Q4 2024 Electromed Inc Earnings Call
Speaker Change: Greetings and welcome to the Electro Med 4th Quarter 2024 earnings call. At this time, all participants are in a listen-only mode.
Speaker Change: A question and answer session will follow the formal presentation. If you require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: It is now my pleasure to introduce you to your host, Mike Cavanaugh, Investor Relations. Thank you, Mike. You may begin.
Speaker Change: Good afternoon, and thank you for joining the ElectroMet earnings call. Earlier today, ElectroMet Incorporated released financial results for the fourth fiscal quarter of 2024, the quarter ended June 30, 2024.
Speaker Change: or at least as currently available on the company's website at www.smartfest.com
Speaker Change: 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.
Speaker Change: Such statements are subject to risk and uncertainties that could cause actual performance or achievements to be materially different from those projected.
Speaker Change: and he's such statements represent management's expectations as of today's date.
Speaker Change: We should not place any undue reliance on those forward-looking statements and 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.
Speaker Change: Please refer to the company's SEC filings for further guidance on this matter.
Speaker Change: Joining me on the call today are Jim Cunniff, Electramed as Chief Executive Officer, and Brad Nagle Chief Financial Officer.
Speaker Change: Jim will provide some operational highlights from the quarter, Brad will then review the financials and we will close with a question and answer session.
Speaker Change: With that, I will now turn the call over to Jim Kinniff, President and Chief Executive Officer of ElectroMed.
Jim Kinniff: Thanks, Mike, and welcome to ElectroBeds 4th Quarter, fiscal year 2024, earnings call. I'm pleased to announce another record, revenue quarter for ElectroBeds. This is our third consecutive quarter of record revenues.
Jim Kinniff: We also successfully delivered record annual revenues for the full year. These results are a testament to the excellent work of our entire team as well as the impact of our relatively new, but highly impactful leadership team.
Speaker Change: Total Net revenue for the fourth quarter of fiscal year 2024, came in at 14.8 million, representing a 9% year over year growth from the same period in fiscal year 2023.
Speaker Change: These results were achieved despite headwinds from the expiration of the CMS waiver that we benefited from in Q4 and the full year in fiscal year 2023. Revenue for the full year came in at 54.7 million, a 14% increase from fiscal year 2023.
Speaker Change: As you might guess from the strong top line growth, operating income for both the quarter and full fiscal year were both records coming in at 2.3 million and 6.6 million respectively.
Speaker Change: These results demonstrate that electrobed continues to deliver compelling top-line growth, coupled with improved operating leverage, which in turn is driving cheerholder value.
Speaker Change: Capitalizing in our operating leverage, we continue to build a Fartache position, which at quarter end exceeded 16 million.
Speaker Change: We use part of our cash generated from operations to purchase the remaining $275,000 of stock that was part of our open stock purchase program, which was approved in May 2021.
Speaker Change: As always, I'll turn the call over to Bradley to review our financials in more detail, but I want to give you some additional financial highlights before discussing our operating highlights.
Bradley: First, as mentioned at our previous calls, we've been focused on improving our finished goods inventory, while simultaneously lowering our overall inventory, which for the first time is below $4 million for the year.
Speaker Change: I'm pleased that our progress in this regard which has a dual purpose, namely to continue to improve our working capital while also improving our service and fulfillment rates. To that end, I'm happy to report that as of June 30th, we had zero pack orders.
Speaker Change: Turning to our operating growth initiatives, we continue to add direct sales reps during the fourth quarter and end of the year with 53 total sales reps.
Speaker Change: Looking ahead, the fiscal year 2025, we have expanded our regional manager team from 6 to 7, and with this enlarged commercial leadership team, who look expand our U.S. sales team to 57 sales reps in total by year end.
Speaker Change: The recruitment for these expanded territories has already begun.
Speaker Change: We have also upgraded our sales incentive plan to reward the sales reps directly for the results that they control, namely driving prescriptions for smart best clear way. The new compensation plan has been well received by the reps and should result in improved sales results.
Speaker Change: with our strong performance in fiscal year 24. And these improvements for fiscal year 2025, we are increasing our expectations for fiscal year 2025, home care revenue per rep to a range of 900,000 to a million dollars.
Speaker Change: Another key part of our gross strategy is to invest in market development to continue to raise awareness of bronchieticism, which most of you and this call know is often overlooked and we believe is under diagnosed.
Speaker Change: As part of this effort, our clinical teams focus on podium and four regional conferences during the fourth quarter alone with the goal of educating KLLs and other care providers on brunciectuses patient identification.
