Q3 2024 Dynatronics Inc Earnings Call

Operator: All participants, please stand by; your conference is ready to begin. Good morning, ladies and gentlemen, and welcome to Dynatronics' third 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.

All participants please standby your conference is ready to begin.

Operator: Good morning, ladies and gentlemen, and welcome to Diana Tronox third quarter fiscal year 'twenty 'twenty four 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 D. Baker: Thank you, operator. Good morning, everyone.

Speaker Change: Thank you operator, good morning, everyone and welcome to the <unk> third quarter earnings call. This is Brian Baker, President and CEO with me today is Gabe Al Wang Our Chief Financial Officer, who will now read our safe Harbor statement.

Brian D. Baker: Thank you Brian.

Brian D. Baker: And welcome to the Dynatronics third quarter earnings call. This is Brian Baker, President and CEO. With me today is Gabe Ellwein, our Chief Financial Officer, who will now read our safe harbor statement.

Brian D. Baker: During the course of this call we will make forward looking statements regarding our current expectations plans projections and financial performance relating to our business.

Brian D. Baker: During the course of 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 involve risks and uncertainties that could cause our 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. 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. Thank you, Gabe.

Brian D. Baker: These forward looking statements reflect our view as of today, only and involve risks and uncertainties that could cause our actual results to differ materially from those discussed today.

Brian D. Baker: 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.

Brian D. Baker: 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 Change: Thank you Gabe.

Brian D. Baker: This morning, we issued a press release announcing the financial results of our third quarter ended March 31, 2024. On today's call, I'll provide some initial commentary, then I'll turn it over to Gabe for a financial report. Following Gabe's report, I'll provide an update on our 2024 fiscal year guidance and provide closing remarks. The operator will then open the phone lines for questions.

Gabe: This morning, we issued a press release announcing its.

Brian D. Baker: Financial results of our third quarter ended March 31 2024.

Gabe: On today's call I'll provide some initial commentary and I'll turn it over to Gail for a financial report.

Gabe: Following gates report I'll provide an update on our 2020 for fiscal year guidance and provide closing remarks. The operator will then open the phone lines for questions.

Brian D. Baker: Before the quarter ended March 31, 2024, we continued to focus on our sales goals and improving profitability. During the quarter, we made another series of cost reductions as a part of our ongoing effort to align costs to today's revenue volume. These steps allowed our gross margin rates to remain in line year-over-year and reduced operating expenses by $3.7 million year-to-date.

Brian D. Baker: For the quarter ended March 31, 2024, we continue to focus on our sales goals and improving profitability.

Brian D. Baker: During the quarter, we made another series of cost reduction as a part of our ongoing efforts to align costs to today's revenue volume.

Brian D. Baker: That's allowed our gross margin rates to remain in line year over year, and reducing operating expenses by $3 7 million year to date.

Brian D. Baker: Our commercial and operations teams continue to strive to meet our monthly and quarterly sales goals, and I'm proud of their achievements in the third quarter. Our three new Hausman product introductions are progressing as scheduled. We work closely with our customers and key distributors to design these additions. For example, our new timber line offers high quality solid wood furniture at an economical price. The Titan Premier Treatment Tables meet high-end functional requirements while supporting our customers' budget needs.

Brian D. Baker: Our commercial and operations teams continue to strive to meet our monthly and quarterly sales goals and I'm proud of their achievements in the third quarter.

Brian D. Baker: Our three new housing product introductions are progressing as scheduled we work closely with our customers and key distributors to design. These additions are new kimberlite offers high quality solid wood furniture at an economical price.

Brian D. Baker: The tightened premier treatment tables meet high and functional requirements, while supporting our customers' budget needs.

Brian D. Baker: We have strong inventory positions for both Titan Premier and Timbre product lines to support our customer demand. We are pleased to see the high customer interest in these products, and feedback from customers taking delivery has been positive. Our new porch line complements our legacy protein products sold into athletic training centers. Forged is an athletic training furniture solution offering heavy-duty aluminum construction with customers' branding and colors.

Brian D. Baker: We have strong inventory positions for both tightened premier and timber product lines that support our customer demand. We are pleased to see the high customer interest in these products and feedback from customers taking delivery how its been positive.

Brian D. Baker: Our new Porsche line complements our legacy protein products sold into the athletic training centers.

Brian D. Baker: <unk> is an athletic training furniture solution offering heavy duty aluminum construction with customers' branding and colors. We are now quoting our forged flying for upcoming builds out in a lot of training space.

