Q4 2026 Electromed Inc Earnings Call

August 25, 2026

Speaker #1: Greetings, and welcome to the Electromed Fiscal Q4 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Operator: Greetings, and welcome to the Electromed Fiscal Q4 2026 earnings call. At this time, all participants are in a listen-only mode. The 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mike Cavanaugh, investor relations. Thank you, Mike. You may begin.

Operator: Greetings, and welcome to the Electromed Fiscal Q4 2026 earnings call. At this time, all participants are in a listen-only mode. The 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mike Cavanaugh, Investor Relations. Thank you, Mike. You may begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #1: I would now like to turn the conference over to Mike Cavanaugh, Investor Relations. Thank you, Mike. You may begin.

Speaker #3: Good afternoon, and thank you for joining the Electromed earnings call. Earlier today, Electromed, Inc. released financial results for the fourth quarter of fiscal 2026.

Mike Cavanaugh: Good afternoon, and thank you for joining the Electromed earnings call. Earlier today, Electromed, Inc. released financial results for the fourth 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 because of new information, future events, or otherwise.

Speaker #3: 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.

Speaker #3: 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.

Speaker #3: 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 because of new information, future events, or otherwise.

Speaker #3: Please refer to the company's SEC filings for further guidance on this matter. Joining me on the call today are Jim Cunniff, Electromed's President and Chief Executive Officer, and Brad Nagel, Chief Financial Officer.

Mike Cavanaugh: Please refer to the company's SEC filings for further guidance on this matter. Joining me on the call today are Jim Cunniff, 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 Cunniff, President and Chief Executive Officer of Electromed.

Speaker #3: 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.

Speaker #3: With that, I will now turn the call over to Jim Cunniff, President and Chief Executive Officer of Electromed.

Speaker #4: Thank you, Mike, and thank you all for joining us today. I'm pleased to report on another record quarter for Electromed. Q4 marks our 15th consecutive quarter of year-over-year revenue and profit growth—a track record that reflects the durability of our direct-to-patient model and the growing recognition of SmartVest within the bronchiectasis community.

Jim Cunniff: Thank you, Mike, and thank you all for joining us today. I am pleased to report on another record quarter for Electromed. Q4 marks our 15th consecutive quarter of year-over-year revenue and profit growth, a track record that reflects the durability of our direct-to-patient model and the growing recognition of SmartVest within the bronchiectasis community. Net revenue for the fourth quarter was a record $19.4 million, up 12% versus the fourth quarter of last year. We again delivered operating leverage in the quarter. Operating income was $3.8 million in Q4, representing 26% year-over-year growth. Earnings per share was also a quarterly record at $0.39 per share on a fully diluted basis. Growth in the quarter was led by our core home care channel, which grew 15%, and our distributor channel, which grew 2%, both reflecting consistent demand for our SmartVest. Hospital revenue declined 29% in the quarter.

Speaker #4: Net revenue for the fourth quarter was a record $19.4 million, up 12% versus the fourth quarter of last year. We again delivered operating leverage in the quarter.

Speaker #4: Operating income was $3.8 million in Q4, representing 26% year-over-year growth. Earnings per share was also a quarterly record at $0.39 per share on a fully diluted basis.

Speaker #4: Growth in the quarter was led by our core home care channel, which grew 15%, and our distributor channel, which grew 2%. Both reflect consistent demand for our SmartVest.

Speaker #4: Hospital revenue declined 29% in the quarter. As we've discussed on prior calls, hospital orders have a longer sales cycle and are inherently less predictable than our other channels.

Jim Cunniff: As we have discussed on prior calls, hospital orders have a longer sales cycle and are inherently less predictable than our other channels. We are bullish on our hospital as a gateway to the home and will continue to invest in this area of our business. We ended the quarter with 64 direct sales representatives, an increase of six reps versus the third quarter. This increase reflects hiring ahead of our planned territory expansions in fiscal 2027, and we are pleased with the caliber of talent we have been able to bring onto the team. We continue to expand our sales force deliberately, and I continue to be impressed with the revenue growth the team has delivered. As many of you know, the largest strategic opportunity for Electromed is within the underserved bronchiectasis market.

Speaker #4: We are bullish on our hospital as a gateway to the home and will continue to invest in this area of our business. We ended the quarter with 64 direct sales representatives, an increase of 6 reps versus the third quarter.

Speaker #4: This increase reflects hiring ahead of our planned territory expansions and fiscal 2027, and we're pleased with the caliber of talent we've been able to bring onto the team.

Speaker #4: We continue to expand our Salesforce deliberately, and I continue to be impressed with the revenue growth the team has delivered. As many of you know, the largest strategic opportunity for Electromed is within the underserved Bronchiectasis market.

Speaker #4: Today, approximately 1 million patients in the United States are diagnosed with bronchiectasis, yet only about 16% are currently benefiting from high-frequency chest wall oscillation therapy.

Jim Cunniff: Today, approximately one million patients in the United States are diagnosed with bronchiectasis, yet only about 16% are currently benefiting from high-frequency chest wall oscillation therapy. That leaves approximately 800,000 patients who have been diagnosed with bronchiectasis that could benefit from SmartVest but have not been prescribed the therapy. We also estimate that more than four million additional individuals may have undiagnosed bronchiectasis, which underscores the market opportunity and necessity for further patient and provider education. To address this, we initiated our Triple Down on Bronchiectasis campaign last year to raise awareness of our therapy to highlight the integral part airway clearance plays in the treatment of bronchiectasis. The campaign is built around our three-part treatment approach. Number one, clear airways first with SmartVest to remove the mucus that fuels future infections. Second, treat the infection with antibiotics, and third, reduce inflammation.

