Q1 2024 Electromed Inc Earnings Call
Good day and welcome to the first quarter 2024 earnings Conference call.
All participants will be in listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on your telephone keypad.
Your question. Please press Star then two.
Please note today's event is being recorded.
I would now like to turn the conference over to Mike Cavanaugh with I see our Westwood. Please go ahead.
Afternoon, and thank you for joining the electromotive earnings call.
Earlier today Electra met incorporated released financial results for the first fiscal quarter of 2024.
Quarter ended September 32023.
The release is currently available on the company's website at Www Dot Mark Best Dotcom.
Before we get started I would like to remind everyone that some of the statements that management will make on this call are considered forward looking statements, including statements about the company's future operating and financial results and plans.
Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected.
Any such statements represent management's expectations as of today's date.
You should not place any undue reliance on those forward looking statements.
The company does not undertake any obligation to update or revise forward looking statements, whether as a result of new information future events or otherwise.
Please refer to the company's SEC filings for further guidance on this matter.
With that I will now turn the call over to Jim <unk>, President and Chief Executive Officer of electrified.
Thanks, Mike and thank you to everyone joining today's call I'm thrilled to report another strong quarter for electromagnetic kick off fiscal year 2024, as we generated quarterly revenue of $12 3 million representing year over year growth of 16%.
All three of our revenue categories home care Hospital and international saw revenue growth over the same period of fiscal 2023, demonstrating that our strategic growth initiatives are yielding impressive results in.
In addition to the strong revenue growth in the quarter operating income came in at 142000 <unk>.
Paired with 44000 in the same quarter of fiscal 2023, Brad will provide more detail later in the call regarding our financial results.
Our increased revenue are direct results of the hard work and execution of the entire electric bad team. We continue to attract high quality talent to expand our direct selling efforts, which is a key component of our commercial plan. We ended the quarter with 51 sales representatives up from 46 reps at the end.
Fiscal year 2023.
The second quarter, we intend to continue to thoughtfully expand the team aiming to hire three additional reps to deepen our penetration in key markets for electrode that and to support a larger pool of physician prescribers.
Additionally, we have initiated a revamp of our training and Onboarding programs with the goal of decreasing the ramp up time to productivity for new sales reps, we have a track record of strong productivity from our sales reps in the first quarter was no exception coming in at an annualized rate of 876000.
In home care revenue per rep, well within our target range of 850 to $950000. We look forward to sharing the results of our revamped sales rep onboarding process, some future business updates and feel confident the pizza efforts will have a beneficial impact on our sales team and our commercial efforts.
March.
In addition to the continued expansion of the sales force. We also recently hired a key executive Amy onto it could lead to quality assurance regulatory affairs and compliance teams and he brings a wealth of quality and regulatory experience in the medical device industry and we are grateful to have him with US also I'm pleased to report we had a success.
Will you be ISO 1345 surveillance audit in the first quarter.
Shifting gears to strategic growth initiatives, helping to ensure a positive patient experience as cord Electra Meds mission.
That in mind, we recently introduced two updates to our business burst, we seamlessly executed a reorganization of the reimbursement team for improved efficiency more meaningful service metrics and service improvements for friction less clinical experience.
Secondly, we launched an improved way of gathering tracking and reporting patient quality of life feedback documentation to physicians.
Keeping the patient front and center of our values will always be fundamental to the success of electrified and by introducing these new services. We believe we are positioning electric bad and our patients for success and better health outcomes.
And we continue to invest in direct to consumer initiatives, we believe that raising awareness with the end consumer that is our patients is an important marketing objectives that can add value to our commercial strategy, especially in exposing and educating patients on the benefits of our new clearer way home care device.
In last quarters call I shared that we are currently underway with the launch of clear way for hospital customers and I'd like to provide some additional color to the launch from a limited beta launch in Q1, we have received encouraging feedback from our customers specifically, we have heard that they like our intuitive touch screen design with a single button start.
Our easy to use manual and programmable therapies as well as our only in class single host connect with the secure fit that does not disconnect from the generator. We also improve the products pedestal designed to make it easier to use and included a basket for the best bolt improvements were a result of user feedback this feedback.
As fundamental to shaping our commercial strategy as we launch more broadly in Q2 now.
Now I'd like to take a moment to update you on our clinical studies, we place high importance on generating clinical data demonstrating the significant improvements in quality of life and reduction in exacerbation rates hospitalizations emergency department visits and antibiotic prescriptions in bronchiectasis patients using the <unk>.
