Electromed, Inc.

Welcome to the ElectroMed Third Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants will be in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to your host, Mike Cavanaugh, Investor Relations. Mr. Cavanaugh, you may begin.

Good afternoon, and thank you for joining the ElectroMed Earnings Call. Earlier today, ElectraMed Incorporated released financial results for the third fiscal quarter of 2023. The quarter ended March 31, 2023. The release is currently available on the company's website at www.smartbest.com. Joining me on the call today is Kathleen Scarvan, President and Chief Executive Officer, and Brad Nagel, Chief Financial Officer. Before we get started, I'd 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. 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 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. Please refer to the company's SEC filings for further guidance on this matter. With that, 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 we report fiscal third quarter results, I'm very pleased to report a strong quarter as we achieved record quarterly revenues of $12.1 million, a 19% increase year-over-year from the same period last year. In the key home care segment, the results were even more impressive, generating $11 million in home care revenue, which represents a 21% increase year-over-year from the same period in fiscal 2022. These results were driven by strong referral flow and strong productivity from our expanded sales force. We also benefited from the introduction of our next generation Clearway device earlier this year to positive reviews from patients. In short, this quarter's results were due to the team's excellent execution, the blocking and tackling every successful company needs to do well. Additionally, we experienced a short period of longer component lead times in the quarter But the team managed that well, demonstrated by our revenue growth. Needless to say, I'm proud of this team's execution during the quarter, delivering excellent top line growth. I'd like to touch on the strong reception our Clearway device has received thus far, one of the factors contributing to our strong referral and top line growth. We have received excellent feedback from clinicians and patients who appreciate Clearway's state-of-the-art touchscreen user interface, which is very intuitive and easy to navigate. And Clearway includes remote monitoring of patient data. We've also received positive feedback regarding the size of the device, which is the lightest HFCWO generator on the market. Our primary design goal was to enhance the patient therapy experience And with Clearway, ElectroMed has made significant advances in HFCWO technology that we believe gives us a tangible advantage over the competition. Operating income during the fiscal third quarter was $1.2 million, which compares to $863,000 in the same period a year ago. This was achieved despite an inflationary macro environment, which was manifested in higher component and shipping costs. and demonstrates the strong operating leverage in our business. Net income for the quarter was $1.1 million, an increase of 71% year-over-year. Brad will review our expenses and margins in more detail, but at a high level, our strong revenue growth was able to offset our higher investments in headcount expansion and other growth initiatives. Overall, this was a strong quarter financially. Turning to an update on our strategic growth initiatives, it is extremely gratifying to see progress across all our strategic growth initiatives, key among them being the continued expansion of the sales force, which includes 48 direct reps in the field as of the end of quarter three. I have been extremely impressed and pleased by this group's performance, and it takes significant effort to onboard new personnel and then support them to ramp to full productivity. Despite new sales rep additions, the productivity of that team continues to be strong. This past quarter, average annualized revenues per rep was $908,000, well within our expected range of $850,000 to $950,000. As you know, we achieved a key strategic milestone when we introduced the new Clearway HFCWO device. A recent patient testimonial highlights the early feedback we've received. Blown away, compact, everything that I could want to make my life easier while still improving the quality of my life. Looks great, updated, classy, sleek and clean, excited all the way around. We expect Clearway to help accelerate our growth and clearly we have strong momentum. One of our other key strategic goals is to generate further data supporting the use of HFCWO therapy and the SmartVest as a treatment for bronchiectasis. As we mentioned on our last quarterly call, we are excited to share data from our quality of life outcome study with COPD patients using SmartVest at the American Thoracic Society 2023 International Conference later this month. Our bronchiectasis quality of life outcome study is complete, and we are evaluating submissions for those results. Our prospective outcome study with bronchiectasis patients is enrolled at 40%, with an additional site beginning enrollment in fiscal quarter three as we target 100 patients. The goal behind all of this work is to gather data supporting the benefits of SmartVest HFCWO therapy and targeted to physicians and key opinion leaders who treat bronchiectasis patients every day and should welcome more information regarding a therapy that can make a huge difference for these patients. Our final growth initiative is focused on our strong push in direct-to-consumer efforts, as well as marketing targeted at pulmonologists who treat bronchiectasis. We are on target with our initiative and pleased with our return on this investment. I'd like to now take a few minutes to address the expected expiration of the CMS waiver, which was implemented during and tied to the public health emergency for COVID-19. With the public health emergency being declared over, we expect the waiver for respiratory devices to expire after May 11th. As a reminder, the waiver allowed indications and documentation typically required for HFCWO to be bypassed, allowing for an easier and faster approval for patients on Medicare. Upon termination, we will revert to pre-COVID CMS requirements for HFCWO reimbursement. However, we are proactively working with physicians to mute the effect of the waiver expiration, and it should be noted that physicians operated under the rules prior to the waiver. It is also worth noting that commercial plans, by and large, never waived the documentation requirements, meaning that the waiver benefited only a subset of our referrals and approvals. All that being said, we do expect our average Medicare patient referral to approval timeframe will lengthen for the remaining calendar 2023, with the potential to reduce our revenue growth in quarter four. But I remain confident with the plans we have in place that the team will manage this transition effectively. To close my prepared remarks, I'd like to provide an update on the search for my successor as chief executive officer. We have engaged with a very capable and highly recommended executive search firm and are in the process of identifying the best candidates to step in and continue the progress we have enjoyed. With that, I'd like to hand the call over to Brad for a review of our financials.