Speaker #4: That leaves approximately 800,000 patients who have been diagnosed with bronchiectasis that could benefit from SmartVest, but have not been prescribed the therapy. We also estimate that more than 4 million additional individuals may have undiagnosed bronchiectasis, which underscores the market opportunity and the necessity for further patient and provider education.

Speaker #4: To address this, we initiated our 'Triple Down on Bronchiectasis' campaign last year to raise awareness of our therapy and to highlight the integral part airway clearance plays in the treatment of bronchiectasis.

Speaker #4: The campaign is built around our three-part treatment approach. Number one, clear airways first with SmartVest to remove the mucus that fuels future infections. Second, treat the infection with antibiotics.

Speaker #4: And third, reduce inflammation. Together, these three steps are designed to break the cycle of chronic infection, persistent inflammation, and airway damage that drives progressive lung disease and declining quality of life for these patients.

Jim Cunniff: Together, these three steps are designed to break the cycle of chronic infection, persistent inflammation, and airway damage that drives progressive lung disease and declining quality of life for these patients. This year, we have expanded this campaign with a new initiative we are calling Treat smart from the start, which is designed to help clinicians identify patients whose current airway clearance therapy isn't working and determine whether it's time to reassess treatment. Beyond these campaigns, our clinical team remained active, raising awareness among providers this quarter. We presented at two regional respiratory conferences, reaching a combined audience of more than 200 clinicians. Additionally, we conducted three peer-to-peer webinars this quarter, each with at least 100 clinicians in attendance, and attended several national conferences.

Speaker #4: This year, we've expanded this campaign with a new initiative we're calling Treat Smart from the Start, which is designed to help clinicians identify patients whose current airway clearance therapy isn't working and determine whether it's time to reassess treatment.

Speaker #4: Beyond these campaigns, our clinical team remained active in raising awareness among providers this quarter. We presented at two regional respiratory conferences, reaching a combined audience of more than 200 clinicians.

Speaker #4: Additionally, we conducted three peer-to-peer webinars this quarter, each with at least 100 clinicians in attendance, and attended several national conferences. On the research side, we completed a manuscript, which was accepted for publication in the September issue of the COPD Foundation Journal.

Jim Cunniff: On the research side, we completed a manuscript which was accepted for publication in the September issue of "The Chronic Obstructive Pulmonary Diseases: Journal of the COPD Foundation." Using data from the Bronchiectasis and NTM Research Registry, the study found that 58% of qualifying patients were not prescribed HFCWO therapy despite meeting all the clinical criteria needed for insurance coverage. That's a meaningful gap we are addressing by engaging physicians who diagnose high volumes of bronchiectasis patients but are not yet prescribing HFCWO therapy. Separately, the Bronchiectasis and NTM Association launched a new educational website for physicians and patients, including a quick guide on airway clearance. We are proud to be a sponsor of their airway clearance resource library, helping close a void in patient and provider education. I've talked previously about our SmartOrder ePrescribe solution, which is changing how prescribing clinics submit orders more efficiently to our fulfillment team.

Speaker #4: Using data from the NTM Bronchiectasis Research Registry, the study found that 58% of qualifying patients were not prescribed HFCW therapy despite meeting all the clinical criteria needed for insurance coverage.

Speaker #4: That's a meaningful gap we are addressing by engaging physicians who diagnose high volumes of bronchiectasis patients but are not yet prescribing HFCW therapy. Separately, the BE NTM Association launched a new educational website for physicians and patients, including a quick guide on airway clearance. We're proud to be a sponsor of their airway clearance resource library, helping close a void in patient and provider education.

Speaker #4: I've talked previously about our Smart Order e-prescribe solution, which is changing how prescribing clinics submit orders more efficiently to our fulfillment team. Of note, the Centers for Medicare and Medicaid Services finalized its rule on administrative simplification, adopting new standards for healthcare claims attachment transactions and electronic signatures.

Jim Cunniff: I've talked previously about our SmartOrder ePrescribe solution, which is changing how prescribing clinics submit orders more efficiently to our fulfillment team.

Jim Cunniff: Of note, the Centers for Medicare & Medicaid Services finalized its rule on Administrative Simplification, adopting new standards for healthcare claims, attachment transactions, and electronic signatures. In practice, this means covered entities will need to modernize how they process orders and phase out faxes by May of 2028. Our ePrescribe solution already meets CMS's requirements for electronic signatures and order processing, which positions us well as the industry moves away from faxes. In the Q4, more than 45% of the orders we received came through SmartOrder, and those orders shipped on average five days faster than orders submitted by fax. Expanding payer coverage remains one of our core strategies because it's what ultimately gives patients in need access to SmartVest. We ended the year with 87% of covered lives in the United States under contract.

Speaker #4: In practice, this means covered entities will need to modernize how they process orders and phase out faxes by May 2028. Our e-prescribe solution already meets CMS's requirements for electronic signatures and order processing, which positions us well as the industry moves away from faxes.

Speaker #4: In the fourth quarter, more than 45% of the orders we received came through Smart Order, and those orders shipped on average five days faster than orders submitted by fax.

Speaker #4: Expanding payer coverage remains one of our core strategies because it’s what ultimately gives patients in need access to SmartVest. We ended the year with 87% of covered lives in the United States under contract.

Speaker #4: This is a tremendous accomplishment by our market access team, which ended the year by executing 40 new payer contracts and expanding our network by more than 6 million covered lives.