Mark that system, we shared data supporting the use of smart fast, it's an efficacious treatment for bronchiectasis at the American Thoracic Society conference in the spring.
Another new initiative with similar focus on health care providers, we continue to support our new sponsored a continuing medical education or CME program. The program is focused on early detection of bronchiectasis and HFC W. O treatment for prescribing physicians, which serves to increase the knowledge skills.
<unk> and professional performance of clinicians CME program continues to receive favorable feedback from our clinicians.
In the last quarterly update we stated electro mech implemented a new enterprise resource planning or ERP system to help improve efficiency in our supply fulfillment and financial processes.
We are already yielding benefits from the new ERP system through improved operational rigor and data insights into the business. For example, we now have better visibility of our inventory ordering and replenishment, which will enable us to reduce our overall inventory over the course of the year, while increasing our finished goods inventory to ensure.
Patient demand is supported.
The electric Med team has made a significant progress executing on our strategic growth plans in the fiscal quarter of 2024, and I look forward to maintaining this momentum into the remainder of the fiscal year.
I'd like to hand, the call over to Brad for a review of our financials Brad.
Thank you Jim.
Net revenue for our first quarter grew 16% over Q1 of last year to $12 $3 million.
Homecare revenue for the quarter was $11 $2 million, an increase of 16% over Q1 last year.
This growth was driven primarily by the increase in the number of our direct sales representatives as we continued to reduce ramp time to productivity for new hires with our new training and Onboarding initiative, we expect to see continued growth.
Q1 hospital revenue increased year over year by 30% to $507000. This revenue increase was due to the addition of a strategic account manager focused on delivering hospital revenue.
Home care distributor revenue for the quarter was $573000 an increase of 3% from Q1 last year.
Q1 international revenue increased year over year by 12% to $91000 as mentioned in previous updates we continue to support and maintain our current distributor in the international markets, but growing our international business is currently not a primary focus for us.
Gross profit increased to $9 $5 million or <unk> 77, 1% of net revenues for the quarter compared to $8 $3 million or 78, 2% of net revenues in Q1 FY2023.
The increase in gross profit dollars for the quarter was primarily due to increased revenue while the gross margin rate decrease year over year was a result of increased material and labor costs.
Selling general and administrative or SG&A expenses were $9 $2 million for Q1, representing an increase of $1 $2 million or 14, 5% compared to the same period last year.
SG&A expenses in Q1 contained several one time expenses totaling over $600000 that are not expected to be recurring throughout the remainder of the year, including our annual sales meeting investments in market research as well as recruiting and expenses associated with changes to our.
Our leadership team.
Research and development expenses decreased $92000 or 31% versus Q1 of last year to $206000.
The decrease was primarily due to reduced costs associated with our CLIA waived product development.
Net interest income increased $73000 or 1820% to $77000 for the quarter.
The increase is primarily due to increased savings rates associated with our cash balances.
As of September 32023, electro med had $7 million in cash 23, and a half million dollars in accounts receivable and no debt achieving a working capital of $34 million and an increase in total shareholders' equity of $600000 to.
$238 $2 million.
The cash balance reflects a decrease of zero point $4 million compared to fiscal year end 2023. The decrease was primarily a result from payment of annual incentive compensation in Q1, which is not expected to occur in the remaining quarters.
With that we'd like to move to the Q&A portion of our call.
Operator, please open the call to questions.
Thank you.
To ask a question. Please press Star then one on your telephone keypad, if you'd like to remove yourself from two please press Star then two.
Today's first question comes from Aaron Wouk Mirror with Lake Street Capital markets. Please go ahead.
Hey, Good afternoon, guys. This is Aaron on the line for Brooks here Congrats on the strong momentum in the quarter.
I guess I just wanted to start with something you mentioned in the press release and the prepared remarks on that being that you launched an improved way of sort of gathering tracking and reporting that patient quality of life feedback to the physicians.
I was just wondering if I could get a bit more color on that you know what that sort of looks like and what things you're sort of looking and thinking about moving forward here.
Yeah. Thanks, Aaron This is Jim can F and I appreciate you being on the call. We are we've introduced what we call Smart notes, it's basically a mechanism to trace the patients' journey from the time that they actually get trained on the therapy at home to after trade are about 10 days after training to 30 days.