Speaker Change: and power in the clinicians to better identify bronchiectasis and their patient population and it treat those patients with smart best. These conversations were tended by over 780 participants in total and were very well received.
Speaker Change: During the quarter, we also continue the promotion of our continuing medical education, or CME course, which is designed to increase the knowledge, skills, and professional performance and relationships that a physician uses to provide services for patients.
Speaker Change: These CME credits are important for health care providers and some states require a minimum number of credits to be earned annually.
Speaker Change: Our program develops these skills, focus on brachyactuses and the HFCWotherapy is highly effective at treating and managing the disease. As of June 30, we had issued 855 total certifications, which is a great result from this initiative.
Speaker Change: Turning to our operational achievements, fiscal year 2024 was a year filled with first for lecture med, including the introduction of our best-in-class Mark Best Clearway into the hospital market, which grew 22% in fiscal year 2024.
Speaker Change: This is a departure from our core home care business and one that we think will pay dividends as it will enable electromagnetic capture patients that are being discharged from the hospital.
Speaker Change: who need to be treated for brachiactuses as they transition to the home. We have a strong service infrastructure in place and being able to receive patient flow from hospitals makes good sense for our business.
Speaker Change: Earlier this year, we introduced Smart Advantage, which consists of sales programs and clinic support resources that highlight our exceptional customer service and seamless ordering process and support of the clinics we serve.
Speaker Change: This initiative is proven to be effective in improving prescriber loyalty and reducing the time it takes from prescription to pair approval to product delivery to a patient.
Speaker Change: We also launch smart notes, important disease management tool for physicians who prescribe the smart best for their patients.
Speaker Change: Smart Notes gives providers updates and a patient's progress in their compliance and using Smart Best Clear Wave.
Speaker Change: This tool complements the twin macro tail lens of remote patient monitoring and care being increasingly delivered at the home. Physicians appreciate bringing a prize to their patients therapy compliance and progress in using smart best clear way which smart notes provides.
Speaker Change: Electramat's web-based clinical resource center was also launched in the year, which is tailored to the needs of clinicians, enabling them to explore or prescribe resources, upcoming events, programs for CME credits, educational videos in our latest clinical studies.
Speaker Change: The ultimate goal is to help introduce airway clearance therapy earlier in the treatment cycle for patients so they can breathe easier and live more actively.
Speaker Change: On top of the growth of the commercial team, which I mentioned earlier, we also bolstered other critical teams with an electromagnetic, new talent, systems and processes to improve our performance and add value to the patients and providers we serve.
Speaker Change: In addition to the sales hires we made, we also expanded our fulfillment team to seamlessly meet growing demand in as part of the reason that we have no backlogs in deliveries.
Speaker Change: Furthermore, the investments we made in our ERP system is paying dividends as the system gives us valuable insights to our business, both financially and operationally. It's also helped us to identify areas for productivity improvements across the functional areas of our business.
Speaker Change: We will continue to invest in our teams and processes to support future growth and profitability targets which provide return on our investment.
Speaker Change: Lastly, before I turn the call over to Brad to review our financials, I wanted to share the news that electromagnetic was recently named when the fastest growing public companies in Minnesota by the Minneapolis St. Paul business journal.
Speaker Change: in a state with a dynamic medical device sector. It is gratifying to be recognized for operational execution, unique focus, and growth. There's all types highlighted today clearly demonstrate that a letter met as moving from strength to strength.
Speaker Change: As you know from previous calls both my incentive compensation and the senior management teams and incentive compensation is tied directly to increasing total shareholder return, ensuring that we are highly focused on our investor's goals.
Speaker Change: Electromet stock is appreciated over 40% since the beginning of fiscal year 2024 and we intend to continue to drive further crisis appreciation by delivering top line growth along with robust operating leverage to drive accelerated earnings.
Speaker Change: I'm pleased with our results this year and look forward to continuing on this track in fiscal year 2025. With that, I'd like to hand the call over to Brad to discuss our financials in more detail. Brad.
Brad Nagle: Thank you, James.
Brad Nagle: Net revenue for $2,4, group $9.0% over $2,4 of last year to $14.8 million for the quarter, bringing net revenue for our full fiscal $20,24 to $54.7 million or $13.8% annual revenue growth over fiscal year 2023.
Brad Nagle: Revenue in our direct home care segment, which represented 90% of our overall revenue in fiscal 2024, increased year over year by 5.6 million dollars, or 12.6% to 49.5 million dollars.
Brad Nagle: The increase in revenue was due to an increase in direct sales representatives and efficiencies recognized within our reimbursement department due to recent investments made to streamline the claims process.