Jim Cunniff: This is a tremendous accomplishment by our market access team, which ended the year by having executed 40 new payer contracts and expanded our network by more than 6 million covered lives. I'm also proud that Electromed, Inc.'s products are manufactured here in the United States. Given the supply chain disruptions we've seen across the industry, we believe our US-based operations are a competitive advantage. 99% of our net revenue is generated domestically, and that concentration gives us confidence in our ability to maintain our strong track record of on-time delivery and our mid-70% or better gross margins. I also want to recognize the Electromed team, which continues to operate at a high level. Recently, the "Minneapolis/St.

Speaker #4: I'm also proud that Electromed's products are manufactured here in the United States. Given the supply chain disruptions we've seen across the industry, we believe our U.S.-based operations are a competitive advantage.

Speaker #4: Ninety-nine percent of our net revenue is generated domestically, and that concentration gives us confidence in our ability to maintain our strong track record of on-time delivery and our mid-70% or better gross margins.

Speaker #4: I also want to recognize the Electromed team, which continues to operate at a high level. Recently, the Minneapolis-St. Paul Business Journal named Electromed the eighth-fastest-growing public company in Minnesota, and we were named a Top Workplace in Minnesota this year by the Star Tribune.

Jim Cunniff: Minneapolis/St. Paul Business Journal named Electromed the eighth fastest-growing public company in Minnesota, and we were named a top workplace in Minnesota this year by the Star Tribune. In fiscal 2026, 45% of our new hires came through employee referrals. Our employees are engaged and want to bring others like them onto the team. We believe engaged employees lead to engaged customers, and that virtuous cycle is a big part of how we built this business. Before I turn the call over to Brad, I would like to take a moment to address an important leadership transition that we also announced today. After considerable thought and discussion with our board, I have decided to retire as Chief Executive Officer of Electromed with expected timing in April 2027.

Speaker #4: In fiscal 2026, 45% of our new hires came through employee referrals. Our employees are engaged and want to bring others like them onto the team.

Speaker #4: We believe engaged employees lead to engaged customers, and that virtuous cycle is a big part of how we've built this business. Before I turn the call over to Brad, I'd like to take a moment to address an important leadership transition that we also announced today.

Speaker #4: After considerable thought and discussion with our board, I have decided to retire as Chief Executive Officer of Electromed, with expected timing in April 2027.

Speaker #4: My decision is accompanied by a thoughtful succession planning process led by our Board. I believe the timing will be right for the company and for me personally.

Jim Cunniff: My decision is accompanied by a thoughtful succession planning process led by our board, and I believe the timing will be right for the company and for me personally. I am extremely proud of what our team has accomplished over the past three years. We have built a strong business, established a clear strategy for growth, and most importantly, developed a talented leadership team that gives me tremendous confidence in the company's future. Between now and my retirement, my focus will remain exactly where it has been, on executing our strategy, delivering against our commitments to shareholders, and ensuring a smooth transition of leadership. I have never been more confident in the strength of the organization or in its opportunities. I am grateful to our employees, customers, shareholders, and board for the opportunity to lead this company, and I look forward to continuing to work with the team over the coming months.

Speaker #4: I'm extremely proud of what our team has accomplished over the past three years. We've built a strong business, established a clear strategy for growth, and, most importantly, developed a talented leadership team that gives me tremendous confidence in the company's future.

Speaker #4: Between now and my retirement, my focus will remain exactly where it's been: on executing our strategy, delivering against our commitments to shareholders, and ensuring a smooth transition of leadership.

Speaker #4: I have never been more confident in the strength of the organization or in its opportunities. I'm grateful to our employees, customers, shareholders, and board for the opportunity to lead this company.

Jim Cunniff: I am grateful to our employees, customers, shareholders, and board for the opportunity to lead this company, and I look forward to continuing to work with the team over the coming months. With that, Brad, over to you.

Speaker #4: And I look forward to continuing to work with the team over the coming months. With that, Brad, over to you.

Jim Cunniff: With that, Brad, over to you.

Speaker #1: Thank you, Jim. I've enjoyed our partnership and your leadership of the Electromed team over the past few years, and I look forward to continuing to work with you until your retirement.

Brad Nagel: Thank you, Jim. I have enjoyed our partnership and your leadership of the Electromed team over the past few years, and I look forward to continuing to work with you until your retirement. Turning to our financial results, all amounts I am about to review are for the 12 months ended 30 June 2026, which I will refer to as fiscal 2026, and compared to the 12 months ended 30 June 2025, or fiscal 2025, unless otherwise noted. Net revenues for Q4 grew 11.6% to $19.4 million, bringing net revenues for our full fiscal year 2026 to a record $73.8 million, or 15.3% growth from $64 million last year. Annual revenues in our direct home care market increased year-over-year by 16.3% to $66.6 million from $57.3 million in the prior year.

Speaker #1: Turning to our financial results, all amounts I’m about to review are for the 12 months ended June 30, 2026, which I will refer to as fiscal 2026, and are compared to the 12 months ended June 30, 2025, or fiscal 2025, unless otherwise noted.

Speaker #1: Net revenues for Q4 grew 11.6% to $19.4 million, bringing net revenues for our full fiscal year 2026 to a record $73.8 million, or 15.3% growth from $64 million last year.

Speaker #1: Annual revenues in our direct home care market increased year over year by 16.3% to $66.6 million from $57.3 million in the prior year.

Speaker #1: The increase in revenue was due to an increase in direct sales representatives, increased sales representative productivity, and higher net revenues per approval. The annualized home care revenue per weighted average direct sales representative in fiscal year 2026 was $1,145,000, exceeding Electromed's target range of $1,000,000 to $1,100,000 per rep. With our strong performance in fiscal 2026 and continued efficiency expected in fiscal 2027, we're increasing our target range for fiscal year 2027 home care revenue per rep to a range of $1,050,000 to $1,150,000 as we balance the record sales rep productivity we saw in fiscal 2026 with the sales team expansion plans for fiscal 2027.

