Electromed, Inc.

Greetings and welcome to the ElectroMed Fiscal Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to our host, Mike Cavanaugh, Investor Relations. Thank you. You may begin.

Good afternoon, and thank you for joining us today. Earlier today, Electromed Incorporated released financial results for the quarter ended June 30, 2022. The release is currently available on the company's website at www.smartbest.com. Kathleen Scarvan, President and Chief Executive Officer of and Michelle Wertz, Interim Chief Financial Officer, will host this afternoon's call. As a reminder, 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. Such statements are subject to risks 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 undue reliance on these 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. Please refer to the company's SEC filings for further guidance on this matter. I will now turn the call over to Kathleen Scarvan, President and CEO of Electromed.

Thank you, Mike, and thank you to everyone joining the call today. As always, we appreciate your continued support of Electromed and look forward to updating you on our progress on the four key pillars in our strategic growth plan. Continued Salesforce growth, direct-to-consumer and physician marketing, infrastructure to support our anticipated sales growth, and clinical studies to further promulgate the body of evidence supporting SmartVest airway clearance and its ability to provide positive outcomes for bronchiectasis patients. I am very pleased with our results for the fiscal year. For both the quarter and the fiscal year 2022, we recorded record revenues of $11.3 million and $41.7 million, respectively. Our year-over-year growth rates for the quarter and fiscal year were 19% for the quarter and 16.5% for the fiscal year. Michelle will talk about the financial results in more detail, but I wanted to share these results, which clearly demonstrate that our strategic growth investments implemented over the past few months are indeed yielding the results we planned. These strong results were driven by our commercial team excellence, focused on driving sales growth, improving our talent, capitalizing on our product and service differentiation, and by a recovery in patient clinic visits early in spring. Early in the year, we experienced a reduction in clinic access and patient flow due to COVID-19 related issues as the Omicron variant spiked across the United States. However, in March, we experienced a rapid pickup in referrals as Omicron cases declined and clinic access and patient flow improved through the fiscal fourth quarter, allowing growth to accelerate unhindered. Revenue growth in the fourth quarter of fiscal year 2022 was driven largely by our core home care segment, which grew 21% year over year. Our home care segment had a particularly strong quarter due to higher referrals, a result of the expanded sales force, strong per sales productivity, and higher approvals. Referrals and approvals are both quarterly records. Adding some perspective to our performance, I am happy to report that our estimated market share in the crucial home care airway clearance segment has increased to approximately 19% of the total market from 15% three years ago. Our agility, adaptability, and focus on our differentiation has been critical to achieving this market share gain. The expansion of the sales force, one of the key investments in growth, continues under the leadership of Chris Holland, who joined us as Chief Commercial Officer in February. We ended the quarter with 43 direct sales reps at our goal set for fiscal year 2022. Home care revenues per sales rep for the fiscal year 2022 were $953,000, significantly exceeding our target range of $800,000 to $900,000. We are raising our target range in fiscal year 2023 to $850,000 to $950,000. This is the second raise since introducing this key metric in fiscal year 2019. We have also taken steps to ensure adequate capacity in our reimbursement team that converts sales leads into approvals. If you recall from our previous earnings calls, We made the decision to internalize our hiring function and we believe that decision has paid off as we have been able to meet our staging goals with high quality individuals in a very tight labor market. Turning to our operational performance, the ElectroMed team skillfully avoided production interruptions caused by widespread supply chain constraints. We managed to do this by purchasing important electronic components in advance and working in partnership with key suppliers to ensure continuity of supply. However, we did see an impact of rising costs for raw materials, shipping, and wages on our operational expenses during the year negatively impacting our operating margins. As communicated last quarter, we have worked diligently to provide patients a new product with more value-added features. We remain on track for a limited market release in late calendar 2022 pending FDA clearance. The new SmartVest is expected to enhance the patient experience and promises to be smaller and lighter weight, less expensive to manufacture, and with the same differentiation as our current SQL model, allowing patients to take deep breaths more easily during therapy than they would with other airway clearance products. We believe it will prove to be a compelling value proposition for both physicians and an expanding patient population. We continue to focus on generating and investing in clinical evidence proving the efficacy and value to patients of our SmartVest therapy. I have three study updates today. First, we recently published in the American Journal of Respiratory and Critical Care Medicine a retrospective study abstract with positive outcomes among non-cystic fibrosis bronchiectasis patients using high-frequency chest wall oscillations. Second, we've completed enrollment in our quality of life outcome study with both COPD and bronchiectasis patients with data analysis now in process. Finally, our multicenter prospective bronchiectasis outcome study to further demonstrate the clinical benefits of SmartVest continues to experience a slower pace of enrollment than planned. And according to physicians at our study site, This is due to patient concerns with face-to-face follow-on visits, a concern that is impacting other observational studies. To solve this issue, we are near final agreement with an additional site in exploring others. Looking ahead to fiscal 2023, our growth target will remain in the mid to high teens while expecting historical fluctuations in our quarter-to-quarter revenue. We will accelerate revenue growth First, through market share gains, and secondly, by increasing penetration with the providers who currently prescribe SmartVest for their patients. We will do this by following a playbook like the one we used in fiscal 2022. First, the continued expansion of our sales force focused on regions of the US where there is high potential. We plan to add five additional sales territories and the direct sales reps to stack them for a total of 47, and targeting higher home care revenue per rep of $850,000 to $950,000. We will arm the strengthened sales team with a better product in the form of the innovative NextGen SmartVest, and we will complement the Salesforce initiative by increasing revenues via digital marketing to consumers and physicians, raising awareness of SmartVest for bronchiectasis sufferers. Finally, we will continue to promulgate the body of evidence supporting the use of HFCWO therapy as an effective means of treating bronchiectasis, an important effort to increase the rate of physician adoption of SmartVest over time. Given the current macro environment, we are expecting to see continued inflationary pressures, which may impact our operating expenses, although longer term we expect improved margin with increasing revenue and the full launch of our next generation product. In conclusion, we believe Electromed has excellent momentum and our company is in a strong position to steadily increase market share in a largely untapped and often overlooked segment of the medical device market. We expect that Electromed will continue to be profitable and generate reliable cash flow from operations, which serves to further solidify a strong financial position. ElectroMed is an attractive growth company in the med tech space with multiple catalysts, and we look forward to engaging with investors and sharing our story. Before I turn the call over to Michelle, I want to thank her for agreeing to move into the interim CFO role June 1st, and for what has been a seamless transition as we explore our options for a permanent replacement. And with that, I would like to turn the call over to Michelle to review our financial results.