After they've been on the therapy and it measures different things like how often they utilize the therapy. We expect most of our patients will be using the smart first twice a day, we want to see the duration of how long they're using the products. So that we're ensuring that the patient is compliant with their therapy and then also you know we've incorporated.
Cat scores, which is basically a measurement two which really for most COPD patients, but it does apply to bronchiectasis patients as well, it's really quality of life metrics and so we gather all that information we reported back to our clinicians and that helps them.
Gauge how the patient is doing on the therapy after it's been prescribed.
Gotcha, Okay. Yeah, that's helpful and I guess, a quick follow up Jen you know you've been there for a few months now I'm wondering just sort of on a broader level. If you could just give an updated impression of you know the space and and the company, specifically and where you sort of see the.
The biggest opportunity is going forward you know if you could just mention I don't know one or two things that that really stood out to you maybe this quarter and are moving forward as sort of untapped potential or maybe some major focus points for the company as you continue into fiscal 'twenty four here.
No I mean, I I've been thrilled with the team that I've inherited eye I think that the space that we operate in especially as a singularly focused company on HFC W. O in bronchiectasis patients and people who need airway clearance the prevalence for the disease state is enormous as I think youre aware Aaron.
And the recognition that this is a flipping a lot more patients I think we're starting to see more and more of that not only with the clinician space, but also a weird a chest conference in Hawaii about a month ago and even the pharmaceutical companies are starting to recognize.
The prevalence of bronchiectasis and Theyre looking at introducing drugs that are anti inflammatories, they're they're not airway clearance drugs, but they are inflammation reduction products and so I think more and more there's a lot more.
Awareness of this disease state and that's only going to help us as we continue to get more and more patients are adopted to HFC W. O. Obviously as you know this is a chronic irreversible condition and the smart fast product are really just improves the patient's quality of life.
If they use the therapy and we think we've got the best technology in the marketplace today.
We're really excited because we did a beta launch of our clear way for hospital launch last quarter, we're launching that full bore this quarter. So we think that there's some additional opportunities for patients who get admitted to a hospital because of an exacerbation, but then again those patients are going to need the device when they get discharged.
And we think getting them on our therapy or device, where we've got a very intuitive product to use we've got a vast it's very comfortable we feel that we're gonna be able to get some traction for from those patients who get discharged from hospitals. So that's one opportunity and then the other is you know where it Brad mentioned this in his comments about.
The international market were evaluating who we want to be in that market.
And we we don't want that to be a distraction for the rest of the business because we really do believe that the domestic market here in the United States is really where the golden opportunity is near term.
Great Great. Yeah that is super helpful. Thank you and just to make sure I caught this right. You ended with 51 sales reps is that correct and then you plan to hire three more.
Correct, yes.
Yeah, and we intend to have those three positions filled there in this month.
The small okay. Okay Gotcha, and then I guess just a quick question for Brad Here. You know you mentioned the the SG&A was a bit high this quarter and it sounds like that's gonna be nonrecurring and just thinking about how we should think about that line move onward. Thanks for taking the questions guys.
Thanks Aaron.
Yeah, exactly Erin I think we've talked a lot about the opportunity that we have as we continue to grow our topline.
In the mid teens or better and wanting to be able to show leverage on the bottom line over time, we know that our Q1 tends to be.
A heavy quarter for us when we're ramping up sales wrap our reps ahead of their kind of reaching sort of full productivity.
But do you anticipate that as a rate of revenue we will see improvement in.
In our SG&A over the balance of the year and really it took all of us to show improvement of that year over year going forward.
Okay.
Gotcha, Okay. It makes sense. Thanks again, guys for taking the questions and congrats on the strong momentum.
Thanks, Aaron Thanks for the questions.
Thank you and ladies and gentlemen, that's all the time, we have for questions today, So I'd like to turn the conference back over to Jim kind of for any closing remarks.
Thank you very much for joining the call today and thank you for your continued support of electro Mad as I.
To Aaron I'm I'm excited to continue executing against our strategic growth plans and the scale of the electro med business to drive increased value to our shareholders.
If you are interested in a follow up call. Please contact our Investor Relations partners at ICR Westwick also I wanted to let everybody know that we'll be hosting an investor meeting in person and virtually in the back half of this quarter and likewise, if you're interested in more information or you'd like to participate please contact our investor.
Relations contacts again at ICR Westwick. So thank you again I appreciate your time today and appreciate your investment on the electrum. It. Thank you everyone.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.