Brad Nagel: The increase in revenue was due to an increase in direct sales representatives, increased sales representative productivity, and higher net revenues per approval. The annualized home care revenue per weighted average direct sales representative in fiscal year 2026 was $1,145,000, exceeding Electromed's target range of $1 million to $1,100,000 per rep. With our strong performance in fiscal 2026 and continued efficiency expected in fiscal 2027, we are increasing our target range for fiscal year 2027 home care revenue per rep to a range of $1,050,000 to $1,150,000 as we balance the record sales rep productivity we saw in fiscal 2026 with the sales team expansion plans for fiscal 2027. Revenue in our non-home care business grew 6.7% to $7.2 million in fiscal 2026. The increase was primarily due to increased distributor and hospital revenue, which grew 12.7% and 9.6% respectively.

Speaker #1: Revenue in our non-home care business grew 6.7% to $7.2 million in fiscal 2026. The increase was primarily due to increased distributor and hospital revenue, which grew 12.7% and 9.6%, respectively.

Speaker #1: Gross profit increased to $57.9 million, or 78.5% of net revenues, from $50.0 million, or 78.1% of net revenues, in fiscal 2025. The increase in gross profit and gross margin was primarily due to increased revenue and higher net revenue per device.

Brad Nagel: Gross profit increased to $57.9 million, or 78.5% of net revenues from $50 million, or 78.1% of net revenues in fiscal 2025. The increase in gross profit and gross margin was primarily due to increased revenue and higher net revenue per device. Selling general and administrative, or SG&A expenses, were $42.7 million, representing an increase of $3.4 million or 8.7% from $39.3 million. The increase was primarily due to increased salaries and incentive compensation related to the higher average number of personnel in the sales support, marketing, and reimbursement teams to process more patient referrals. Operating income this year was $13.9 million, or 18.8% of net revenues, compared to $9.7 million, or 15.1% of net revenues last year.

Speaker #1: Selling, general and administrative, or SG&A, expenses were $42.7 million, representing an increase of $3.4 million, or 8.7%, from $39.3 million. The increase was primarily due to increased salaries and incentive compensation related to the higher average number of personnel in the sales, sales support, marketing, and reimbursement teams to process more patient referrals.

Speaker #1: Operating income this year was $13.9 million, or 18.8% of net revenues, compared to $9.7 million, or 15.1% of net revenues, last year.

Speaker #1: The growth of 43.7% in operating income reflects the leveraged benefit of mid-teens growth in net revenues and gross profit, balanced with the disciplined investment into the business's operating expenses, which grew about 9%.

Brad Nagel: The growth of 43.7% in operating income reflects the leveraged benefit of mid-teen growth in net revenues and gross profit, balanced with a disciplined investment into the business's operating expenses, which grew about 9%. When putting these full year results together, we are excited to have delivered a record year with pre-tax income of $14.4 million, net income of $11.3 million, and full year EPS of $1.30 per diluted share. As of 30 June 2026, Electromed had $20.5 million in cash, $29.8 million in accounts receivable, and no debt, achieving a working capital of $45.1 million and total shareholders' equity of $54 million. The cash balance reflects an increase of $5.2 million for the year ended 30 June 2026, compared to a decrease in cash of $0.8 million in the same period in the prior year.

Speaker #1: When putting these full year results together, we're excited to have delivered a record year with pre-tax income of 14.4 million dollars, net income of 11.3 million dollars, and full year EPS of a dollar 30 cents per diluted share.

Speaker #1: As of June 30, 2026, Electromed had $20.5 million in cash, $29.8 million in accounts receivable, and no debt, achieving a working capital of $45.1 million and total shareholders' equity of $54 million.

Speaker #1: The cash balance reflects an increase of $5.2 million for the year ended June 30, 2026, compared to a decrease in cash of $0.8 million in the same period in the prior year.

Speaker #1: The increase in cash for the 12 months ended June 30, 2026, was driven primarily by positive operating cash flow of $9.7 million, partially offset by repurchases of Electromed common stock totaling $3.9 million.

Brad Nagel: The increase in cash for the 12 months ended 30 June 2026, was driven primarily by positive operating cash flow of $9.7 million, partially offset by repurchases of Electromed common stock totaling $3.9 million. I will close by saying that Jim and I are very encouraged by the commitment and energy of the Electromed team as we continue bringing our innovative SmartVest technology to patient populations that remain significantly underserved. It is rewarding to see how that dedication to the patients and physicians we serve has translated into strong financial performance throughout fiscal 2026, creating meaningful value for Electromed and our shareholders. As we look forward into fiscal 2027, we continue to see opportunity to leverage the investments we have made to drive both our mission and our financial commitments forward, delivering double-digit top-line growth, expanded operating leverage, and strong operating cash flow in the new year.

Speaker #1: I'll close by saying that Jim and I are very encouraged by the commitment and energy of the Electromed team as we continue bringing our innovative SmartVest technology to patient populations that remain significantly underserved.

Speaker #1: It's rewarding to see how that dedication to the patients and physicians we serve has translated into strong financial performance throughout fiscal 2026, creating meaningful value for Electromed and our shareholders.

Speaker #1: As we look forward into fiscal 2027, we continue to see opportunities to leverage the investments we've made to drive both our mission and our financial commitments forward, delivering double-digit top-line growth, expanded operating leverage, and strong operating cash flow in the new year.

Speaker #1: Operator, please open the call to questions.

Brad Nagel: Operator, please open the call to questions.

