Q3 2025 Electromed Inc Earnings Call
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Speaker Change: Greetings and welcome to the Electromed 3rd quarter fiscal 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.
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 Electromed Earnings call.
Speaker Change: Earlier today, Electromed Incorporated Released Financial Results for the 3rd fiscal quarter of 2025. The quarter ended March 31, 2025.
Speaker Change: Press release is currently available on the company's website at www.smartfest.com.
Speaker Change: Before it gets started, I would like to remind everyone that some of the statements that management will make on this call are considered forward-looking statements.
Speaker Change: including statements about the companies, future operating, and financial results and plans.
Speaker Change: But statements are subject to risk 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.
Speaker Change: You should not place any undue reliance on those forward-looking statements.
Speaker Change: 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, Electromed President, Chief Executive Officer, and Brad Nagel, Chief Financial Officer.
Speaker Change: As on previous calls, Jim will provide color around 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 Cunniff, President and Chief Executive Officer of Electromed.
Speaker Change: Thank you, Mike, and welcome everyone to Electromed's third quarter earnings call. With me today's Brad Nagel, Electromed's Chief Financial Officer.
Speaker Change: As we usually do, I will share some comments and observations about our operational highlights for the quarter, and we'll follow with a detailed review of our financials, and we'll wrap up with a question and answer session.
Speaker Change: I'm happy to report another strong quarter today and I'm proud to share that the quarter ended March 31st, 2025 marked our 10th consecutive quarter of year-over-year revenue and that income growth, a rarity among small-cap medical technology companies.
Speaker Change: To be more specific, revenue for the third quarter came in at 15.7 million, a 13.1% increase from the same period a year ago.
Speaker Change: As most of you are aware, Electromed is laser focused on the airway clearance space, specifically bringing relief to thousands of patients who are being treated for the chronic disease of bronchiactosis.
Speaker Change: is our mission to be the most trusted airway clearance solution for both patients and the healthcare providers treating and managing this awful disease.
Speaker Change: At a high level, we pursue this goal through a strategy consisting of multiple initiatives which taken together have proven to be cohesive and effective in delivering revenue growth.
Speaker Change: We continue to thoughtfully expand our team of direct sales reps who promote our smart best airway clearance technology and end of the quarter with 55 reps up from 51 reps in the prior year.
Speaker Change: I say we do this thoughtfully as we want to ensure a good return on our investment in incremental hires while also avoiding the pitfall of hiring too many people too quickly which has caused many companies to stumble operationally.
Speaker Change: To highlight another initiative on the marketing front, we recently launched a Veterans Administration Direct Consumer Outreach Program in 11 cities.
Speaker Change: Designed to demonstrate the benefits of our technology to veterans whose breathing may improve from airway clearance therapy.
Speaker Change: We customize the initiatives specifically for the veterans experience and includes a web landing page, blog and social posts.
Speaker Change: We've also created a VA-specific informational packet for those veterans who wish to explore our therapy beyond the website and social media. This program generated 1200 clicks with 1100 page views since being launched last quarter.
Speaker Change: We continue to invest in raising awareness of the widespread challenge of bronchiactasis and I will spend a few minutes sharing several examples with you today.
Speaker Change: Most people have heard of COPD and cystic fibrosis but very few Americans have heard of bronchiactasis. In fact, the number of people suffering from bronchiactasis is many times larger than those suffering from cystic fibrosis and happens to be a common comorbidity with COPD.
Speaker Change: Furthermore, it is estimated that there are over 4 million Americans who have bronchiactasis but are undiagnosed.
Speaker Change: To address this knowledge gap, in late 2024, we launched the triple-down on bronchi-ectasis campaign, which is designed to raise awareness of the disease as well as the important function our smart best therapy plays in successful long-term disease management.
Speaker Change: Program highlights the three-pronged treatment paradigm of airway clearance with smart vests removed mucus from the lungs, along with treating infections and reducing inflammation, thereby helping break the vicious vortex.
