Good morning, and welcome to Sidoti & Company's March Virtual Investor Conference. The next company to present is Electromed, Inc. Representing the company is the CEO, Jim Cunniff, and the CFO, Brad Nagel. There'll be 30 minutes for the presentation. We might have some time at the end for Q&A, so if you do have a question, you can type it into that Q&A box at the bottom of your screen. With that, it's all yours, Jim and Brad. Thanks so much, Jim, for the introduction, and welcome, everybody. Good morning. I'm Jim Cunniff, and as Jim had mentioned, with me is Brad Nagel, who's our CFO. What I wanted to do is walk you through Electromed, give you a sense of who we are as a company, what's the market that we play in, the opportunity within the market that we play in, and then also share with you why we think this is a good investment opportunity. We are a airway clearance technology company. I'm gonna get the disclosures out of the way, which you can read at your leisure. Really what I wanna focus on in the next 30 minutes is, you know, who we are as a company. We're a medical device company which is focused on airway management, and so the disease state that we're treating, which I'll go through in a minute, is bronchiectasis. But in essence, what we're focused on with our single product is helping people around the world breathe better, stay healthy, and lead active and fulfilling lives. And so it's really part of our mission. It's what gets us up in the morning to treat these patients that have this chronic, irreversible condition, and it's a really exciting space for us to be in. Couple of fun facts about the company. We're headquartered in New Prague, Minnesota, which is south of the Twin Cities. And what's neat is we've been in the business for the last 32 years, so we're really experts in this market, experts in this technology. Our annual revenue is roughly around $50 million. We've had a bump to our market cap in the last several weeks. We had a really strong Q2, and that's appreciated our stock price, and so we're really excited about that. We manufacture all of our products in Minnesota. So when you take a look at some of the challenges that manufacturers here in the United States are having with some of the supply chain issues in Asia and in the Middle East, we are really not hampered by any of that. All of our products are manufactured here in Minnesota, and quite frankly, over 90% of our raw materials that we use in production, we source from a radius of about 100 miles from our manufacturing facility. So we're in really good shape from a supply chain standpoint. Why Electromed? You know, we're a growing and profitable medical technology company. We are in a market that's growing, and expanding, and I'm gonna share with you in a little bit some more particulars about that. The product which we market is called SmartVest, and the mechanism of action for that product is called High-Frequency Chest Wall Oscillation, also known as HFCWO. I know it's a bit of a mouthful, but what you'll find with that technology is, for the people who are afflicted with this condition, it's a real life changer. I'm gonna share with you in some of the subsequent slides really that what that mechanism of action is and how it works. We've got an attractive direct-to-patient and provider model, which is different than a lot of manufacturers predominantly in the patient-to-home space. And again, I'll talk more about that in a minute. Not only are we a manufacturer, but we have a lot of back office capabilities, where we have direct to payer relationships, and we also deliver our product directly to a patient's home, do the training, and help that patient work through the reimbursement. Then lastly, but certainly not least, as you can see in the graphs on the right, but also in the last bullet point, we're, you know, a growing company that is profitable. Our gross profit margin on our products is in the mid-70s%. We are generating cash, and we have no debt, which is a really nice place to be as a micro-cap company. So let me shift gears and talk a little bit about bronchiectasis. Again, a bit of a mouthful, but this is the disease state most notably that we treat. It's an irreversible chronic condition, and what happens is, you know, a patient will have an infection. They'll have a pulmonary inflammation within their bronchi, and as a consequence of that, it doesn't subside, and so mucus builds up in the bronchial cavity, and the patient has a really hard time breathing. This disease is underdiagnosed, our technology is underprescribed, and we really think that's part of the great tailwind of opportunity that we have. And what's also interesting is, as most of you know that's on the call, is that, you know, kind of the overarching disease state within respiratory is COPD. We reckon that about 54% of COPD patients actually have bronchiectasis as well, so we feel like there's a really large, untapped market that we could unlock. And to that point, this iceberg gives you an idea of how big the market actually is. I know this is a bit of a busy slide, so let me direct you to a couple of things of note. If you look on the right-hand side of the screen, the diagnosis for bronchiectasis is growing