Brad Nagle: Hospital revenue increased year over here by $0.5 million or 21.9% to $2.5 million.
Brad Nagle: The revenue increase was due to an increase in sales representatives focused on the hospital market, as well as increased demand for both capital devices sold in the hospitals and the disposable products used to provide care for each hospital patient.
Brad Nagle: Homecare distributor revenue increased year over year by $0.2 million or $14.5% to $1.9 million.
Brad Nagle: The revenue increase was due to increased demand from one of our primary home care distribution partners.
Brad Nagle: Other revenue increased year over year by $0.4 million or 94.8% to $0.8 million.
Brad Nagle: The increase in other revenue was primarily due to increased demand of international distributor purchases and purchases by customers that do not fall within the other markets previously described.
Brad Nagle: Gross profit increased $41.7 million in fiscal 2024 or 76.3% of net revenues from $36.5 million or 76% of net revenues in fiscal 2023.
Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If you require operator assistance during the conference, please press star zero on your telephone keypad.
Brad Nagle: The increase in gross profit was primarily due to increased revenue in fiscal 2024, decreased shipping expenses, and higher material costs in the prior year to expedite inventory purchases which did not recur in the current year.
Mike Cavanaugh: As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mike Cavanaugh, Investor Relations.
Mike Cavanaugh: Thank you, Mike.
James Cunniff: You may begin. Good afternoon, and thank you for joining the Electromed earnings call. Earlier today, Electromed Incorporated released financial results for the fourth fiscal quarter of 2024. The quarter ended June 30, 2024. The release is currently available on the company's website at www.smartbest.com. 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.
Brad Nagle: Selling General and Administrative or SGNA expenses were $34.5 million in fiscal 2024, representing an increase of $2.9 million or $9.2% from $31.6 million in fiscal 2023.
Brad Nagle: A-roll and compensation-related expenses increased by $2.9 million, or $14.0% to $23.4 million in fiscal 2024.
James Cunniff: Such statements are subject to estimates 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, and 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.
Brad Nagle: The increase was primarily due to increased share-based compensation, salaries, and incentive compensation related to the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals.
Brad Nagle: Travel meals and entertainment expenses increased $0.4 million, or 11.8% to $3.3 million in fiscal 2024.
Brad Nagle: The increase in the current year period was due to a higher average number of direct sales representatives, higher travel costs, and increased number of sales territories and a mid-year sales meeting held in Q3.
James Cunniff: Please refer to the company's SEC filings for further guidance on this matter.
Mike Cavanaugh: Joining me on the call today are Jim Caniff, Electromed's Chief Executive Officer, and Brad Nagel Chief Financial Officer. Jim will provide some operational highlights from the quarter. Brad will then review the financials, and we will close with a question and answer session.
Brad Nagle: Professional fees decreased by $0.5 million or $8.6% to $4.8 million.
Brad Nagle: Professional fees are primarily for services related to legal costs, reporting requirements, information technology, technical support, and consulting fees.
James Cunniff: With that, I'll now turn the call over to Jim Caniff, President and Chief Executive Officer of Electromed. Thanks, Mike, and welcome to Electromed's fourth quarter of fiscal year 2024 earnings call. I'm pleased to announce another record revenue quarter for Electromed. This is our third consecutive quarter of record revenues. We also successfully delivered record annual revenues for the full year. These results are a testament to the excellent work of our entire team as well as the impact of our relatively new but highly impactful leadership team.
Brad Nagle: The decrease was primarily related to higher fiscal 2023 costs, such as consulting costs associated with the termination of the public health emergencies for COVID-19 and recruiting costs for multiple senior leadership positions that did not occur in fiscal 2024.
Brad Nagle: Total discretionary marketing expenses increased by $0.5 million, for $43.7% to $1.5 million.
Brad Nagle: The increase was primarily due to an investment in market research, as well as direct a consumer and direct decision marketing.
James Cunniff: Total net revenue for the fourth quarter of fiscal year 2024 came in at 14.8 million, representing a 9% year-over-year growth from the same period in fiscal year 2023. These results were achieved despite headwinds from the expiration of the CMS waiver that we benefited from in Q4 and the full year in fiscal year 2023. Revenues for the full year came in at 54.7 million, a 14% increase from fiscal year 2023. As you might guess from the strong top line growth, operating income for both the quarter and full fiscal year were both records coming in at 2.3 million and 6.6 million respectively.
Brad Nagle: R&D expenses decreased by $0.3 million or 28.4% to $0.7 million in fiscal 2024.