Speaker #2: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may re-queue, and time permitting, those questions will be addressed. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Kyle Bowser with Titan Partners. Please proceed.

Speaker #2: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible, we ask that you limit yourselves to one question and one follow-up.

Speaker #2: If you have additional questions, you may re-queue and, time permitting, those questions will be addressed. One moment, please, while we pull for questions. Thank you.

Speaker #2: Our first question comes from the line of Kyle Bowser with Titan Partners. Please proceed.

Speaker #3: Great, thanks for taking my question. But first, Jim, congrats on your retirement next year. We wish you all the best.

Kyle Bowser: Great. Thanks for taking my questions. First, Jim, congrats on your retirement next year. Wish you all the best.

Kyle Bauser: Great. Thanks for taking my questions. First, Jim, congrats on your retirement next year. Wish you all the best.

Speaker #1: Hey, thank you, Kyle. I appreciate that.

Jim Cunniff: Hey, thank you, Kyle. I appreciate that.

Speaker #3: Yep, glad to see there's some time to make the transition, so thanks for the update there. And maybe for my first question—obviously, another really strong quarter of operating leverage.

David Brown: Yeah. Glad to see there's some time to make the transition. Thanks for the update there. For my first question, obviously another really strong quarter of operating leverage. You talked a little bit about it, but maybe you could just discuss a bit about your expectations for continued leverage in fiscal 2027 and any expectations to add more reps in territories as well.

Kyle Bauser: Yeah. Glad to see there's some time to make the transition. Thanks for the update there. For my first question, obviously another really strong quarter of operating leverage. You talked a little bit about it, but maybe you could just discuss a bit about your expectations for continued leverage in fiscal 2027 and any expectations to add more reps in territories as well.

Speaker #3: And you talked a little bit about it, but maybe you could just discuss a bit about your expectations for continued leverage in fiscal '27, and any expectations to kind of add more reps and territories as well.

Speaker #1: Well, you know, I think Brad said it well. We're expecting this year to be, not necessarily a repeat of last fiscal year, but we're certainly projecting that we will be able to deliver double-digit top-line growth and operating leverage.

Jim Cunniff: Well, I think Brad said it well. We are expecting this year to be not necessarily a repeat of last fiscal year, but we are certainly projecting that we will be able to deliver double-digit top-line growth and operating leverage. That has been the mantra that we have been beating the drum on for the last three years, and we have been able to deliver on that. Yes, we are confident we will be able to do that. We have added sales reps, which we are excited about. As you heard in the prepared remarks, we really ended the year with 64 direct sales reps. A lot of those actually came in in June of the last fiscal year. But the good news is they were to help fill the void for territory expansions that we have for this fiscal.

Speaker #1: And that's been the mantra that we've been beating the drum on for the last three years, and we've been able to deliver on that.

Speaker #1: So yes, we're confident we'll be able to do that. You know, we have added sales reps, which we're excited about. So, as you heard in the prepared remarks, you know, we really ended the year with 64 direct sales reps.

Speaker #1: A lot of those actually came in in June of the last fiscal year. But the good news is, they were to help fill the void for territory expansions that we have for this fiscal year.

Speaker #1: So we're kind of hitting the ground running. That includes actually two hospital account liaisons. These are folks that we're actually doing a pilot with in a couple of key markets to see if we can capture some of those patients that are in the hospital, that then get transitioned to the home and get those referrals.

Jim Cunniff: We are kind of hitting the ground running. That includes actually two hospital account liaisons. These are folks that we are actually doing a pilot with in a couple of key markets to see if we can capture some of those patients that are in the hospital that then get transitioned to the home and get those referrals. In addition to that, we also have three additional territories that we are looking to fill. Touch wood, our expectation is to have 67 territories filled this year, including two hospital account liaisons. Brad had also mentioned in his comments that we have raised our guidance on the revenue per rep for this year, albeit it is below where we ended up last year, and that is mainly because, as you know, Kyle, some of these reps are going to take some time to ramp up and become productive for us.

Speaker #1: In addition to that, we also have three additional territories that we're looking to fill. So, you know, our touchwood, our expectation is to have 67 territories filled this year, including two hospital account liaisons.

Speaker #1: You know, Brad had also mentioned in his comments that we have raised our guidance on the revenue per rep for this year, albeit it's below where we ended up last year.

Speaker #1: And that's mainly because, as you know, Kyle, some of these reps are going to take some time to ramp up and become productive for us.

Speaker #1: But yeah, we're really bullish on the business and, you know, the new talent that we're bringing onto the team.

Jim Cunniff: We are really bullish on the business and the new talent that we are bringing onto the team.

Speaker #3: Got it. Appreciate that. And maybe for my follow-up—obviously, the cash balance continues to grow amidst, you know, a very strong share price. Any thoughts on your capital allocation strategy and how you're thinking about deploying cash going forward?

Kyle Bowser: Got it. Appreciate that. Maybe for my follow-up, obviously the cash balance continues to grow amid very strong share price. Any thoughts on your capital allocation strategy and how you are thinking about deploying cash going forward?

Kyle Bauser: Got it. Appreciate that. Maybe for my follow-up, obviously the cash balance continues to grow amid very strong share price. Any thoughts on your capital allocation strategy and how you are thinking about deploying cash going forward?

Speaker #1: Thanks for the question, Kyle. Yeah, the strategy remains the same. We continue to think in terms of priorities with our cash. First, just de-risking the business.