Brian D. Baker: We are now quoting our forged line for upcoming build-outs in the athletic training space. While it is too early to estimate the level of revenue contribution from these new product lines, we are optimistic they will enhance our existing sales base. I encourage you to visit our Hausman website to learn more about these exciting additions. As a reminder, historically, the business experiences higher revenue in the first quarter, lower second and third quarter revenue, with a bounce back in the fourth quarter.

Brian D. Baker: While it's too early to estimate the level of revenue contribution from these new product lines. We are optimistic they will enhance our existing sales base.

Brian D. Baker: Curt you to visit our Hausmann website to learn more about these exciting additions.

Brian D. Baker: As a reminder, historically the business experience as higher revenue in the first quarter lower second.

Brian D. Baker: And third quarter revenue, but the bounce back in the fourth quarter right.

Brian D. Baker: Recently, the business has experienced an increase in quote volume, and although not all quotes convert to firm orders, we believe this is a positive leading indicator that the fourth quarter will align with the historical trend. These results reflect continued progress on our fiscal year 2024 operating plan and strategic priority. Our team's daily commitment to the business has been key in achieving our goals, and I want to thank all of our employees for their ongoing dedication to the business. I'll now turn it over to Gabe to provide a financial report.

Brian D. Baker: Recently, the business has experienced an increase in quote volume and although not all quote convert to firm orders. We believe this is a positive leading indicators that the fourth quarter well aligned with the historical trials. These results reflect continued progress in our fiscal year 'twenty 'twenty four operating plan and strategic priorities.

Brian D. Baker: Our cadence daily commitment to the business has been key in achieving our goals and I want to thank all of our employees for their ongoing dedication in the business I'll now turn it over to Gabe to provide a financial Corp.

Gabe: Thank you Brian.

Gabe Ellwein: As a reminder, the full income statement and management discussion and analysis can be found in the 10Q. I will summarize some of the key financial results. Net sales were $7.7 million for the third quarter of fiscal year 2014. That compares to net sales of $9.2 million in the third quarter of fiscal year 2020. The year over year decrease is primarily due to a change in relationship with private label customers and less demand in our orthopedic soft bracing category. Gross profit for the quarter was $1.8 million or 23.7% of net sales compared to $2.2 million or 23.9% of net sales in the same period the prior year.

Gabe: As a reminder, the full income statement and management discussion and analysis can be found in the 10-Q I will summarize some of the key financials here.

Gabe Ellwein: Net sales were $7 $7 million for the third quarter of fiscal year 'twenty four.

Gabe Ellwein: That compares to net sales of $9 $2 million in the third quarter of fiscal year 'twenty three the.

Gabe Ellwein: The year over year decrease is primarily due to a change in relationship with private label customers and less demand in our orthopedics operation category.

Gabe Ellwein: Gross profit for the quarter was $1 $8 million or 23, 7% of net sales compared to $2 $2 million or 23, 9% of net sales in the same period the prior year.

Gabe Ellwein: The decrease in growth profit was driven primarily by the reduction in net sales discussed previously and decreases in product margin rates in our orthopedic soft bracing category, partially offset by an increase in product margin rates in our rehabilitation category.

Gabe Ellwein: The decrease in gross profit was driven primarily by the reduction in net sales discussed previously and decreases in product margin rates in our orthopedic soft breathing category.

Gabe Ellwein: Partially offset by an increase in product margin rates in our rehabilitation category.

Gabe Ellwein: Selling, general, and administrative expenses decreased $1 million, or 30%, to $2.4 million for the quarter ended March 31, 2024, compared to $3.4 million for the quarter ended March 31, 2023. The overall reduction in selling, general, and administrative expenses was led by a reduction of $0.7 million in salaries and benefits, with the remainder of the $0.3 million spread across travel, repair and maintenance, and other professional services. The net loss for Q3 fiscal year 2024 was $0.7 million. That compares to a net loss of $1.2 million for the same period in fiscal year 2023. The outstanding shares will increase by approximately 400,000 per quarter, depending on our share price.

Gabe Ellwein: Selling general and administrative expenses decreased $1 million or 30% to $2 $4 million for the quarter ended March 31, 2024, compared to $3 $4 million for the quarter ended March 31 2023.

Gabe Ellwein: The overall reduction in selling general and administrative expenses was led by a reduction of $7 million and salaries and benefits with the remainder of the point $3 million spread across travel repair and maintenance and other professional services.