Speaker Change: We have now generated over 27,000 views to our triple-down on Brocky-Ectasis landing page, and we are confident these efforts will result in greater awareness in more prescriptions over time.
Speaker Change: And while the campaign has been successful thus far, we made a subtle yet important enhancement to the program by emphasizing that the three-pronged treatment should focus on clear airways first.
Speaker Change: We did this because clearing the airways of mucus plays a critical role in reducing the fuel for future infections and allows patients to breathe easier.
Speaker Change: Another example of our leadership in raising awareness around bronchiactasis is the presentation we made in March to the California thoracic society where we hosted a product theater breakfast presentation which highlighted the importance of airway clearance as an important part of the bronchiactasis treatment continuum.
Speaker Change: Similarly, in partnership with Respiratory Associates, our clinical team delivered a continuing education unit titled, Rocky Actuses Overlap Syndrome. What's the big deal? That was approved by the American Association of Respiratory Care or AARC.
Speaker Change: The session was attended by over 120 registered nurses and registered therapists, and their response was overwhelmingly positive, with 64% of the attendees saying that the information gained during the session would lead to an adjustment in their practice habits.
Speaker Change: Due to strong demand, we have two more presentations scheduled for fiscal Q4.
Speaker Change: In the spirit of continuous improvement, we refresh the product page on our website to make it more user friendly.
Speaker Change: We had over 1.3 million visits to our website this fiscal year, which shows the impact our market development initiatives are having on driving interest in SmartFest. Additionally, we upgraded our SmartFest luggage to make it more ergonomic and spacious to better accommodate the device, pose, and vest.
Speaker Change: Additionally, we are supporting our prescribing clinics and moving them from the dark ages of order submission to us via facts to the new age of submitting orders via our smart order e-prescribed solution.
Speaker Change: This is an efficiency enhancement for our clinics and provides electric med with complete prescription documentation enabling us to ship product to our patients sooner so they can breathe easier. In Q3, 35% of our orders were submitted through our smart order e-prescribed solution.
Speaker Change: Given our strong operational performance this fiscal year, we have a healthy cash position on our balance sheet, and as many of you know, we are always looking for ways to better utilize our cash and deliver value to our shareholders. To that end, on March 6, 2025, our board approved a share repurchase of up to $5 million worth of Electromed stock.
Speaker Change: In Q3, approximately $1.4 million worth of stock was repurchased through this latest authorization, bringing fiscal year-to-date repurchasing up to $6.4 million.
Speaker Change: Before I turn the call over to Brad, I'd like to comment on the current tariff situation which has become an area of concern for many companies.
Speaker Change: Electromed is a US-based company with all of our manufacturing operations located in the US and 99% of our net revenues are generated in the US.
Speaker Change: Given the concentration of our business operations in the US, we feel we are well positioned to maintain our strong track record of on-time delivery to our customers and maintain our mid-70s gross margins.
Speaker Change: However, this is a fluid situation which we are monitoring with our primarily domestic suppliers who may have exposure within their upstream supply chains. With that, I will turn the call over to Brad to discuss our financials. Brad?
Brad Nagel: Thanks, Jim. Unless otherwise noted, all amounts I'm about to review are for the three months ended March 31st, 2025, or Q3 FY 2025, and compared to the three months ended March 31st, 2024, or Q3 FY 2024.
Net revenues grew 13.1% to $15.7 million from $13.9 million.
Brad Nagel: Revenue in our direct home care business increased year over year by 14.8% to $14.1 million from $12.3 million.
Brad Nagel: The growth in revenue was due to incremental referrals and approvals driven by an increase in direct sales representatives and efficiencies within our reimbursement department, as well as higher net revenues per approval.
Brad Nagel: The annualized home care revenue for weighted average direct sales representative in the quarter was $1,028,000, slightly higher than Electromed's annual target range of $900,000 for $1,000,000.
Brad Nagel: Revenue in our non-home care businesses remained consistent year-over-year at $1.6 million.