Brad Nagle: The decrease was primarily due to reduced costs associated with our smart best clear-way platform development in the prior year, which is now then launched into both the home care and hospital markets.
Brad Nagle: Net income for fiscal 2024 was $5.2 million for 58 cents per diluted share compared to net income of $3.2 million or 36 cents per diluted share in fiscal 2023.
Brad Nagle: The increase of 62.7% in current year net income over 2023 was primarily driven by the combination of strong revenue growth, diligent expense management and increased interest income on our growing cash position.
James Cunniff: These results demonstrate that Electromed continues to deliver compelling top line growth coupled with improved operating leverage, which in turn is driving shareholder value. Capitalizing and our operating leverage, we continue to build up our cash position, which had quarter and exceeded 16 million. We use part of our cash generated from operations to purchase the remaining $200,75,000 of stock that was part of our Open Stock Repurchase Program, which was approved in May 2021.
Brad Nagle: As of June 30, 2024, Electramat had $16.1 million in cash, $23.3 million in accounts receivable and no debt, achieving a working capital of $36.5 million, and total shareholder's equity of $44.5 million.
James Cunniff: As always, I'll turn the call over to Brad later on to review our financials in more detail, but I wanted to give you some additional financial highlights before discussing our operating highlights. First, as mentioned on our previous calls, we've been focused on improving our finished goods inventory while simultaneously lowering our overall inventory, which for the first time is below $4 million for the year. I'm pleased that our progress in this regard, which has a dual purpose, namely, to continue to improve our working capital while also improving our service and fulfillment rates.
Speaker Change: With that, we'd like to move to the Q&A portion of the call. Operator, please open the call to questions.
Speaker Change: Thank you, we will now be conducting a question and answers session. If you would like to ask a question, please press R1 on your telephone keypad. A confirmation home will indicate your line is in the question queue.
Speaker Change: You may press start too, if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: I'm Beaumitt Please Holy Pool for questions.
James Cunniff: To that end, I'm happy to report that as of June 30th, we had zero pack orders. Turning to our operating growth initiatives, we continue to add direct sales reps during the fourth quarter and end of the year with 53 total sales reps. Looking ahead, to fiscal year 2025, we have expanded our regional manager team from 6 to 7, and with this in large commercial leadership team, we will expand our US sales team to 57 sales reps in total by year end.
Speaker Change: [inaudible]
Speaker Change: [inaudible]
Speaker Change: Thank you. Our first question comes from the line of Brooks O'Neill with Lake Street Capital Markets. Please proceed with your question.
Speaker Change: Hey, good afternoon guys, this is Aaron on the line for Brooks, are you able to hear me okay?
Speaker Change: Yes, hey Eric, how are you?
James Cunniff: The recruitment for these expanded territories has already begun. We've also upgraded our sales incentive plan to reward the sales reps directly for the results that they control, namely, driving prescriptions for SmartBest Clearway. The new compensation plan has been well received by the reps and should result and improve sales results. With our strong performance in fiscal year 24, and these improvements for fiscal year 2025, we are increasing our expectations for fiscal year 2025 homecare revenue per rep to a range of $900,000 to a million.
Speaker Change: Thanks Jim, congrats you guys on the record year and quarter very encouraging to see. Just have a couple from me, so you mentioned operating leverage and we're definitely seeing.
Speaker Change: strong evidence and progress there, which is great. I'm just curious on maybe some of the key lovers in your mind that are going to continue to drive this leverage for you guys as we head into the fiscal 25th.
Speaker Change: Yes, so I think we communicate this in the past, but I know especially in fiscal year 2024, we really got some great tailwinds from a couple of things, number one on which is.
James Cunniff: Another key part of our growth strategy is to invest in market development, continue to raise awareness of bronchiectasis, which most of you on this call know is often overlooked, and we believe is underdiagnosed. As part of this effort, our clinical teams spoke on podium at four regional conferences during the fourth quarter alone, with the goal of educating KOLs and other care providers on bronchiectasis patient identification, empowering the clinicians to better identify bronchiectasis in their patient population, and to treat those patients with SmartBest.
Speaker Change: Here during the pandemic we were settled with some challenges from the supply chain standpoint. So we had to expedite componentry that we were using in production that's no longer the case.
Speaker Change: and our distribution costs as an example is a percent of our cost of goods sold at decline quite substantially, which is fantastic.
Speaker Change: Secondarily, in the past, we used to have pretty much one-to-one correlation between where we made a sales rep investment.
James Cunniff: These conference sessions were tended by over 780 participants in total, and were very well received. During the quarter, we also continue the promotion of our continuing medical education or CME course, which is designed to increase the knowledge, skills, and professional performance and relationships that a physician uses to provide services for patients. These CME credits are important for health care providers, as some states require a minimum number of credits to be earned annually.
