jump in on necessary.
As far as new products go we're still tracking about 6% of our overall revenue for <unk> related to new products and we are getting some feedback from our customers or some modifications that we can do to existing products or a few additions that we can add to our product portfolio and with these changes our new additions, we're seeing some new opportunity to come.
John Krier: Before I turn the call over to Brian, I want to take a moment and thank all our employees, President and Past, customers, suppliers, investors, analysts, and stakeholders for your continued support and partnership during the last three-plus years. I am proud of what we have been collectively able to achieve, especially during the pandemic's extremely challenging operating environment. I've had the pleasure to work with Brian since I joined the company in 2020. And he has the right talent, skill set, and energy to lead Dynatronics as we move forward.
In.
Speaker 4: Gotcha, okay, that's helpful. Thanks for taking the questions, guys.
Got you Okay. That's helpful. Thanks.
Thanks for taking the questions guys.
Thanks, Dan.
Speaker 1: Once again, if you have a question, please press star then 1.
Once again, if you have a question. Please press Star then one.
Speaker 1: Our next question comes from Jeffrey Cohen of Lattenberg. Please go ahead. Hi John and Brian , how are you?
Our next question comes from Jeffrey Cohen of Ladenburg. Please go ahead.
Oh, Hi, John and Brian how are you.
Brian Baker: I will now turn the call over to Brian. Thank you, John. For the past three to four months, I've been speaking with our employees, customers, and vendor partners to assess our forward-looking plans.
Very good morning, Jeff Good morning, Jeff.
Brian Baker: As a result of these conversations, I believe we have the opportunity to sharpen our focus on our customers' needs and to offer the products they seek at competitive pricing. In order to enable us to do this, we have implemented significant cost reductions in all areas of the business. We need for largely completed by June 30, 2023, and we believe these customers will improve our financial performance at the revenue levels in our guidance.
Speaker 5: Just a couple questions from Aaron. First, could you give us any further insight on the line of credit and the terms there, please?
Just a couple.
Couple of questions from <unk> first one could you give us any further insight on the on the line of credit and you have the terms of airplanes.
Speaker 2: Yeah, the terms there, we executed that line of credit on August 1st. It's an asset based line of credit centered around our inventory and accounts receivable. So, I decided to 7 and a half million dollar facility. Our borrowing base as of September 15th is roughly 4.4M. That's going to be driven by our size and our inventory size in terms of the terms of the agreement. It's roughly at about 11% today in terms of interest rate. It's a 5%.
Yeah. The the terms there we executed that line of credit on August 1st its an asset based line of credit centered around our inventory and accounts receivable.
Decided to seven and a half million dollar facility, our borrowing base as of September 15th is roughly $4 4 million, that's going to be driven by our size and our inventory size in terms of the terms of the agreement it's roughly at about 11% today in terms of interest rate, it's a sofa plus 5% and it is one primary covenant on it but overall.
Brian Baker: Our goal is to demonstrate steady improvement in operating profitability during fiscal year 2024. We also intend to continue to manage our working capital and the line of credit that we executed on August 1, 2023, which will provide us the operating flexibility in this regard. While the business environment in our markets remains uncertain, I believe Dynatronics can be more nimble in navigating both the opportunities and challenges ahead of us.
Speaker 2: And it has one primary covenant on it. But overall, it's been a great addition to the working capital flexibility for our team going forward.
It's been a great addition for the working capital flexibility for our team going forward.
Speaker 5: Okay, got it. Big picture for 24. Could you talk about number of customers and current channels and how we may see any potential shift in channels, customers, geographical presence, etc.? Yes.
Okay got it.
Picture for 24 could you talk about number of customers.
And current channels and how we may soon see any potential shift in channels customers geographical promotions et cetera.
John Krier: John will now provide a financial report. Thanks, Brian. I will now review the financial performance during the quarter and cover the year-end results.
Speaker 2: I think when we look at the overall business, Jeff, it's going to be very consistent to what we're seeing today, both in the mix of product category revenue, we're seeing very similar results.
I think when we look at the overall business, Jeff it's going to be very consistent to what we're seeing today both in the mix of product category revenue, we're seeing very similar results, Brian highlighted that with some of the new product discussions, we're having but we may continue to see some penetration with our existing customers, but there should be no major shift in.
John Krier: The full income statement and management, discussion, and analysis can be found in the 10K, and I will summarize them here. Net sales were 8.4 million for the quarter-ended June 30, 2023, compared to 11.2 million in last year's quarter. For the full fiscal year-ended June 30, 2023, net sales were 40.6 million compared to 44.3 million in the prior fiscal year. The year-over-year decrease is primarily due to the acquisition of a competitor by one of our larger rehabilitation product category customers and a reduction in demand in our orthopedic software and category.