Gabe Ellwein: Net loss for Q3 fiscal year 2024 was $7 million that.

Gabe Ellwein: That compares to a net loss of $1 $2 million for the same period of fiscal year 2023.

Gabe Ellwein: Outstanding shares will increase approximately 400000 per quarter, depending on our share price as of March 31, 2024, the number of common shares outstanding was approximately $4 9 million.

Gabe Ellwein: As of March 31, 2024, the number of common shares outstanding was approximately 4.9 million. The net cash balance was approximately $0.6 million on March 31, 2024, which was no change to the $0.6 million reported on December 31, 2023.

Gabe Ellwein: The net cash balance was approximately $6 million on March 31, 2024, no change to the point 6 million reported on December 31 2023.

Gabe Ellwein: As of March 31, 2024, our line of credit balance was approximately $2.4 million, and additional line of credit availability was approximately $1.9 million on a borrowing base of approximately $4.3 million. Cash used by operating activities was $1.9 million for the first nine months of fiscal year 24. The company used these proceeds from the line of credit to reduce accounts payable and accrued expenses by $1.7 million and to fund prepaid expenses of $0.4 million. The overall net change in cash position for the quarter compared to December 31st, 2023 was a positive $40,000. This concludes our summary of the financial and operating results. Thank you

Gabe Ellwein: As of March 31, 2020 for our line of credit balance was approximately $2 $4 million additional line of credit availability was approximately $1 $9 million on a borrowing base of approximately $4 $3 million.

Gabe Ellwein: Cash used by operating activities was $1 $9 million for the first nine months of fiscal year 'twenty for the.

Gabe Ellwein: The company used these proceeds from our line of credit to reduce accounts payable and accrued expenses by $1 $7 million and to fund the prepaid expenses of <unk> $4 million.

Gabe Ellwein: The overall net change in cash the cash position for the quarter compared to December 31, 2023 was a positive $40000.

Gabe Ellwein: This concludes our summary of the financial and operating results.

Speaker Change: Thank you Gabe.

Brian D. Baker: In terms of guidance for fiscal year 2024, we estimate net revenues to be $32.5 million to $34 million due to slower demand in the rehabilitation space and changes to our private-label customer relationship. We are not providing gross margin guidance currently. Given our reductions in revenue expectations, we are seeking improved stabilization in the business before considering reinstituting such guidance. SG&A is anticipated to be in the range of 30% to 32% of net sales for the fiscal year.

Speaker Change: In terms of guidance for fiscal year 'twenty 'twenty four we estimate revenues to be 32.5 million to 34 million due to slower demand in Rio in the rehabilitation space and changes to our private label customer relationships, we're not providing gross margin guidance currently given a reductions in <unk>.

Brian D. Baker: Revenue expectations, we are seeking improved stabilization in the business before considering re instituting such guidance S.

Brian D. Baker: SG&A is anticipated to be in the range of 30% to 32% of net sales for the fiscal year.

Brian D. Baker: In summary, our 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. I'll now turn it over to the operator for questions. Thank you.

Brian D. Baker: In summary, our 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.

Speaker Change: Now I'll turn it over to the operator for questions.

Operator: Thank you. We will now take questions from the telephone lines. If you have a question, please press star 1 on your device's keypad. You may cancel your question at any time by pressing star 2. Please press star 1 at this time if you have a question. There will be a brief pause while the participants register. Thank you for your patience. And there are no questions registered at this time, so I would like to turn the floor back over to Brian for any closing comments.

Speaker Change: Thank you we will now take questions from the telephone lines. If you have a question. Please press star one on your devices Keypad you may cancel your question at any time by pressing star queue. Please press star one at this time if you have a question there will be a brief pause some other participants register thank you for your patience.

Operator: And there are no questions registered at this time I would like to turn the floor back over to Brian for any closing comments.

Brian D. Baker: Thank you for your time this morning and for your ongoing interest in Dynatronics. If you have any further questions, please direct them to ir@dynatronics.com.

Brian: Thank you for your time this morning and for your ongoing interest in Dynatron X. If you have any further questions. Please direct them to IR at <unk> Dot Com operator, you may end the call.

Operator: Operator, you may end the call. Thank you, Mr. Baker. The conference has now ended. Please disconnect your lines at this time, and we thank you for your participation.

Speaker Change: Thank you Mr Baker.

Operator: Conference has now ended please disconnect your lines at this time and we thank you for your participation.

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

Operator: Thank you. The conference has now ended please disconnect your lines at this time and we thank you for your participation.