Brad Nagel: Thanks for the question, Kyle. The strategy remains the same. We continue to think in terms of priorities with our cash. First, just de-risking the business. Second, investing back into the business. As Jim mentioned, we are adding quite a few sales reps as we come into 2027 and want to support them, not just the headcount, but also with the right marketing support, the right investment into R&D, continuing to reinvest into the business to the extent that we can and still show leveraged growth across the P&L. Beyond that, as we have in the past, we will continue to look for ways to add shareholder value. Our key method of operation on that has been through share repurchases, which we have done over the past couple of years. So opportunistically, when we have the option to, we will continue to find ways to create that shareholder value.

Speaker #1: Second, investing back into the business. And as Jim mentioned, we are adding quite a few sales reps as we come into 2027, and want to support them—not just the headcount, but also with the right marketing support, the right investment into R&D, and continuing to reinvest in the business to the extent that we can.

Speaker #1: And still show leveraged growth across the P&L. Beyond that, as we have in the past, we'll continue to look for ways to add shareholder value.

Speaker #1: Our key method of operation on that has been through share repurchases, which we've done over the past couple of years. So, opportunistically, when we have the option to, we'll continue to find ways to create that shareholder value.

Speaker #3: Okay, got it. Well, thanks for taking my question, guys.

Kyle Bowser: Okay. Got it. Well, thanks for taking my question, guys.

Kyle Bauser: Okay. Got it. Well, thanks for taking my question, guys.

Speaker #1: Yeah, thank you, Kyle.

Jim Cunniff: Thank you, Kyle.

Operator: Thank you. Our next question comes from the line of Arulham Kanthix with Freedom Broker. Please proceed.

Operator: Thank you. Our next question comes from the line of [Arulham Kanthix] with Freedom Broker. Please proceed.

Speaker #2: Thank you. Our next question comes from the line of Arlem Canottix with Freedom Broker. Please proceed.

Speaker #4: Hi, and hi, Tim. Hi, Brad. Before I get to my questions, congratulations on the announcement. Three years and 15 straight quarters is a good place to hand off from.

Arulham Kanthix: Hi, and hi, Jim. Hi, Brad. Before I get to my questions, congratulations on the announcement. Three years and 15 straight quarters is a good place to hand off from. I want to say thanks for taking my question.

[Analyst] (Freedom Broker): Hi, and hi, Jim. Hi, Brad. Before I get to my questions, congratulations on the announcement. Three years and 15 straight quarters is a good place to hand off from. I want to say thanks for taking my question.

Speaker #4: So I want to say thanks for taking my questions.

Speaker #1: Oh, thank you. And thank you for the kind words.

Jim Cunniff: Well, thank you, and thank you for the kind words.

Speaker #4: So, first question is about R&D. Spend was up meaningfully year over year in percentage terms, so it's still a small name for the P&L. Can you give us a sense of what the dollars are actually going toward?

Arulham Kanthix: So first question is about R&D. Spend was up meaningfully year-over-year in percentage terms, so it is still a small name for the P&L. Can you give us a sense of what that dollar is actually going forward or going toward? Is it iteration on the ClearWay generator? Is it the connectivity and data side of things like SmartVest Connect, or is it work on something adjacent to the current platform?

[Analyst] (Freedom Broker): So first question is about R&D. Spend was up meaningfully year-over-year in percentage terms, so it is still a small name for the P&L. Can you give us a sense of what that dollar is actually going forward or going toward? Is it iteration on the ClearWay generator? Is it the connectivity and data side of things like SmartVest Connect, or is it work on something adjacent to the current platform?

Speaker #4: Is it iteration on the Clearway generator? Is it the connectivity and data side of things, like SmartNotes, or is it work on something adjacent to the current platform?

Speaker #1: No, that's a great question. And to your point, it's actually on a really small base. Our R&D investment—you know, we are a single-product company.

Jim Cunniff: That's a great question. To your point, it's actually on a really small base, our R&D investment. We are a single product company, so when you take a look at our R&D spend, it's really bifurcated for sustaining engineering. So we're always looking at upgrading the technology that we have today. That's one element to it, so we're investing in that. The other side of it is innovation, and I think I've mentioned this on previous calls in the past. One of the areas that we believe needs a little bit more innovation on our side, there's really two areas, one of which is connectivity, and we're working on that right now, as you had mentioned. The second piece of it is really just expanding our vest line.

Speaker #1: And so, when you take a look at our R&D spend, it's really bifurcated for sustaining engineering. So, we're always looking at upgrading the technology that we have today.

Speaker #1: That's one element to it, and so we're investing in that. The other side of it is innovation, and I think I've mentioned this on previous calls in the past.

Speaker #1: One of the areas that we believe needs a little bit more innovation on our side—there are really two areas. One of which is connectivity, and we're working on that right now.

Speaker #1: As you had mentioned, and then the second piece of it is really just expanding our vest line. And so you know, to do that, predominantly on the smaller sizes of our vests, that's really where a big focal point of our R&D team is, is to enhance that and expand it.

Jim Cunniff: So, to do that predominantly on the smaller sizes of our vests, that's really where a big focal point of our R&D team is to enhance that and expand it.

Speaker #4: Great, thank you. And I also have a related question. So, acquisition shows up in the deck as one of the three named pillars of the growth strategy.

Arulham Kanthix: Great. Thanks. I also have a related question. So acquisition shows up in the deck as one of the three named pillars of the growth strategy. I want to know the detail behind it. When you talk about inorganic opportunities, what problem are you trying to solve? Is it adding a second product to the reps are already carrying, or is it acquiring a capability like monitoring data, or is it about diversification?

[Analyst] (Freedom Broker): Great. Thanks. I also have a related question. So acquisition shows up in the deck as one of the three named pillars of the growth strategy. I want to know the detail behind it. When you talk about inorganic opportunities, what problem are you trying to solve? Is it adding a second product to the reps are already carrying, or is it acquiring a capability like monitoring data, or is it about diversification?