Speaker 2: Brian highlighted that with some of the new product discussions we're having, we may continue to see some penetration with our existing customers. But there should be no major shift in our overall customer base going forward as we see now. We took obviously a major shift the last year with the acquisition of one of our competitors by a significant customer. And we're still digesting that throughout this first half of this next fiscal year. But other than that, pretty consistent.
Our overall customer base going forward as we see now we took obviously a major shift to last year with the acquisition of one of our competitors by a significant customer and were still digesting that throughout this first half of this next fiscal year, but other than that pretty consistent.
Speaker 5: Got it. And then lastly for us, any color on cadence of 24 readout? Should we assume that previous years are a good indication as far as any seasonality quarter wise?
Got it and then lastly for us any color on the cadence for twenty-four read out should we assume that previous years are good indication as far as any any seasonality quarter wash.
Speaker 2: We should, we should assume that. We believe at least the way the quarter's playing out and the way that we expect the season to play out, seasonality should be the same. Revenue higher in the first and fourth quarters, typically they account for about 26% of our revenue. A little lower in Q2 and Q3, that's about 24% of our revenue. So we do expect that to play out and to follow the guidance that we've given out there for revenue.
We should we should assume that we believe at least the way the quarters playing out in a way that we expect the season to play out seasonality should be the same revenue higher in the first and fourth quarters typically they account for about 26% of our revenue a little lower in Q2 and Q3, that's about 24% of our revenue. So we do expect that to play out and to follow the guidance that we've given.
John Krier: Gross profit for the three-month-end June 30, 2023 decreased to 1.2 million or 14.7% of net sales compared to 2.6 million or 23.4% of net sales in the same quarter of the prior year. Due for a fiscal year-23, gross profit reduction of 1.4 million compared to Q4 of fiscal year-22 was driven equally by reduction in revenue and the result of a lower product margin on the reduced revenue levels. Q4 included additional inventory reserves of 0.2 million compared to the prior period.
Given out there for revenue.
Speaker 5: Got it. Okay, and then lastly, one more on margins. Any outlook expectations, hopes, aspirations on margin levels for 24?
Got it Okay, and then lastly, one more on margins any outlook expectations hopes aspirations on our margin levels for 'twenty four.
Speaker 2: Yeah, I'd say a couple of things. One, let's talk SG&A first. One thing you'll notice on SG&A is this range that we provided this fiscal year is lower than we've provided in the past at 29% to 33%, like Brian highlighted. That's a continuation of what we talked about in May, that when we recognized that we needed to steer the business to be profitable at lower revenue levels, we made significant changes in the business.
Yeah, I'd say a couple of things one let's talk SG&A first one thing you'll notice on SG&A is this range that we provided this fiscal year is lower than we've provided in the past that 29% to 33% like Brian highlighted that's a continuation of what we've talked about in may that when we recognize that we need to do to steer the business to be profitable at lower revenue levels, we made significant.
John Krier: Gross profit for the full fiscal year ended June 30, 2023 with 10.2 million or 25% of net sales compared to 10.7 million or 24.1% of net sales in fiscal year 2022. The year-over-year decrease in gross profit was primarily attributable to a reduction in sales related to the revenue disruption previously discussed. West. Improving in the gross margin as a percentage of net sales year over year was driven by net price realization, selling general and administrative expenses with $3.6 million for the three-month ended June 30, 2023, a decrease of $0.5 million from $4.1 million in last year's period.
Changes in the business. So it will be on the lower end of that range in our higher quarters, and a little bit of a higher end of that range in our middle quarters, just based on the overall revenue number we're not ready to give gross margin guidance now and we know that that's something that all of us want to see in the future and that's just because of the revenue shifts and the change in as we rightsize operations at our plant.
Speaker 2: So we'll be on the lower end of that range in our higher quarters and a little bit of the higher end of that range in our middle quarters just based on the overall revenue number.
Speaker 2: We're not ready to give gross margin guidance now, and we know that that's something that all of us want to see in the future. And that's just because of the revenue shifts and the change and as we right-size operations in our plan.
Speaker 2: Typically, our first quarter is one of our higher margin quarters. However, that's not reliable in our current state because we had such disruption in Q3 and Q4. So we'd be looking at Q3 and Q4 and saying, is that more likely here while we digest getting our plants right size and our operations right size going into the year? But as soon as we have a little more data, we'll get back to everybody with that and try to provide more clarity. Okay, perfect.
