Electromed, Inc.

Good day and welcome to the ElectroMed second quarter fiscal year 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key To ask a question, you may press star then 1 on a touch-tone film. To withdraw your question, please press star then 2. Please note that this event is being recorded. I would now like to turn the conference over to Mike Cavanaugh, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining the Electromed Earnings Call. Earlier today, Electromed Incorporated released financial results for the second quarter of fiscal 2026. The press release is currently available on the company's website at www.smartvest.com. Before we get started, I would 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 any 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. Joining me on the call today are Jim Kniff, Electromed's President and Chief Executive Officer, and Brad Nagel, Chief Financial Officer. As on previous calls, Jim will provide operational highlights from the quarter, Brad will then review the financials, and we will close with a question and answer session. With that, I will now turn the call over to Jim Kniff, President and Chief Executive Officer of Electromed.

Good afternoon, everyone, and thank you for joining our call today. I'm thrilled to share our impressive results for the quarter ended December 31st, 2025. Before diving into the numbers, I'm excited to announce that this marks our 13th consecutive quarter of year-over-year revenue and profit growth, an achievement that showcases the strength of our business model and the growing recognition of our best-in-class SmartVest airway clearance solution. Let me now share some of our financial highlights for fiscal Q2. We achieved record revenue of $18.9 million, representing robust 16.3% year-over-year growth compared to the same period last year. Growth in the quarter was powered by consistently strong performance in our core home care business, which surged 18.4% year-over-year, and our distributor channel, which delivered a 12.1% increase year-over-year. These results reflect the effectiveness of our sales strategy and growing demand from our valued home medical equipment partners. The hospital channel experienced a 9.4% year-over-year decline in the quarter due to strategic prioritization of shipments to high demand home patients and the unpredictable timing of capital orders. We believe hospital demand will rebound in the coming quarters. Complementing our top line growth, operating income of $3.6 million in the quarter represented a stout growth rate of 42.4% year over year. Operating income as a percentage of sales reached an impressive 19% as we continue to deliver operating leverage with earnings per share of 32 cents on a fully diluted basis compared to 22 cents per share in the second quarter of fiscal 2025. Our balance sheet continues to be strong with 13.8 million in cash on hand and no debt. As previously reported, our board approved a $10 million stock repurchase authorization in Q1, reflecting our confidence in Electromed's future and our commitment to delivering shareholder value. Now let me highlight our strategic initiatives and market opportunities. As most of you know, the primary strategic opportunity for Electromed lies in addressing the vastly underserved bronchiectasis market. Today, approximately 923,000 patients in the United States are diagnosed with bronchiectasis, yet only 16% are currently benefiting from high-frequency chest wall oscillation therapy. This presents an incredible untapped opportunity to help nearly 800,000 diagnosed patients who could experience life-changing benefits from our SmartVest system. Even more exciting, it is estimated that there may be over 4 million additional individuals with undiagnosed bronchiectasis, highlighting the tremendous need for education and raising awareness of the massive health problem that is bronchiectasis. To seize this opportunity, in calendar 2025, we successfully launched our innovative Triple Down on Bronchiectasis campaign, promoting a powerful three-pronged treatment paradigm. Number one, clear airways first with SmartVest to effectively remove mucus, which is the fuel for future infections. Second, treat the patient's infections with antibiotics. And third, help reduce inflammation. This three-pronged approach helps break the vicious vortex where chronic infection, persistent inflammation, and damaged airways continuously worsen, leading to progressive lung disease and reduced quality of life for patients. We continue to pursue additional opportunities to raise awareness. During Q2, our marketing team participated in three national trade shows, numerous regional pulmonary medical events, and co-promoted three virtual continuing education units hosted by respiratory associates and attended by 655 individuals to showcase our technology and reinforce the critical importance of airway clearance and bronchiectasis management. We also completed an important manuscript based on data from the NTM Bronchiectasis Research Registry, which revealed that 58% of qualifying patients were not prescribed HFCWO therapy despite meeting clinical criteria, even though they were significantly sicker than those who didn't meet criteria. This represents a clear near-term opportunity for early intervention, and our dedicated team is making excellent progress in closing this gap. Moreover, to expand the ability for patients to benefit from our technology, we executed 25 payer contracts in the first half of our fiscal year and added 2.9 million covered lives to the over 270 million covered lives we currently have under contract who could benefit from SmartVest. To help capitalize on our marketing efforts, we continue to strengthen our highly productive sales organization. We now have 58 talented direct sales representatives. Our plan is to expand this number to 61 representatives by the end of this fiscal year. Adding sales reps is a key component of our growth strategy and will enable us to reach more clinicians and patients with our innovative technology. We're also making tremendous progress implementing our Smart Order ePrescribe solution, which is improving how prescribing clinics submit orders to our fulfillment team. As I've mentioned on past calls, this digital solution replaces outdated fax-based processes providing complete prescription documentation that enables us to deliver SmartVest to patients faster and improves a clinic's workflow. In Q2, over one-third of the orders we received came through this platform, a testament to the platform's value. The CRM system we launched in Q1 is already delivering fantastic benefits, including improved field sales productivity, enhanced market insights, and seamless communication with our fulfillment team. All of this results in improved sales productivity and a better patient experience through faster and more efficient order fulfillment. We also successfully completed and implemented our manufacturing optimization plan at the beginning of this fiscal year. Specifically, we redesigned our manufacturing layout to improve production efficiency and provide ample capacity to support our future growth. And speaking of manufacturing, I'm incredibly proud to emphasize that ElectroMed is a U.S.-based company with all of our operations and product assembly located in the U.S. Moreover, 99% of our net revenues are generated domestically. This positions us to maintain our track record of on-time delivery to customers while sustaining our mid-70% or better gross margins. Tariffs continue to be in the news, and we remain vigilant about potential challenges with our primarily domestic suppliers who may have tariff exposure within their upstream supply chains. We're confident that our U.S.-centric operations help shelter us from the impact of tariffs and provide us with a competitive advantage. In conclusion, our Q2 results demonstrate that ElectroMed continues to perform extremely well in our growth strategy. We're rapidly expanding our market reach, enhancing operational capacity, and delivering outstanding financial performance, all while helping patients breathe easier and enjoy an improved quality of life. With that, I'd like to turn the call over to Brad for a review of our financials. Brad, over to you. Thanks, Jim.