roughly 12% annually. That's not to say that all of those patients are going to be put on HFCWO, but the opportunity for our type of technology to be used with that patient population is growing. The undiagnosed market, that's part of the iceberg that's represented by what I mentioned before about those COPD patients. But what I really want to direct you to is who has been diagnosed. So there's 824,000 patients in the United States that have been diagnosed with bronchiectasis. About 127,000 of those patients are on HFCWO today, which is great, and they're getting the benefits from the technology. Of the remaining, say, 700,000 patients, about 230,000 of those patients are actually being seen by a pulmonologist, and that's important because this technology is typically being prescribed by a pulmonologist, and that is really our call point for our sales reps. If you take a look at 230,000 patients times the average sale price of our product at $10,000 a unit, that illustrates about a $2.3 billion untapped revenue opportunity. Part of what we're trying to do is unlock this iceberg and get many of these patients onto the technology sooner in their care continuum than later. Now, how does bronchiectasis treated? It's treated through really a combination of drugs for the underlying infection. But as I'd mentioned before, what happens with these patients is mucus builds up in their airways, and again, they have a hard time breathing, so they need something to help them expel that mucus. Our technology is really a three-part technology. We have a generator that's attached to a hose, which is then attached to a vest. As you can see on this depiction, a patient wears a very lightweight, comfortable vest. What's unique about our product is we provide 360 degrees of therapy around the patient's torso. So that vest gently squeezes and releases the patient's torso, and then that forces the mucus up into the major bronchial tubes, and then that patient can cough that up or swallow it. As I'd mentioned before, the beauty of that is then they can breathe easier, and they can become more active. Since this is an irreversible chronic disease, once the patient is on the technology, they need to wear it for life, so they typically will wear it twice a day. Depending upon the pulmonologist, they'll typically prescribe it for 20-minute intervals, and the patient will use this product 7 days a week. We introduced, at the end of 2022, the newest HFCWO device on the market, and this has really given us some great tailwind. It's gotten us to get in front of some of our potential customers that heretofore we didn't have a chance to see. They wanted to see the new technology, and it opened up the door for us, and we're really excited about this product. It's the smallest, lightest, most intuitive product to use. There's no on/off button. Most of our patients are over 65 years of age, and so we wanted to make this product as intuitive as possible. As you can see, the industrial design of this product is fantastic, and that's important because this product is actually gonna be used in the home, and so we wanted something that looked good, whether it was, you know, seated within a living room or one's bedroom. And again, it's just a very easy product to use. It's also remote monitoring enabled. So if a patient wanted to connect through Bluetooth to their provider to help that provider see if the product is being used, if they're compliant with the therapy, we have that capability. And also, all of our products come delivered with luggage. So if the patient is active and travels, we've got a component that the patient can use for travel as well. On the bottom of the screen, you also see that, you know, we have a well-established reimbursement code, for this technology through CMS and, also through many of our, commercial, payers. So we have about 275 million lives, here in the United States that are covered with this technology. One of the other, benefits that one gets when they use the SmartVest through Electromed is we provide what's called SmartNotes. So, this is a really interesting way for us to stay connected to the therapist at the, pulmonology site, to stay connected to the patient. It's also a way for us to give an assessment of how the patient is doing on our technology. And so, when we go and do the training for the patient at their home, we do an initial assessment that's then sent to the provider so that they can see that the patient understands how to use the product, what their baseline position is. And then we follow up with that patient after 6 days, do the same type of assessment, and then we'll follow up with that same patient after 30 days. And we provide all that information back to the provider, and we feel like this is not only a value add to the patient who's on the technology to make sure that they're comfortable with our technology, it is having an impact, but it's also a great way for the provider to stay in contact with the patient that they're serving. This product has great clinical evidence, and so that's really important. It's not just a, you know, an interesting technology. Does it actually do what it's advertised to do? And so, you know, one of the key benefits of