Speaker Change: that we had to make a corresponding investment within our reimbursement team to help on the pair of education with our patients, et cetera. And that's really no longer the case. We're getting a lot more leverage from our reimbursement team. So as we add sales reps,
Speaker Change: We don't have to add as many folks on our in-house reimbursement team, so it's been a real big boon for the business.
Speaker Change: Absolutely, yeah, it's super helpful. And then I'm just curious, if you had any comment or expectations regarding how the drug being developed by InSmed to treat patients with bronchiaticis might affect you guys either positive or negative, this any thoughts there will be helpful.
James Cunniff: Our program develops these skills, focus on bronchiectasis and the HFCWO therapy is highly effective at treating and managing the disease. As of June 30, we had issued 855 total certifications, which is a great result from this initiative. Turning to our operational achievements, Fiscal Year 2024 was a year filled with first for Electromed, including the introduction of our best-in-class Mark Vest Clearway into the hospital market, which grew 22% in Fiscal Year 2024.
Speaker Change: I think it's early innings on that, Aaron, and the drug that you reference is not been approved by the FDA. I think that the insmed is encouraged by the results, but really the focal point of that is on.
Speaker Change: Information, so I'm going to look at a brunciectasis patient in particular, you know, there's a couple of things that what they call as the vicious vortex, so you have a patient who has
James Cunniff: This is a departure from our core home care business, and one that we think will pay dividends as it will enable Electromed capture patients that are being discharged from the hospital who need to be treated for a rocky act as they transition to the home. We have a strong service infrastructure in place, and being able to receive patient flow from hospitals makes good sense for our business. Earlier this year, we introduced Smart Advantage, which consists of sales programs and clinic support resources that highlight our exceptional customer service and seamless ordering process in support of the clinics we serve.
Speaker Change: In fact, they have inflammation and then they have mucus that gets built up in their lungs that needs to be expelled.
Speaker Change: I think the ins med drug is interesting in that it's really focused on the inflammation that the patient.
Speaker Change: who has bronchectuses and really retarding that. But it's not going to diminish the infection that those patients still may have, and it's not going to diminish the fact that the patient still needs to remove their mucus. And so I think it's part of the care continuum. I don't think it's the silver bullet.
James Cunniff: This initiative has proven to be effective in improving prescriber loyalty and reducing the time it takes from prescription to pair approval to product delivery to a patient. We also launched Smart Notes, an important disease management tool for physicians who prescribe the Smart Vest for their patients. Smart Notes gives providers updates on a patient's progress in their compliance and using Smart Vest Clearway. This tool complements the twin macro tail winds of remote patient monitoring and care being increasingly delivered at the home.
Speaker Change: and again, it hasn't been approved by the FDA, it hasn't been launched and I think we're kind of an early innings on that.
James Cunniff: Physicians appreciate bringing a prize of their patient's therapy compliance and progress in using Smart Vest Clearway, which Smart Notes provides. Electromed's web-based clinical resource center was also launched during the year, which is tailored to the needs of clinicians enabling them to explore prescriber resources, upcoming events, programs for CME credits, educational videos in our latest clinical studies. The ultimate goal is to help introduce airway clearance therapy earlier in the treatment cycle for patients so they can breathe easier and live more actively.
Jim: will appreciate that color and Jim, you know, it's marks about a year I believe, maybe a little less that you've been at the company. Can you just maybe reflect on, you know, your first year and then maybe talk about some of the biggest opportunities you see, especially in this next year for the company going forward.
Jim: Yeah, I'd love to. Yeah, it's been a fantastic first year in the saddle here, and uh...
Jim: You know, I've taken over from Kathleen Scarban who's still the chair of our board, so she is involved in the business as well, but I think as I reflect on the past year, what I'm really most excited about is the team that we have. We've got, as I've mentioned, on previous calls in the past.
Jim: A relatively new team, but a team that's come to the company with great ideas and great experience, and they've really infused that into the different...
Jim: functional areas of our business.
Jim: I'd also say that it's a very cohesive team that we have an electromagnet.
James Cunniff: On top of the growth of the commercial team which I mentioned earlier, we also bolstered other critical teams within Electromed with new talent, systems and processes to improve our performance and add value to the patients and providers we serve. In addition to the sales hires we made, we also expanded our fulfillment team to seamlessly meet, growing demand and as part of the reason that we have no backlogs and deliveries. Furthermore, the investments we made in our ERP system is paying dividends as the system gives us valuable insights to our business both financially and operationally.