Speaker #4: I want to know the detail behind it. When you talk about inorganic opportunities, what problem are you trying to solve? Is it adding a second product to the reps?

Speaker #4: Is it already carrying or is it acquiring a capability like monitoring data? Or is it about diversification?

Speaker #1: Yeah, it could be all of the above. No, I think those are great questions. So, you know, we're always looking at—we are a single-product company.

Jim Cunniff: Yeah, it could be all of the above. No, I think those are great questions. So, we're always looking at, we are a single product company. It would be great if we could add another leg to the stool for our sales reps, add something to their bag that complements the call point that they focus on and enhances the customer relationship. We are constantly on the lookout if there's a one plus one equals three, we're interested in it. We just haven't found it yet. To your question, we're not pigeonholing ourselves into one inorganic opportunity. If it makes sense for our sales rep and it complements what they're doing, that's something that we're very much open to. Conversely, we've got a terrific reimbursement team and contracting engine, and in the home care space, that's a very valuable asset.

Speaker #1: It would be great if we could add another leg to the stool for our sales reps—add something to their bag that complements the call point they focus on and enhances the customer relationship.

Speaker #1: And, you know, we are constantly on the lookout if there’s a one-plus-one-equals-three. You know, we’re interested in it; we just haven’t found it yet.

Speaker #1: And, you know, to your question, we're not pigeonholing ourselves into one inorganic opportunity. If it makes sense for our sales reps and it complements what they're doing, that's something that we're very much open to.

Speaker #1: Conversely, you know, we've got a terrific reimbursement team and contracting engine. And in the home care space, you know, that's a very valuable asset.

Speaker #1: And so that's another area where we could see leveraging that capability through an acquisition, and bringing somebody on board who may have a technology that fits this space, but who doesn't have that same type of capability.

Jim Cunniff: That is another area we could see leveraging that capability through an acquisition and bringing somebody on board who may have a technology that fits this space, but they do not have that same type of capability.

Speaker #4: Great, great. I'm really excited for the results, and good luck. Thanks for taking my questions.

Arulham Kanthix: Great. I am really excited for the results, and good luck, and thanks for taking my questions.

[Analyst] (Freedom Broker): Great. I am really excited for the results, and good luck, and thanks for taking my questions.

Speaker #1: Thank you so much.

Jim Cunniff: Thank you so much.

Speaker #2: Thank you. Our next question comes from the line of Ben Hanor with Lake Street Capital Markets. Please proceed.

Operator: Thank you. Our next question comes from the line of Ben Haynor with Lake Street Capital Markets. Please proceed.

Speaker #5: Good evening, gentlemen. Thanks for taking the questions. First off for me, just thinking about payer mix as we get into fiscal 2027—it looks like you had commercial go down by a couple or few hundred basis points over the course of fiscal '26.

Ben Haynor: Good afternoon, gentlemen. Thanks for taking the questions. First off for me, just thinking about payer mix as we get into fiscal 2027. It looks like you had commercial go down a few hundred basis points over the course of fiscal 2026. Some of that was probably comps, Medicare and Medicare Advantage up a little bit. How should we think about that tracking? Does it just kind of bounce around? Is there any underlying trends that make things go towards one or the other?

Speaker #5: You know, some of that was—you know, Medicare and Medicare Advantage up a little bit. How should we think about that tracking? Is it just kind of bouncing around?

Speaker #5: Are there any underlying trends that make things go towards one or the other?

Speaker #1: Yeah, no, first off, thanks for the question, Ben, and thanks for being on the call. You know, as you know, when we're going into a clinic and talking to a physician, we're not identifying who the payer type is that the patient has.

Jim Cunniff: Yeah, no. First off, thanks for the question, Ben, and thanks for being on the call. As you know, when we are going into a clinic and talking to a physician, we are not identifying who the payer type is that the patient has. What we are really looking for is, are there patients that could benefit from using our technology? From that, it is kind of a black box for us. We really do not find out what type of insurance that patient has until we have gotten a prescription. Typically and historically, the split has been pretty even between Medicare and commercial pay. I think the good news, and one of the things we want to highlight, is the fact that over the course of the last fiscal year, we have added 6 million additional covered lives.

Speaker #1: What we're really looking for is, you know, are there patients that could benefit from using our technology? And so, from that, it's kind of a black box for us.

Speaker #1: We really don't find out, you know, what type of insurance that patient has until we've gotten a prescription. And so, typically and historically, you know, the split's been pretty even between Medicare and commercial pay.

Speaker #1: I think the good news, and one of the things we want to highlight, is the fact that, you know, over the course of the last fiscal year, we've added six million additional covered lives.

Speaker #1: So, you know, in the past, we might have gotten a prescription. We may have been out of network, and we can't fulfill that because the patient doesn't want to, you know, be burdened with a large out-of-pocket expense.

Jim Cunniff: In the past, we might have gotten a prescription, we may have been out of network, and we cannot fulfill that because the patient does not want to be burdened with a large out-of-pocket expense. By continuing to add payer coverage, it just helps our ability to serve our patients and our ability to no longer be out of network.

Speaker #1: And so, by continuing to add payer coverage, it just helps our ability to serve our patients and our ability to no longer be out of network.

Speaker #5: Okay, so there's not necessarily a clear trend, except perhaps in demographics.

Ben Haynor: Okay, so there is not necessarily a clear trend except for perhaps demographics.

Speaker #1: No, I mean, I think the reality is—what's the stat? I think there's about 10,000 people per day who turn 65, and so the trend is more towards Medicare.