Brad Nagel: Homecare Distributor Revenue of $696,000 through $32.8% and was offset by a 7.5% decline in hospital revenue which decreased to $724,000 and a 41.5% decline in other revenue which decreased to $162,000.
Brad Nagel: As a reminder, our non-home care revenues can be affected by timing, quarter to quarter, but year to date, our non-home care revenue has grown 24.5%.
Brad Nagel: Growth's profit increased to $12.2 million or 78.0% of net revenues from $10.4 million or 74.8% of net revenues.
Brad Nagel: The increase in gross profit dollars was primarily a result of increased overall revenue and the increase in gross profit percentage was a result of higher net revenue per device.
Brad Nagel: Spelling General Edd Administrative or S-GNA expenses were $9.8 million, representing an increase of $1.4 million or 17.2%.
Brad Nagel: The increase in the current year period was primarily due to increased salaries and incentive compensation related to the higher average number of sales, sales support, marketing, and reimbursement personnel to process higher patient referrals.
Brad Nagel: Operating income was $2.1 million or 13.6% of net revenues compared to $1.8 million or 13.3% of net revenues.
Brad Nagel: The increase in operating income was primarily due to an increase in revenue and gross profit.
Brad Nagel: We're putting all these Q3 results together. We're excited to have executed a great quarter with pre-tax income of $2.3 million net income of $1.9 million and quarterly EPS for our shareholders of 21 cents per deluded share.
Brad Nagel: As of March 31st, 2025, Electromed had $15.2 million in cash, $23.4 million in accounts receivable, and no debt, achieving a working capital of $35.7 million, and total shareholders equity of $43.9 million.
Brad Nagel: The cash balance reflects a decrease of $0.8 million for the nine months ended March 31st, 2025, compared to an increase in cash of $4.3 million in the same period in the prior year.
Brad Nagel: The decrease in cash in fiscal 2025 was driven by shared repurchases of approximately $6.3 million of Electromed common stock.
Brad Nagel: and $2.3 million of taxes paid from that share settlement of vested stock offset by $7.5 million of positive operating cash flow.
Brad Nagel: With that, we'd like to move to the Q&A portion of the call. Operator, please open the call to questions.
We will now begin the question and answer session.
Brad Nagel: To ask a question, you may press star then one on your telephone keypad.
Brad Nagel: If you are using a speaker phone, please pick up your handset before pressing the keys.
To withdraw your question, please press star then two.
Brad Nagel: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question today is from Brooks O'Neill with Lake Street Capital Markets. Please go ahead.
Brooks O'Neill: Thank you very much. Good afternoon, guys. Another terrific quarter. Congratulations on that.
I guess I'll start by asking
Speaker Change: Jim mentioned, you know, your thoughtful approach to adding sales reps, and I appreciate that.
Speaker Change: But maybe you could comment on what the environment is and what your appetite is for continuing to build your organization through adding additional salespeople.
Brooks O'Neill: Brooks, thanks for the question and thanks for being on the call.
Brooks O'Neill: We're making sure that we don't add sales reps too quickly, which can be very disengaging for our sales reps. We're taking a very deliberate approach. Even as we enter Q4 and prepare for the next fiscal year, we're already in the process.
of hiring for next year.
Brooks O'Neill: We want to be thoughtful about it. We want to make sure that our existing reps are prepared if their territory is going to get cut.
Brooks O'Neill: and so that, you know, we don't add too many reps too quickly. And actually, we've...
Brooks O'Neill: This past, well, this quarter and a little bit in the tail end of the last quarter, we've hired some really talented folks which are joining our roster so I'm excited about that. And we're going to continue to add reps over time.
Brooks O'Neill: The other thing that we're going to do going into next year is we're going to add another sales representative for our hospital business and today we have just a few people that are doing that and we feel like there's growth opportunity there so we're going to make an investment in that area as well.
Speaker Change: Thanks. And how do you feel about the $900,000,000 per rep kind of target range? Is that still suitable in your mind?
