Electromed fiscal 2012 net revenues increase to $19.5 million

Electromed, Inc. (NYSE MKT: ELMD), today announced financial results for the 2012 fourth quarter and fiscal year, ended June 30, 2012.

Fourth Quarter Results

Net revenues for the fiscal 2012 fourth quarter were $4.6 million, compared with net revenues of $5.0 million for the same period last year. Net loss for the quarter was $179,000, or ($0.02) per diluted share, compared to net income of approximately $165,000, or $0.02 per diluted share, for the comparable fiscal 2011 period. Although the number of prescriptions for the Company's SmartVest^® Airway Clearance System rose in the fourth quarter, revenue was impacted negatively by reimbursement factors. These factors included lower allowable reimbursement amounts with certain insurance carriers and group purchasing organizations that renewed contracts with Electromed during the quarter.

Gross profit decreased to $3.2 million for the fiscal 2012 fourth quarter, or 70.4 percent of net revenue, compared to gross profit of $3.6 million, or 72.7 percent of net revenue, for the fiscal 2011 fourth quarter. The decrease in gross profit resulted primarily from factors such as diagnoses that are not assured of reimbursement and insurance programs with lower allowable reimbursement amounts (for example, state Medicaid programs), which affected average reimbursement received. Electromed's Medicare referrals rose year over year, but such referrals can take an extended time to recognize and collect. These factors tend to fluctuate on a quarterly basis due to the appeals process.

Operating expenses, which consist of selling, general, and administrative expenses and research and development expenses, were $3.4 million for the fiscal 2012 fourth quarter, an increase from $3.2 million in the prior-year period. This increase was primarily due to severance expense related to the retirement of the Company's former Chairman and Chief Executive Officer.

Full-Year Results

Net revenues for fiscal 2012 totaled $19.5 million, compared to $19.0 million for the previous year. Net income was $187,000, or $0.02 per diluted share, compared to net income of $1.1 million, or $0.13 per diluted share, in fiscal 2011.

Gross profit increased to $14.1 million for the 2012 fiscal year, or 72.4 percent of net revenue, compared to gross profit of $13.8 million, or 72.5 percent of net revenue, for fiscal 2011.

Operating expenses, which consist of selling, general, and administrative expenses and research and development expenses, were $13.5 million for fiscal 2012, an increase of 13.7 percent over operating expenses in the prior-year.

Balance Sheet and Cash Flow Overview

Total cash and cash equivalents were $1.7 million as of June 30, 2012, compared to total cash and cash equivalents of approximately $4.1 million at the same time last year. For the year ended June 30, 2012, cash used in financing activities was approximately $369,000, consisting mostly of long-term debt payments and capital lease obligations. Electromed used approximately $1.2 million in operating activities during fiscal 2012, driven by an increase in the Company's accounts receivable, inventory and other assets. Accounts receivable rose to approximately $10.9 million, an increase of 13.1 percent compared to fiscal 2011. In addition to existing cash and cash equivalents, the Company had $3.1 million unused and available under its line of credit as of June 30, 2012.

Jim Cassidy, Ph.D., Electromed's Interim CEO, said, "We experienced deceleration in revenue growth in fiscal year 2012, primarily due to turnover in our domestic sales force. Although we had significant expenses due to severance costs for our former Chairman and Chief Executive Officer and former Chief Financial Officer, recruitment costs associated with replacing sales representatives, and staffing increases for sales growth that did not materialize, we still ended the year with a modest profit."

"As a Company, we see a clear opportunity to drive performance and deliver better results. Electromed enters fiscal 2013 with a focus on growing long-term shareholder value. We will carefully monitor our expense levels, while still investing in product development, reimbursement, sales, and marketing to build revenues. The Company had 22 Clinical Area Managers and three regional sales managers at fiscal year end. We plan to hire six to eight more sales professionals in key territories in fiscal 2013. An expanded sales team will enable us to reach more physicians and educate them on the benefits of High Frequency Chest Wall Oscillation and the SmartVest^® System. With key management changes and a fresh perspective, our goal for fiscal 2013 is to create a scalable and strong operating platform and continue to grow our customer base. We believe we are adding the necessary resources, training, and skills to return to higher profitability," concluded Cassidy.