Jim Cunniff: No, I think the reality is, what is the stat? I think there is about 10,000 people per day who turn 65, and so the trend is more towards Medicare. But again, when we look historically over the last 3 years, the Medicare to commercial pay split has been pretty much 50/50.

Speaker #1: But again, you know, when we look historically over the last three years, the Medicare-to-commercial pay split has been pretty much 50/50.

Speaker #5: Sure. Yeah, that makes sense. And then, secondly for me, on the CHEST guidelines—I believe those got published not all that long ago.

Ben Haynor: Sure. Yeah, that makes sense. Secondly for me on the CHEST guidelines, I believe those got published not all that long ago, listing HFCWO across the board, I believe. What does that do for your reps when they are detailing docs? Can you give us a sense of how that helps folks out?

Speaker #5: You know, listing HFCWO kind of across the board, I believe—what does that do for your reps when they're detailing docs?

Speaker #5: Can you give us a sense of how that helps folks out?

Speaker #1: Yeah, I think the good news is there's never been care guidelines in the United States for how to treat bronchiectasis patients. And the guidelines, truthfully, you know, they're going to be published later on this quarter.

Jim Cunniff: Yeah, I think the good news is there has never been care guidelines in the United States on how to treat bronchiectasis patients. The guidelines, truthfully, they are going to be published later on this quarter, and so we are excited about that. It has been on the horizon for a long time, Ben, as you know. It is not as definitive as we would like. There is not really an algorithm for treatment of bronchiectasis patients. Really what the guidelines point to is what are some of the different things that a provider can use to take care of bronchiectasis patients. Included in that is airway clearance, no surprise. As you even heard on my remarks, these patients, they have a chronic irreversible condition. They have fluid that is building up in their lungs, and they need something to remove that mucus, which is the fuel for future infections.

Speaker #1: And so we're excited about that. It's been on the horizon for a long time, Ben, as you know. And it's not as definitive as we would like.

Speaker #1: There's not really an algorithm for treatment of bronchiectasis patients. Really, what the guidelines point to is what are some of the different things that a provider can use to take care of bronchiectasis patients?

Speaker #1: And included in that is airway clearance, no surprise. And, you know, as you even heard in my remarks, these patients, they have a chronic, irreversible condition.

Speaker #1: They have fluid that's building up in their lungs, and they need something to remove that mucus, which is the fuel for future infections. And so we're kind of the first point of attack.

Jim Cunniff: We are kind of the first point of attack. The other thing I would just point you to is, and this is exciting, is that in conjunction with the CHEST guidelines, the Bronchiectasis and NTM Association have actually just introduced new BE Care pathway. I think that is going to be a little bit better for healthcare providers to understand what tools they have in their toolbox to treat bronchiectasis patients. So it is good news for the industry in general, and it is good news for us because airway clearance is included in both of those guidelines.

Speaker #1: The other thing I would just point you to is, and this is exciting, is that in conjunction with the CHEST guidelines, the Bronchiectasis NTM Foundation have actually just introduced a new BE care pathway.

Speaker #1: And I think that's going to be a little bit better for healthcare providers to understand what tools they have in their toolbox to treat bronchiectasis patients.

Speaker #1: So, it's good news for the industry in general, and it's good news for us because airway clearance is included in both of those guidelines.

Speaker #5: Okay, so that makes sense. And thanks for taking the questions. Congrats on the retirement—going out on top. It was very nice.

Ben Haynor: Okay. That makes sense. Thanks for taking the questions. Congrats on the retirement, going out on top. It is very nice.

Speaker #1: Yeah, appreciate it, Ben. Thank you so much.

Jim Cunniff: Yeah, appreciate it, Ben. Thank you so much.

Ben Haynor: Thanks.

Speaker #2: Thank you. There are no further questions at this time. I'd like to turn the floor back over to Jim Cunniff for closing comments.

Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Jim Cunniff for closing comments.

Speaker #1: Yeah, thank you, operator. And before we close the call, I just want to leave you with some key takeaways from this past quarter. First, this was our 15th consecutive quarter of year-over-year revenue and profit growth, with record revenue and record diluted earnings per share.

Jim Cunniff: Yeah. Thank you, operator. Before we close the call, I just want to leave you with some key takeaways from this past quarter. First, this was our 15th consecutive quarter of year-over-year revenue and profit growth with record revenue and record diluted earnings per share. It is our goal to deliver continued growth and profitability. In line with this goal, we are investing ahead of demand, such as adding to our sales force. The bronchiectasis opportunity remains substantial, and our Treat Smart from the Start campaign, together with our clinical, educational, and payer initiatives, are all designed to help us reach more patients responsibly. Our financial foundation is strong. We have a debt-free balance sheet and strong cash generation, which enable us to keep investing in profitable growth. As always, I want to thank you for joining us today.

Speaker #1: It's our goal to deliver continued growth and profitability. In line with this goal, we're investing ahead of demand, such as adding to our sales force.

Speaker #1: The bronchiectasis opportunity remains substantial, and our 'Treat Smart from the Start' campaign, together with our clinical, educational, and payer initiatives, are all designed to help us reach more patients responsibly.

Speaker #1: Our financial foundation is strong. We have a debt-free balance sheet and strong cash generation, which enable us to keep investing in profitable growth. As always, I want to thank you for joining us today.

Speaker #1: If you have questions or would like to schedule a call with the Electromed team after today's report, please reach out to our investor relations partners at ICR Healthcare.

Jim Cunniff: If you have questions or would like to schedule a call with the Electromed team after today's report, please reach our investor relations partners at ICR Healthcare. Operator, please close the call.

Speaker #1: Operator, please close the call.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Q4 2026 Electromed Inc Earnings Call

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