Brad Nagel: Yeah, Brooks, actually we've exceeded that two out of three quarters so far this year and we don't want to lose ground there I think part of what Jim is talking about with us.
Brad Nagel: Fossil Editions to Sales Reps is we'd like to be at that million plus and you'll probably see us revise that as we come into our new fiscal year, but finding that right balance between growing our sales rep force and being able to maintain that strong revenue per rep of about a million, we're slightly over that on average this year.
Thank you for your time and take care.
Speaker Change: Cool. And then my last question is, how do you feel about the reimbursement environment? Obviously, a lot of volatility and...
Brad Nagel: in the government a lot of volatility in the states, a lot of volatility everywhere, so I'm just curious if you have any thoughts or outlook on what we can expect from the reimbursement
Speaker Change: Now, that's a great question. I mean, it's almost akin to the discussions that are being had with tariffs, but quite candidly, we've been insulated from that right now. And in fact this year, Brooks, one of the investments that we did make is...
Speaker Change: in certain geographies where, up until now, we haven't had coverage. So, we've actually seen an uplift there and really we don't really see that as a rest of the business right now, but obviously that's an area we want to keep a close eye on.
Great, thank you for taking my questions.
Pleasure.
Speaker Change: The next question is from Anderson Schock with B. Riley. Please go ahead.
Anderson Schock: Hey, thank you for taking the questions and congrats on the strong first quarter or sorry, third quarter and all the progress.
Anderson Schock: I guess, can you just provide an update on the implementation progress of your new CRM system and when you expect to complete that? And I mean, I guess there's been any learning curves observed there that may have reduced productivity.
Anderson Schock: No, that's actually, it's actually something which our sales team is eagerly awaiting. This is one of the key initiatives that they wanted us to invest in, which we have.
Anderson Schock: Anderson, quite candidly, we're in really good position to launch that at the beginning of next fiscal year, so just a couple months from now.
Anderson Schock: and we're giving ourselves enough time to really make sure that we have user acceptance training that's done in advance of going live.
Anderson Schock: We also are cognizant of the fact that our fiscal year ends at the end of June , and so we don't want to launch it, you know, two days after the end of the fiscal year, but we are intending to launch that first part of Q1 of fiscal year 26, and we're very excited about it, the team has done a fantastic job, and this will
Anderson Schock: Actually, start to tie together several of our other systems which have somewhat been disparate so we're very excited about the benefits it's going to give us.
Speaker Change: Okay, got it. Thank you. And then you're tripled down on bronchi ectasis campaign. I think you engaged in 10,000 clinicians, or I guess the last quarter. I guess how many did you engage this quarter and are you seeing any measurable impacts from this initiative in terms of prescription growth and market awareness?
Speaker Change: Well, yeah, I mean, I think one of our, when you take a look at some of our key initiatives for growth, one of them is market awareness. And, you know, between us, some of our competitors and some people that are entering the market predominantly on the drug space.
Speaker Change: I think collectively we've done a good job of illuminating the fact that there's a very large cohort of patients that can benefit from this technology that have this disease state and, as I mentioned in my...
Speaker Change: This is a disease state that there just hasn't been a lot of awareness. So, today we've had over 27,000 views on our triple-down on bronchi-actasis landing page.
Speaker Change: and it's hard to tie together Anderson exactly how that's correlating to new prescriptions.
Speaker Change: But I think the results can speak for themselves when you take a look at what our revenue growth has been. And we're really excited about the referral growth that we're seeing as a company as well. So in the referrals then, over time do translate into revenue.
Okay, got it. Thank you for taking our questions.
Pleasure.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Jim Cunniff for any closing remarks.
Jim Cunniff: Well, thank you all again for joining us today and for your continued support of Electromed. Our team continues to execute at a high level, and as I've stated before, Electromed is unique in the small cap medical technology space, growing the top line double digits with strong operating leverage and profitability.
Jim Cunniff: We're always happy to speak with investors. Please feel free to contact our investor relations partners at ICR Healthcare if you'd like more information or to speak with the team. Operator, please close the call.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.