using this product is not only it improves the patient's quality of life, but it also reduces the hospitalizations. And, you know, an exacerbation is when a patient's condition with bronchiectasis past their baseline is not improving, and so many times they get actually hospitalized. And so when a patient is on the technology, they're compliant with the technology, we've proven that that results in 59% fewer hospitalizations, which saves healthcare money, and it also obviously is a great relief to the patient as well. It also results in 75% reduction in ER visits, which is fantastic because, I think everybody on the line could attest, nobody wants to spend time in an ER, and no one wants to spend time being hospitalized. So it's a great benefit to the patient in addition to improving their quality of life. Let me shift gears, talk a little bit about the markets that we serve. Most of our revenue comes from home care, and what that means is we work directly with physicians. They prescribe the technology. We then walk that patient through the payer journey to make sure that they are covered from a reimbursement standpoint. We deliver the product to the patient's home, do training and follow-up, and that's 95% of where our revenue comes from. 4% of our revenue comes from hospitals, and that's really a capital and a trailing disposable business for us. So we sell a piece of capital to the hospital, which is our generator. Then as they get new patients, they'll replace the hose and the vest and/or wrap that the patient is using, and that is the model with the hospital business. It's a much smaller market than home care, and really, the magic there, and it's something that we're looking to address and see if we can untap or tap into, is that it's good to get the hospital business, but quite candidly, what we're interested in is following that patient and their journey to the home and getting the referral for our technology into the home. The nascent part of our business is international. I would say we've been opportunistic there. We go through distributors in those markets that we serve, and we provide those distributors with collateral, training, and product. But it's really their responsibility for registration, as well as marketing our products in the markets that they serve. I mentioned before the direct-to-patient model. I think this is a pretty good illustration of really what that means. Most manufacturers in the home care space, they will sell to a DME, a durable medical equipment distributor, who will then buy that product from the manufacturer. They will then work with the patient to get the product to that patient. They'll help the patient navigate the reimbursement landscape. They'll do the training, and really, the manufacturer is just providing the product and the training to that DME. But obviously, when you go through that model, the manufacturer needs to make a margin, so does the DME. Our model, the majority of our model is a direct-to-patient model, and so, as I mentioned before, you know, when you take a look at our technology, you know, we've got a very robust mid-70s% gross profit margin on our product today, and a lot of that has to do with the fact that we go direct to the patient. Let me give you a quick breakdown of where our revenue is. So I talked about the markets. 95% of it is in home care, 4% in hospitals, 1% international. About 50% of our payer volume comes from Medicare, and most of our commercial payers actually follow what the reimbursement rate is from Medicare. That is a set rate, which, you know, when you talk about pricing elasticity, we don't have a lot in our market, and that goes not only for us, but our three primary competitors as well. We all basically, you know, through the reimbursement code, get paid roughly the same amount for our technology. Where is our referral volume coming from? I've spent a lot of this presentation talking about bronchiectasis, and that's mainly because that's typically the type of patient that we serve with this technology. But as you can see here, there's other disease states that this product is appropriate for, whether it's, you know, cystic fibrosis or neuromuscular disease, or COPD. So what is our growth strategy? How will we increase our market share? How can we continue to win as a business? Something that's served us well and will continue to serve us well is we continue to invest in our sales force expansion. And so at the end of Q2, we had 49 sales representatives. I'm confident by the end of this quarter, we'll have 54, and we're putting plans in place to continue to invest in our sales team going forward. We also need to complement them with a strong backbone internally to make sure that when we get a prescription from a provider, that we can help that patient navigate, again, as I'd mentioned before, the payer journey, do the training, and so we also invest in that complementary back office infrastructure. I talked before about direct-to-consumer. That's been a winner for us. Many people who have this condition are looking to see what opportunities there are for treating their condition online, and so we provide a portal for people to get educated. We provide them with information packages, and