Electromed, Inc. Q2 FY2026 earnings call

• Thirteen consecutive quarter of year-over-year revenue and profit growth. • Record revenue of $18.9 million, 16.3% year-over-year growth. • Home Care business up 18.4%, distributor channel up 12.1%, hospital channel down 9.4%. • Operating income $3 million, 42.4% year-over-year growth. • Strategic initiative to address underserved bronchiectasis market, launched 'Triple Down on Bronchiectasis' campaign, participated in trade shows and medical events, completed manuscript on NTM Bronchiectasis Research Registry, executed 25 payer contracts adding 2.9 million covered lives. • Strengthening sales organization with 58 direct sales representatives, plan to expand to 61 by end of fiscal year. • Implemented Smart Order e-prescribe solution and CRM system. • Completed manufacturing optimization plan, all operations and product assembly in US, 99% net revenues domestic.

For the quarter ended December 31, 2025, Electromed achieved record revenue of $18.9 million, a 16.3% year-over-year growth. Core Home Care business surged 18.4% year-over-year to $17.3 million. Distributor channel had a 12.1% increase to $900,000. Hospital channel declined 9.4% to $700,000. Gross profit increased to $14.8 million or 78.4% of net revenues from $12.6 million or 77.7% of net revenues. Operating income was $3.6 million or 19.2% of net revenues. Net income increased to $2.8 million or $0.32 per diluted share.

• Plan to expand sales rep number to 61 by end of fiscal year. • Continue to see opportunities to deliver on double-digit top-line growth and expanded operating leverage. • Board approved $10 million stock repurchase authorization, continuing to monitor cash position, share pricing for opportunistic repurchases.

• Forward-looking statements subject to risks and uncertainties that could cause actual performance to differ from projections. • Tariffs potential challenges with domestic suppliers' upstream supply chains. • Volatility in payer mix impact on growth. • Lag in productivity when hiring new sales reps.

Q: Hi, Jim and Brad. Great results here. And thanks for taking my question. Maybe first, it looks like the home care Medicare segment was particularly strong this quarter, up significantly sequentially. Anything to call out here?

A: No. I think, you know, we're just really executing on our strategy, Kyle. And thanks for the question, by the way. You know, we've, as you know, improved our sales force over time, and I think we're starting to see the results relative to our revenue in the home care segment. I would also tell you that, you know, as we discussed on previous calls, there's just a lot more awareness about bronchiectasis in the space. And a consequence of that is I think that more of the prescribing physicians are starting to identify patients who could benefit from high-frequency chest wall oscillation technology. And, when you couple, you know, our sales reps calling on those accounts, helping to identify patients who could benefit from our technology, and our clinician base that I think is more attuned that some of their patients might have bronchiectasis. It's kind of a winning combination. And, yeah. So we feel great about our results really for not only Q2 of this year but really for the first half of this year as well.

Q: Yep. Got it. Makes sense. And related to that, in terms of building awareness around bronchiectasis, you know, as you know, Brent Supri sales in the first full quarter were $145 million, which is pretty remarkable. I think one of the best launches in the respiratory space ever. Can you talk a little bit about how this is impacting your business and helping to kind of build awareness around HFCWO?

A: That's a great question. And I think everybody was wondering what was the impact of bransupri when it got launched on this space because it's the first drug that's been approved by the FDA to treat bronchiectasis. But the way we look at it is it's really an adjunct to airway clearance. You know, as you know, Kyle, you know, if you have bronchiectasis, unfortunately, it's chronic. It's irreversible. And part of the challenge that these patients have is that they have mucus that builds up within their airways, and they need to relieve that mucus. And the drug, brensoapri, for those on the call who aren't familiar with it, is really to address part of that vicious vortex, which is inflammation. But again, once you have bronchiectasis, it's chronic and it's irreversible. And you need to have something to clear the airways. And that's really where SmartVest comes into play. So our perspective is that, you know, they've done a terrific job in educating and bringing awareness to this horrible disease. And a consequence, as you mentioned in your question, you know, they had an incredible Q4 on their drug. But so did we. So we feel like, you know, the story we've been telling around this being complementary is really starting to play out in the results.

Q: Got it. And I think you mentioned in your prepared remarks, registry data showing 58% of patients who qualify for HFCWO therapy not receiving it. So those who have had a CT scan or and daily productive cough for six months and tried and failed something else. That haven't been prescribed. In your sense, given the new drug that hit the market, do you think more people are being properly diagnosed? Or do you think, you know, for bronchiectasis or are the people who are being diagnosed being properly fitted for that? Or is it a combination? Just trying to understand, you know, how this could impact kind of usage of HFCWO, you know, across the industry.

