-- Second Consecutive Quarter of Year over Year Growth, Continuing Profitability & Positive Cash Flow while Investing in Key Strategic Initiatives --

Electromed, Inc. (“Electromed” or the “Company”) (NYSE American: ELMD), a leader in innovative airway clearance technologies, today announced its financial results for the three months ended March 31, 2021 (“Q3 FY 2021”).

Q3 FY 2021 Highlights

• Net revenue increased 0.5% to $8.8 million, compared to $8.7 million during the three months ended March 31, 2020 (“Q3 FY 2020”), driven by a 4.2% increase in home care revenue.
• Gross profit percentage increased to 76.3% of net revenue, compared to 75.4% in Q3 FY 2020, primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care.
• Net income equaled $224,000, or $0.03 per diluted share, compared to $653,000, or $0.07 per diluted share, in Q3 FY 2020, and reflects increased strategic investments in both R&D and SG&A.
• Cash as of March 31, 2021 was $12.5 million, benefiting from $834,000 in operating cash flow in Q3 FY 2021.

Kathleen Skarvan, President and Chief Executive Officer of Electromed, commented, “Although this winter’s resurgence of new COVID-19 cases and hospitalizations dampened our home care revenue in January and February, we noted a sharp rebound in March, during which we achieved record monthly referrals and revenue. In March, we benefited from increased patient visits to clinics and greater access for our sales representatives as restrictions were further lifted and vaccines started to become more widely administered throughout the country. In our institutional segment, which had the greatest overall impact from the pandemic, we registered 43.4% sequential revenue growth, another positive indication that hospitals are increasing their non-COVID-19 patient census and our sales representatives are gaining greater hospital access.”

Ms. Skarvan concluded, “While we continue to operate within the constraints of a pandemic, the ongoing nationwide deployment of vaccinations, the extension of the provisional waiver from the Centers for Medicare & Medicaid Services, and our strong operating performance in March gives us optimism that positive operating performance will continue in the fourth quarter. Even during these uncertain times, our solid cash flow generation capacity and strong balance sheet enable us to invest in Electromed’s future. We continue to make strategic investments in research and development, sales, marketing, and infrastructure to position Electromed for profitable long-term growth and to support our goal of enhancing patients’ quality of life one breath at a time with our differentiated SmartVest® Airway Clearance System.”

Q3 FY 2021 Review

Net revenue in Q3 FY 2021 increased 0.5% to $8.8 million, from $8.7 million in Q3 FY 2020. Home care revenue increased 4.2% to $8.2 million in Q3 FY 2021 from $7.8 million in Q3 FY 2020, primarily due to an increase in referrals and approvals. Field sales employees totaled 48, of which 39 were direct sales, at the end of Q3 FY 2021, compared to 44 at the end of Q3 FY 2020, of which 37 were direct sales. We commenced recruiting for four additional direct field sales employees in April. Institutional revenue decreased 27.3% to $443,000 from $609,000 in Q3 FY 2020, primarily due to the continued impact of COVID-19 on hospital purchasing activity. Home care distributor revenue decreased 36.0% to $105,000 from $164,000 in Q3 FY 2020. International revenue decreased 44.5% to $76,000 from $137,000 in Q3 FY 2020.

Gross profit in Q3 FY 2021 totaled $6.7 million, or 76.3% of net revenue, compared to $6.6 million, or 75.4% of net revenue, in Q3 FY 2020. The increase in gross profit percentage was primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care.

Selling, general and administrative (“SG&A”) expenses in Q3 FY 2021 increased 14.4% to $6.1 million from $5.3 million in Q3 FY 2020. The increase in SG&A spending was primarily due to increased payroll and compensation-related expenses associated with higher average number of sales and marketing personnel, greater temporary resources to assist with systems infrastructure investments and increased incentive payments on higher home care revenue. The Company also incurred higher discretionary marketing expenses related to a direct-to-consumer marketing campaign and a comprehensive market research project, as well as higher professional fees. These increased expenses were partially offset by lower travel, meals and entertainment expenses. As a percentage of revenue, SG&A expenses were 68.9%, compared to 60.5% in Q3 FY 2020.