Jim: that really does a great job of collaborating and I think it's that collaboration.
Jim: which is really enabled us to really go from strength to strength and all functional apartments, whether it's the service levels and the inventory results that we've been able to drive in operations or the improved support that we're providing are.
Speaker Change: Klinicians from the reimbursement standpoint in our payers and reducing.
Speaker Change: The amount of personnel that we need within that department, so as we talked about earlier, we're getting more leverage. But I would say that, you know, it's really the talent. We've really upgraded the talent with the team and I think they're making a difference.
James Cunniff: It has also helped us to identify areas for productivity improvements across the functional areas of our business. We will continue to invest in our teams and processes to support future growth and profitability targets which provide a return on our investment. Lastly, before I turn the call over to Brad to review our financials, I wanted to share the news that Electromed was recently named one of the fastest growing public companies in Minnesota by the Minneapolis St. Paul Business Journal.
Speaker Change: and I'd also stand the commercial side, you know, we've been able to provide our...
Speaker Change: Sales Force with a lot of tools and equipment to help them be more successful in the marketplace. We've got a best in-class product with smart, best clear way.
Speaker Change: that we introduced at the end of 2022 but then introduced into the hospital market this past fiscal year, which has been both very well received on the home side as well as the hospital side of our business.
James Cunniff: In a state with a dynamic medical device sector, it is gratifying to be recognized for operational execution, unique focus and growth. The results I have highlighted today clearly demonstrate that Electromed is moving from strength to strength. As you know from previous calls, both my incentive compensation and the senior management teams and incentive compensation is tied directly to increasing total shareholder return, ensuring that we are highly focused on our investor's goals. Electromed stock has appreciated over 40 percent since the beginning of fiscal year 2024 and we intend to continue to drive further price appreciation by delivering top-line growth along with through a bust operating leverage to drive accelerated earnings.
Speaker Change: It's still the newest HFCWO product on the market, it's the lightest way, it's the most comfortable, and we've got just fantastic industrial design with that. And then, yes, we've talked about on some previous calls there, and you know, we've upgraded.
Speaker Change: Bob, we're looking for in our sales team and so I think that's helped us to recruit better talent and that talent I think is hitting the ground running and that's one of the reasons why
Speaker Change: You know for fiscal year 2025 we're increasing our expectations of...
Speaker Change: Revenue per wrap from 852
James Cunniff: I am pleased with our results this year and look forward to continuing on this track in fiscal year 2025.
Speaker Change: [inaudible]
Bradley Nagel: With that, I would like to hand the call over to Brad to discuss our financials in more detail.
Bradley Nagel: Brad?
Bradley Nagel: Thank you, Jim. Net revenue for Q4 grew 9.0 percent over Q4 of last year to $14.8 million for the quarter, bringing net revenue for our full fiscal 2024 to $54.7 million, or 13.8 percent annual revenue growth over fiscal year 2023. Revenue in our direct home care segment, which represented 90 percent of our overall revenue in fiscal 2024 increased year over year by $5.6 million, or 12.6 percent to $49.5 million.
Speaker Change: I know you guys don't give specific, um...
Speaker Change: Numbers in your guidance, but I'll just curious as far as, you know, revenue trends, you expect anything out of the ordinary or any major deviations, or we can kind of assume that they're going to sort of follow the pattern that we've seen the past couple years.
Speaker Change: Thanks for the question, Aaron. Yes, we do continue to see opportunity to grow our sales team, grow the support that they have, and with that continue to drive double-digit growth consistently on the top line, as well as expanded operating leverage as we said in the past.
Bradley Nagel: The increase in revenue was due to an increase in direct sales representatives and efficiencies recognized within our reimbursement department due to recent investments made to streamline the claims process. Hospital revenue increased year over year by $0.5 million, or 21.9 percent to $2.5 million. The revenue increase was due to an increase in sales representatives focused on the hospital market as well as increased demand for both capital devices sold into hospitals and the disposable products used to provide care for each hospital patient. Home care distributor increased year over year by $0.2 million, or 14.5 percent to $1.9 million.
Aaron: Thank you guys for taking my questions. We're really excited about this next fiscal year so congratulations.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time.
Speaker Change: Very good. Thank you, Aaron, and thank you all very much for joining the call today, and thank you for continued support of ElectroMed.
Speaker Change: I'm pleased with the results that we drove in fiscal year 2024, but we're not resting in our laurels.
Speaker Change: and we'll look to deliver another exceptionally year of operating results in fiscal year 2025. We're always happy to speak with investors, and if you're interested in a follow-up call, please contact our investor-relation partners at ICER Westwick. Thanks again for your time today. Operator, please close the call.