A: I think you've nailed it. I think, you know, one of the challenges has been for this patient population is all of the reimbursement criteria that you just outlined, you know, daily productive cough, CT scan, tried and failed, something else. I think part of the challenge has been not only, a, the awareness of bronchiectasis as a disease, and, you know, identifying that with the patients, as you mentioned, Kyle, but also getting on the technology sooner in that patient's clinical journey versus later. And that 58% that I referenced in our notes really speaks to the fact that here's a cohort of, you know, this is a study that was retrospectively done on over 5,000 patients, and, you know, these patients had bronchiectasis, but yet they and they met treatment guidelines. But yet they weren't given the technology. And so, you know, part of our job and part of what we're gonna be promoting, you know, with our clinicians is those results because I think it'll illuminate the opportunity for us to get more patients on our technology sooner rather than later.

Q: Got it. And then maybe just one more. I think you, let's see. If you average 58 home care direct reps, and I think that's across 61 territories. Correct me if I'm wrong. But is 61 still a good number? And, you know, how do you envision this trending?

A: Yeah. Yeah. Yeah. I think we had just an outstanding quarter relative to our productivity, you know, $1.2 million per rep on an annualized basis. As we get to 61 reps, and you're correct, that's what we're promoting for this fiscal year. I think our productivity per rep is gonna probably mediate within that million to million 1 that we've been guiding on. Because, obviously, when you hire a new rep, we've gotta train them. They've gotta come up to speed in the market. They've gotta build relationships. And so, you know, there's always a lag in that productivity when that happens. And the math will just pour out that I, you know, we feel very comfortable staying within that million to million one for our sales rep productivity, which is a vast improvement. Kyle, you've been covering us for quite some time. From where we were, you know, even several years ago.

Q: Good afternoon, gentlemen. Thanks for taking the questions. First off, for me, just following up on the rep productivity. I mean, obviously, $1.2 million was quite a performance. But as you do go to, you know, 61 reps, I mean, that's, you know, 5% growth of the rep headcount, is there a reason why we should expect, you know, more than 5% decline from the $1.2 million level to, you get down into that million to million 1, or is it, you know, just an area that you're more comfortable at the moment?

A: Yeah. Thanks for the question, Ben. And, yes, there are a number of factors that play into that productivity rep. And one of Kyle's questions kinda hit on it. We see things like our payer mix that can impact the amount of revenue that we get per referral, that can drive that number up a little bit more. So in a quarter like Q2 where we saw higher growth in Medicare, which is our sort of top payer value, we'll see a bit higher rep productivity. Obviously, on the efficiency side, we've talked a lot about the fact that we haven't implemented the CRM, and we do wanna continue to lean into those gains that we've gotten from the system and continue to see the efficiency out of the rep. But some of those pricing dynamics can factor in too, which is why we continue to guide to the million to million one per rep.

Q: Okay. Got it. And then, you know, just kinda on the mix, I mean, you've seen fantastic growth really the first half of the fiscal year amongst government payers. Is there anything relative to commercial payers? I mean, it looks like, you know, just eyeballing it, you know, twice or even three times the rate. Is there anything special that's kind of occurred with commercial payers or government payers that is worth highlighting?

A: Not really. So, obviously, when we're out selling, we are not looking for a payer mix as we're selling. We're out there trying to drive referrals. And we've seen over time there's volatility there. Sometimes the Medicare is growing a bit faster. Sometimes those commercial payers are growing faster, but there aren't significant trends that we would point to, looking forward. To continue to see sort of outsized growth from one versus the other, as we look out at the coming quarters.

Q: That makes sense. I mean, obviously, going back a couple of few quarters, it was the other way where commercial is growing faster than the government pay. And then lastly for me, just curious on how often the share buyback, sizing, and rapidity of repurchase gets kind of revisited by the board.

A: Yeah. So if you look back at what we did last year, we authorized two separate tranches of $5 million over the course of the year. But really, we saw the full $10 million get repurchased fairly evenly over the course of the year, a little bit of volatility quarter to quarter. And the same is true this year. We authorized the full $10 million in Q1 and are always continuing to monitor both our cash position, the pricing of the shares, and looking at an opportunistic way to make sure that we're getting the most value for our cash and for our shareholders.

Q: So with the five and five last year, should we expect ten and ten this year?

A: Yeah. So we did authorize $10 million at the beginning of this year.

Q: But that's open at coming after the June. Right?

A: We can't promise that. Again, we're always looking at our options for uses of cash, but excited to be in our second year where we've authorized another $10 million this year.