Research and development (“R&D”) expenses in Q3 FY 2021 totaled $407,000, compared to $392,000 in Q3 FY 2020, and include expenses for the development of a next generation platform. As a percentage of revenue, R&D expenses were 4.6% compared to 4.5% in Q3 FY 2020.

Net income before income taxes in Q3 FY 2021 totaled $253,000 in Q3 FY 2021, compared to $947,000 in Q3 FY 2020, and reflects increased strategic investments in both R&D and SG&A.

Net income was $224,000, or $0.03 per diluted share in Q3 FY 2021, compared to $653,000, or $0.07 per diluted share, in Q3 FY 2020. In Q3 FY 2021, income tax expense totaled $29,000, compared to an income tax expense of $294,000 in the same period of the prior year.

Year-to-Date FY 2021 Summary

For the nine months ended March 31, 2021, net revenue grew 2.7% to $26.3 million, from $25.6 million in the same period of our fiscal year ended June 30, 2020 (“FY 2020”). The revenue increase was primarily due to growth in the Company’s home care market, partially offset by lower institutional and international revenue. Gross profit percentage was 77.5%, compared to 76.6% in the prior fiscal year period. The gross margin percentage increase was primarily due to a higher mix of home care revenue and a favorable mix of Medicare within home care. Net income was $2.0 million, or $0.22 per diluted share, compared to $2.9 million, or $0.33 per diluted share, in the first nine months of FY 2020. The net income decrease was primarily due to increased strategic investments in R&D and SG&A.

Financial Condition

The Company’s balance sheet at March 31, 2021 included cash of $12.5 million, accounts receivable of $16.2 million, no debt, working capital of $28.1 million, and shareholders’ equity of $32.9 million.

Conference Call

Management will host a conference call on Tuesday, May 11, 2021 at 4:00 pm CT (5:00 pm ET) to discuss Q3 FY 2021 financial results and other matters.

Interested parties may participate in the call by dialing:

• (877) 407-9753 (Domestic)
• (201) 493-6739 (International)

The conference call also will be accessible via the following link: https://78449.themediaframe.com/dataconf/productusers/elctr/mediaframe/44645/indexl.html

For those who cannot listen to the live broadcast, an online webcast replay will be available in the Investor Relations section of the Company’s web site at: http://investors.smartvest.com/

About Electromed, Inc.

Electromed, Inc. manufactures, makes, and sells products that provide airway clearance therapy, including the SmartVest^® Airway Clearance System, to patients with compromised pulmonary function. The Company is headquartered in New Prague, Minnesota and was founded in 1992. Further information about the Company can be found at www.smartvest.com.

Cautionary Statements

Certain statements in this press release constitute forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can generally be identified by words such as “believe,” “intend,” “may,” “potential,” “should,” “will,” and similar expressions, including the negative of these terms, but they are not the exclusive means of identifying such statements. Forward-looking statements cannot be guaranteed, and actual results may vary materially due to the uncertainties and risks, known or unknown associated with such statements. Examples of risks and uncertainties for the Company include, but are not limited to, the duration, extent and severity of the COVID-19 pandemic, including its effects on our business, operations and employees as well as its impact on our customers and distribution channels and on economies and markets more generally; the competitive nature of our market; changes to Medicare, Medicaid, or private insurance reimbursement policies; changes to state and federal health care laws; changes affecting the medical device industry; our ability to develop new sales channels for our products such as the Home Care distributor channel; our need to maintain regulatory compliance and to gain future regulatory approvals and clearances; new drug or pharmaceutical discoveries; general economic and business conditions; our ability to renew our line of credit or obtain additional credit as necessary; our ability to protect and expand our intellectual property portfolio; the risks associated with expansion into international markets; and the risks associated with our planned sales force expansion, as well as other factors we may describe from time to time in the Company’s reports filed with the Securities and Exchange Commission (including the Company’s most recent Annual Report on Form 10-K, as amended from time to time, and subsequent Quarterly Reports on Form 10-Q and Current Reports on 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 press release. We undertake no obligation to update them in light of new information or future events.

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