Typically our first quarter is one of our higher margin quarters. However that is not reliable in our current state because we had such disruption in Q3 and Q4. So we'd be looking we're looking at Q3, and Q4, and saying was that more likely here, while we digest getting our plants right sizing our operations rightsize going into the year, but as soon as we have a little more data.
John Krier: SGNA would have been $0.9 million lower compared to the prior year before, including the effect of seven expenses of $0.2 million, and other one-time specific charges of $0.2 million. For the full fiscal year, SGNA was down $0.4 million compared to the prior year, due primarily to low salaries and benefits. Other income was $0 for the three-month ended June 30, 2023, a decrease of $0.1 million from other expense of $0.1 million in last year's period.
I'll get back to everybody with that and try to provide more clarity.
Okay perfect. Thanks for taking our questions.
Thanks, Jeff and good day.
Speaker 1: This concludes the question and answer session. I would like to turn the conference back over to Mr. Crear for any closing remarks.
This concludes the question and answer session I would like to turn the conference back over to Mr. Greer for any closing remarks.
Speaker 2: Thank you, operators, and thank you all for your interest in dynatronics. I'm pleased to be supporting Brian in this transition and look forward to watching the success of the organization in the quarters and the years to come. If you have any further questions, please direct them to IR at dynatronics.com. Have a great day. Operators, you may end the call.
Thank you operator, and thank you all for your interest in <unk> I'm pleased to be supporting Brian in this transition and look forward to watching the success of the organization in the quarters and the years to come if you have any further questions. Please direct them to IR at <unk> Dot com have a great day operator.
John Krier: For the full fiscal year, other income was $0 compared to other income of $0.9 million for the fiscal year 2022. The decrease in other income is due to the absence of the employee retention credit in the current year. Net loss was $2.4 million for the three-month ended June 30, 2023, compared to a loss of $1.6 million in the same quarter of last year. The Q4 net loss included $0.2 million of additional COGs related to inventory reserves and $0.4 million of SGNA related to severance and other one-time costs for total quarterly costs of $0.6 million.
You may end the call.
Speaker 1: Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Thank you. This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
Okay.
Yeah.
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John Krier: Net loss was $5.0 million for the full fiscal year, and the June 30, 2023, compared to a net loss of $4.0 million in the prior year. We expect our outstanding shares to increase in the range of 240,000 per quarter depending on our share price. As of September 22, 2023, the number of common shares outstanding was approximately $4.3 million. As of June 30, 2023, net cash was $0.6 million compared to $0.7 million on June 30, 2022.
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Yeah.
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Yeah.
John Krier: As a reminder, Dynamitronics executed a new working capital-based line of credit on August 1, 2023. As of September 15, 2023, our line of credit balance was approximately $1.8 million. Additional line of credit availability was approximately $2.6 million on a borrowing base of approximately $4.4 million. Proceeds from the line of credit enabled the company to reduce the accounts payable balance by approximately $2.0 million as of September 15, 2023, compared to the period ended June 30, 2023.
John Krier: This concludes our summary of financial results.
Brian Baker: I will now turn the poll back to Brian. Thank you, John. In terms of guidance for fiscal year 2024, we expect net revenue to be in the range of $34,000 to $37 million. The distribution of the revenue is expected to align with historical trends.
Brian Baker: We are not providing gross margin guidance at this time. Foundation. Given the recent reductions in revenue and costs, we'd like to have more data before considering reinstituting such guidance. S-GNA is anticipated to be in the range of 29-33% of net sales for the fiscal year. Outstanding shares, currently 4.3 million as of September 22, 2023 will generally increase approximately 240,000 shares per quarter depending on our share price.
Brian Baker: In summary, my focus for the current fiscal year is to strengthen our customer relationships as we improve our operating profitability and financial flexibility. We appreciate and thank our investor base and employees for their ongoing support.
Operator: I will now turn it over to the operator for questions. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your hands that before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as colors join the queue.
Aaron Wickmeer: Our first question comes from Aaron Wickmeer of Lake Street Capital Markets. Please go ahead. Hey good morning guys, this is Aaron.
Aaron Wickmeer: I'm a line for Brooks this morning. I just want to start us off talking about the demand in general. You mentioned a little bit about a reduction in demand in all of the PDGs, but just in general and overall terms of product mixing odds. There have been a significant change there from Q3 and how is the macro-environment sort of affected your operations?
John Krier: Good morning Aaron.
John Krier: This is John and I'll start with that. Our overall mix of our product categories is still pretty consistent when you look at a quarter of a quarter and where we end of the year. It's roughly 45% in our orthopedic-bracing category and 55% of our revenues in the rehabilitation product categories. We talked about this a little bit last quarter that the overall market demand in our categories is in that low single digits, 1, 2 to 3% year-over-year growth.