Bradley Nagel: The revenue increase was due to increased demand from one of our primary home care distribution partners. Other revenue increased year over year by $0.4 million, or 94.8 percent to $0.8 million.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Bradley Nagel: The increase in other revenue was primarily due to increased demand of international distributor purchases and purchases by customers that did not fall within the other markets previously described. Gross profit increased $41.7 million in fiscal 2024, or 76.3 percent of net revenues, from $36.5 million, or 76 percent of net revenues in fiscal 2023. The increase in gross profit was primarily due to increased revenue in fiscal 2024, decreased shipping expenses, and higher material costs in the prior year to expedite inventory purchases, which did not recur in the current year.
Bradley Nagel: Selling general and administrative, or S-GNA expenses, were $34.5 million in fiscal 2024, representing an increase of $2.9 million, or 9.2 percent from $31.6 million in fiscal 2023. Aerole and compensation-related expenses increased by $2.9 million, or 14.0 percent to $23.4 million in fiscal 2024.
Bradley Nagel: The increase was primarily due to increased share-based compensation, salaries, and incentive compensation related to the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals. Travel meals and entertainment expenses increased $0.4 million, or 11.8 percent to $3.3 million in fiscal 2024. The increase in the current year period was due to a higher average number of direct sales representatives, higher travel costs, and increased number of sales territories and a mid-year sales meeting held in Q3. Professional fees decreased by $0.5 million or 8.6% to $4.8 million. Professional fees are primarily for services related to legal costs, reporting requirements, information technology, technical support, and consulting fees.
Speaker Change: Music
Speaker Change: Music
Speaker Change: A few minutes later, I'll be back in the next video.
Bradley Nagel: The decrease was primarily related to higher fiscal 2023 costs, such as consulting costs associated with the termination of the public health emergency for COVID-19 and recruiting costs for multiple senior leadership positions that did not occur in fiscal 2024. Total discretionary marketing expenses increased by $0.5 million or $43.7% to $1.5 million. The increase was primarily due to an investment in market research, as well as direct to consumer and direct to physician marketing. R&D expenses decreased by $0.3 million or 28.4% to $0.7 million in fiscal 2024.
Operator: The decrease was primarily due to reduced costs associated with our smart best clear-wave platform development in the prior year, which has now been launched into both the home care and hospital markets. Net income for fiscal 2024 was $5.2 million or 58 cents per diluted share compared to net income of $3.2 million or 36 cents per diluted share in fiscal 2023. The increase of 62.7% in current near net income over 2023 was primarily driven by the combination of strong revenue growth, diligent expense management, and increased interest income on our growing cash position.
Operator: As of June 30, 2024, electric med had $16.1 million in cash, $23.3 million in accounts receivable, and no debt, achieving a working capital of $36.5 million and total shareholder equity of $44.5 million. With that, we'd like to move to the Q&A portion of the call. Operator, please open the call to questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press the R1 on your telephone keypad.
Operator: A confirmation home will indicate your line is in the question queue. You may press R2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please hold a poll for questions. Thank you.
Aaron Wukmir: Our first question comes from the line of Brooks O'Neill with Lake Street Capital Markets. Please proceed with your question. Okay, good afternoon, guys. This is Aaron on the line for Brooks. Are you able to hear me okay? Yes. Hey, Aaron, how are you? Well, thanks, Jim. Congrats, you guys, on the record year and quarter. I'm very encouraging to see. Just have a couple for me. So you mentioned operating leverage, and we're definitely seeing strong evidence and progress there, which is great.
Aaron Wukmir: Just curious on maybe some of the key levers in your mind that are going to continue to drive this leverage for you guys as we as we head into fiscal 25. Yeah, so Aaron, I think we communicated this in the past, but I know especially in fiscal year 2024, we really got some great tailwinds from a couple of things. Number one, which is during the pandemic, we were settled with some challenges from the supply chain standpoint.
Aaron Wukmir: So we had to expedite componentry that we were using in production that's no longer the case, and our distribution cost as an example is a percent of our cost of goods sold and decline quite substantially, which is fantastic. Secondarily, in the past, we used to have pretty much a one-to-one correlation between where we made a sales rep investment, that we had to make a corresponding investment within our reimbursement team to help on the pair of adjudication with our patients, et cetera.
Aaron Wukmir: And that's really no longer the case. We're getting a lot more leverage from our reimbursement team. So as we add sales reps, we don't have to add as many folks on our in-house reimbursement team. So it's been a real big boon for the business. Absolutely, super helpful.
