Electromed, Inc. Reports Higher First Quarter Revenues and Operating Income

Electromed, Inc. (NYSE MKT:ELMD) today announced financial results for its first quarter ended September 30, 2015.

Net revenues for the first quarter of fiscal 2016 were $5.0 million, a 4.8% increase compared to the first quarter of fiscal 2015. Growth in total net revenues was attributable to strong results in the home care market where revenue increased by approximately 12.3%, or $0.5 million, compared to the same period of fiscal 2015. Home care sales increased due to a higher number of approvals and higher average selling price from third party payers, such as insurance companies, Medicare and Medicaid, for the Company’s Smartvest^® products.

The Company reported net income of $341,000, or $0.04 cents per basic and diluted share, for the first quarter of fiscal 2016, compared to $378,000, or $0.05 per basic and diluted share, for the same period of fiscal 2015. The decrease in net income was primarily the result of recording current tax expense in fiscal 2016, mostly offset by increased revenue and reductions in cost of goods sold expenses year over year. The first quarter of fiscal 2015 benefitted from the Company’s use of its tax loss carryforwards, combined with a valuation allowance on net deferred tax assets, which eliminated income tax expense. In the first quarter of fiscal 2016, the Company reported income tax expense of $224,000. Net income before income tax expense rose $187,000 or 49.6%, compared to the first quarter of the prior fiscal year.

Gross margins in the first quarter of fiscal 2016 were 77.2%, up from 69.1% in the first quarter of fiscal 2015. The increase in gross profit percentage resulted primarily from the increase in domestic home care revenue The increase in gross profit dollars resulted from the increase in domestic home care revenue at higher average selling price and greater referral to approval percentage, as compared with the prior year, along with lower manufacturing costs due to the decrease in our manufacturing costs of the Smartvest SQL. Operating expenses, which include selling, general and administrative as well as research and development expenses, in the first quarter of fiscal 2016, were $3.3 million or 65.5% of revenue compared with $2.9 million or 60.7% of revenue in the same period of the prior year. The increase was due to a combination of additional employees in our sales and sales support departments, consulting fees associated with information technology improvements and outsourcing certain IT services.

Commenting on the first quarter results, Kathleen Skarvan, President and Chief Executive Officer of the Company said, “The Company continues to make steady gains and I’m particularly pleased with margin performance and pretax income growth. While showing positive trends, revenue growth as compared to the prior quarter was affected by the timing of some referrals and approvals from third party payers. We estimate continued revenue growth in fiscal 2016 as the addition of sales resources provides a larger and more diverse base of sales opportunities. Quarterly revenues may fluctuate though based on the referral mix of payers. I am very pleased with the improvement in gross margin we reported as it reflects higher average selling price from third party payers in our home care and the progress we have made in lowering the manufacturing cost of our newest generation device, Smartvest SQL. Sales and marketing expenses grew as planned. Overall, it was a solid quarter that continues momentum we have worked hard to create and we will look to build on that momentum as fiscal 2016 progresses.”

About Electromed, Inc.
Electromed, Inc. develops, manufactures, markets, and sells innovative products that provide airway clearance therapy, including the Smartvest^® Airway Clearance System and related products, to patients with compromised pulmonary function with a commitment to excellence and compassionate service. Further information about the Company can be found at www.electromed.com.

Cautionary Statements
Certain statements in this release constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect current views with respect to future events and financial performance and include any statement that does not directly relate to a current or historical fact. Forward-looking statements can generally be identified by the words “anticipate,” “believe,” “estimate,” “expect,” “will” and similar words. Forward-looking statements in this release include estimated revenue trends, changes in sales opportunities and planned expenses. Forward-looking statements cannot be guaranteed and actual results may vary materially due to the uncertainties and risks, known and unknown, associated with such statements. Examples of risks and uncertainties for the Company include, but are not limited to, the impact of emerging and existing competitors, the effect of new legislation on our industry and business, the effectiveness of our sales and marketing and cost control initiatives, changes to reimbursement programs, as well as other factors described from time to time in our reports to the Securities and Exchange Commission (including our most recent Annual Report on Form 10-K, as amended from time to time, and subsequent reports on Form 10-Q and Form 8-K). Investors should not consider any list of such factors to be an exhaustive statement of all of the risks, uncertainties or potentially inaccurate assumptions investors should take into account when making investment decisions. Shareholders and other readers should not place undue reliance on “forward-looking statements,” as such statements speak only as of the date of this release.

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