John Krier: We've certainly seen pricing become more of an issue in the recent term, but the general demand out there is steady and as we continue to reorganize the business and position ourselves going forward, we think that demand will be consistent. Yeah, okay, that's helpful.
Aaron Wickmeer: As you sort of think about new product activity, you released eight or nine products since early 2021.
Brian Baker: Are there any specific highlights that you'd offer that might give us some encouragement about the future and your opportunity to go on this next year? How are these current products being accepted if you could give some more color there? That would be great. Thank you.
Brian Baker: Yeah, this is Brian. I'll jump in on this here. As far as new products go, we're still tracking about 6% of our overall revenue for related to new products and we are getting some feedback from our customers or some modifications that we can do to existing products or a few additions that we can add to our product portfolio. And with these changes or new additions, we're seeing some new opportunity come in.
Aaron Wickmeer: Gotcha, okay, that's helpful. Thanks for taking the questions, yes. Thank you. Once again, if you have a question, please press star then one.
Jeffrey Cohen: Our next question comes from Jeffrey Cohen of Laddenburg. Please go ahead. Hi, John and Brian, how are you? Good, good. Good morning, Jeff. Just a couple of questions from our end.
John Krier: First, could you give us any further insight on the on the line of credit and the terms there, please? Yeah, the terms there. We have to do that line of credit on August 1st. It's an asset based line of credit centered around our inventory and accounts receivable. So as a set of seven and a half million dollar facility, our borrowing base as of September 15th is roughly 4.4 million. That's going to be driven by our AR size and our inventory size in terms of the terms of the agreement.
John Krier: It's roughly at about 11% today in terms of interest rate. It's still for close 5%. And it has one primary covenant on it. But overall, it's been a great addition for the working capital flexibility for our team going forward.
Jeffrey Cohen: Okay, got it. And big picture for 24.
John Krier: Could you talk about number of customers and current channels and how we may see any potential shift in channels, customers, geographical, persons, etc.? I think, you know, when we look at the overall business, Jeff, it's going to be very consistent to what we're seeing today. Both in the mix of product category revenue, we're seeing very similar results. Brian highlighted that with some of the new product discussions we're having, we may continue to see some penetration with our existing customers.
John Krier: But there should be no major shift in our overall customer base going forward as we see now. We took obviously a major shift the last year with the acquisition of one of our competitors by a significant customer. And we're still digesting that throughout this, you know, first half of this next fiscal year. But other than that, pretty consistent. Got it.
John Krier: And then lastly for us, any color on cadence for 24 readout. Should we assume that previous years are good indication as far as any any seasonality quarter wise? We should assume that we believe at least the way that the quarters playing out and the way that we expect the season to play out. Seasonality should be the same. The revenue higher in the first and fourth quarters. Typically they account for about 26% of our revenue.
John Krier: A little lower in Q2 and Q3. That's about 24% of our revenue. So we do expect that to play out and to follow, you know, the guidance that we've given out there for revenue. Got it. Okay.
John Krier: And then lastly, one more on margins. Any outlook, expectations, hopes, aspirations on margin levels for 24. Yeah, I'd say a couple of things.
John Krier: One, let's talk SGNA first. One thing you'll notice on SGNA is this range that we provided this fiscal year is lower than we've provided in the past at 29 to 33% like Brian highlighted. That's a continuation of what we talked about in May. That when we recognize that we needed to steer the business to be profitable lower revenue levels, we made significant changes in the business. So we'll be on the lower end of that range in our higher quarters and a little bit of the higher end of that range in our middle quarters just based on the overall revenue number.
John Krier: We're not ready to give gross margin guidance now, and we know that that's something that, you know, all of us want to see, you know, in the future. And that's just because of the revenue shifts and the change and as we write size, you know, operations in our plant. Typically, our first quarter is one of our higher margin quarters. However, that's not reliable in our current state because we had such disruption in Q3 and Q4.
John Krier: So we'll be looking at Q3 and Q4 and saying, you know, is that more likely here while we digest getting our plants right size and our operations right size going into the year. But as soon as we have a little more data, we'll get back to everybody with that and try to provide more clarity. Okay, perfect. Thanks for taking our questions. Thanks, Jeff. Have a good day.
John Krier: This concludes the question and answer session. I would like to turn the conference back over to Mr. Krier for any closing remarks. Thank you, Operator, and thank you all for your interest in Dynatronics. I'm pleased to be supporting Brian in this transition and look forward to watching the success of the organization in the quarters and the years to come. If you have any further questions, please direct them to IR as Dynatronics.com.
John Krier: Have a great day.
Operator: Operators, you may end the call. Thank you.
Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.