James Cunniff: And then I'm just curious if you had any comment or expectations regarding how the drug being developed by insmed to treat patients with bronchiatasis, might affect you guys either positive or negative. Any thoughts there will be helpful. Well, I think it's early innings on that, Aaron.
James Cunniff: And the drug that you reference is not been approved by the FDA. I think that insmed is encouraged by the results, but really the focal point of that is on inflammation. So when you look at a bronchiatasis patient in particular, there's a couple of things that what they call the vicious vortex. So you have a patient who has infection, they have inflammation, and then they have mucus that gets built up in their lungs that needs to be expelled.
James Cunniff: And so I think the insmed drug is interesting in that it's really focused on the inflammation that the patient who has bronchiatasis and really retarding that. But it's not going to diminish the infection that those patients still may have. And it's not going to diminish the fact that the patient still needs to remove their mucus. And so I think it's part of the care continuum. I don't think it's the silver bullet. And again, it hasn't been approved by the FDA. It hasn't been launched. And I think we're kind of in early innings on that.
Aaron Wukmir: We appreciate that, Collar.
Aaron Wukmir: And Jim, you know, it marks about a year, I believe, maybe a little less that you've been at the company.
James Cunniff: Can you just maybe reflect on, you know, your first year and then maybe talk about some of the biggest opportunities you see, especially in this next year for the company going. Ford. Yeah, I'd love to. Yeah, it's been a fantastic first year in the saddle here. I've taken over from Kathleen Scarvan, who's still the chair of our board, so she is involved in the business as well. But I think, as I reflect on the past year, what I'm really most excited about is the team that we have.
James Cunniff: We've got, as I've mentioned on previous calls in the past, a relatively new team, but a team that's come to the company with great ideas and great experience, and they've really infused that into the different functional areas of our business. I'd also say that it's a very cohesive team that we have an Electromed that really does a great job of collaborating. And I think it's that collaboration, which has really enabled us to really go from strength to strength and all functional apartments, whether it's the service levels and the inventory results that we've been able to drive in operations or the improved support that we're providing are clinicians from a reimbursement standpoint in our payers and reducing the amount of personnel that we need within that department.
James Cunniff: So as we talked about earlier, we're getting more leverage. But I would say that it's really the talent. We've really upgraded the talent with the team, and I think they're making a difference. And I'd also say on the commercial side, we've been able to provide our sales force with a lot of tools and equipment to help them be more successful in the marketplace. We've got a best-in-class product with SmartFest Clearway that we introduced at the end of 2022, but then introduced into the hospital market this past fiscal year, which has been both very well received on the home side as well as the hospital side of our business.
James Cunniff: It's still the newest HFCWO product on the market. It's the lightest weight, the most comfortable, and we've got just fantastic industrial design with that. And then yes, we've talked about on some previous calls, Aaron. We've upgraded what we're looking for in our sales team. And so I think that's helped us to recruit better talent. And that talent, I think, is hitting the ground running. And that's one of the reasons why for fiscal year 2025, we're increasing our expectations of revenue per rep from 850 to 950,000 dollars per rep, which is what we had in fiscal year 2024 to 900 to a million dollars this fiscal year.
Aaron Wukmir: Absolutely, and all that makes sense, appreciate all that.
Aaron Wukmir: And then maybe if I can just squeeze a quick one in for Brad, I know you guys don't give specific numbers in your guidance, but I'll just curious, as far as revenue trends, do you expect anything out of the ordinary or any major deviations? Or can we kind of assume that they're going to sort of follow the pattern that we've seen in the past couple of years?
Bradley Nagel: Thanks for the question, Aaron. Yes, we do continue to see opportunity to grow our sales team, grow the support that they have. And with that continue to drive double-digit growth consistently on the top line, as well as expanded operating leverage as we sat in the past. Awesome.
Aaron Wukmir: Thank you guys for taking my questions. We're really excited about this next fiscal year, so congratulations. Thank you.
James Cunniff: There are no further questions at this time. Very good. Thank you, Aaron, and thank you all very much for joining the call today, and thank you for continued support of Electromed.
James Cunniff: I'm pleased with the results that we drove in fiscal year 2024, but we're not resting on our laurels, and we'll look to deliver another exceptional year of operating results in fiscal year 2025. We're always happy to speak with investors, and if you're interested in a follow-up call, please contact our investor-relation partners at ICER Westwick. Thanks again for your time today.
Operator: Operator, please close the call. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Jack Cavanaugh, Aaron Wukmir, James Cunniff, Bradley Nagel, Electromed