depending upon what their condition is, because we follow up with these patients with respiratory therapists, you know, we can direct them to a provider to see and see if HFCWO makes sense for them. You know, I would say in the eight months that I've been here, one of the things I've been really impressed with is not only the team and the leadership that we have at Electromed, but we've got just great customer care and support. We're a single-product company. We know the landscape, environment better than anyone in this space, and so what we try to do is make working with Electromed as seamless as possible for our providers and our patients. One of the other things, too, that we're investing in is, because this is a underserved market, is we're gonna be continuing to invest in societies, pulmonology societies, respiratory societies, as well as, key opinion leaders in the pulmonology space, to better educate them on prescribing HFCWO for bronchiectasis patients. And we think, you know, by getting patients on this technology sooner rather than later, it'll expand the market, and we'll do a better job of serving these patients who really have a really challenging condition... and then, you know, certainly last but not least, we're gonna continue to promote our latest and greatest technology. Our long-term objectives, we don't give guidance, but certainly for fiscal year 2024, which ends at the end of June, we're anticipating for our fiscal 2024 year that we'll have mid-teens revenue growth. We've been able to demonstrate that we can improve our operating margin, which I think has been rewarded by the investment community. And going forward, the one thing that I can state is we're looking to continue to deliver profitable growth going forward. So we do think this is a unique investment opportunity. It's a large, expanding market that we're in. We've got great industry tailwinds. As most of you know, 10,000 people per day are turning 65. A lot of people that are within that age class have bronchiectasis or a respiratory illness, and we think this technology can help support them. We've got prove... Clinically proven technology. We have a well-established reimbursement code, and we do have broad payer coverage, as I mentioned before. We've been able to demonstrate organic growth, so we have not done any M&A activity. That is something that we're looking at, but heretofore, our growth has all been organic, and it's usually been double digit. As I mentioned before, we've got really strong gross profit margins in the mid-70s. We've got robust operating cash flow. We've got $10,000-$10 million in the bank, and we have absolutely no debt, which is fantastic. The one last thing I want to leave everybody with is the fact that, yeah, one of the other things that I think makes us unique in that not only are we growing, we're profitable, we have cash, we have no debt, is the fact that, you know, our management team is aligned with our investors. So when I came on board, my incentive reward is really based on increasing total shareholder return. In addition to that, one of the things that we changed is management's incentive compensation is focused solely on delivering revenue growth as well as EBITDA performance, and we think that that aligns with what our investors expect from Electromed. So we're excited about where we're at, where we're going, and we're excited about the opportunity that we afford people who are looking to invest in the company. Thank you for the time and attention. I think we've got time for questions, Jim. Yeah, we do. We do. We do. That's great, and we have plenty of questions. Okay. But, first couple from me. You know, the thing that strikes me is, right now, only about one out of six patients who are diagnosed with bronchiectasis, you know, actually gets the device. So, you know, what do you do to get that number up? Well, that's—therein lies the billion-dollar question, Jim. That's really, as I mentioned in the presentation, we're focused on. What happens is, and let me maybe take a step back, the reimbursement journey for a patient to get reimbursed for this technology, they have to have had a productive cough, had to have had a CT scan, which basically validates that they have bronchiectasis, and they have to have tried and failed another technology. That's for bronchiectasis. And so one of the key things is, we're seeing many of these patients being treated by antibiotics for their underlying infection, which is appropriate, and then they're using some lesser technologies like OPEP, which is like blowing into a kazoo, to have them cough. But provided that's not providing the kind of mucus clearance that the patient needs, they then progress onto our technology. And so we're working with, and we're starting to see actually a lot more illumination within the pulmonology community, where they need to get their patients on this technology sooner rather than later. For all the reasons we mentioned, fewer hospitalizations, fewer ER visits, and a reduction in the amount of antibiotic use. But that's the journey we're on, and I think if we're successful in doing that, we'll continue to expand the market. Are there studies being done? I mean, how do you get the word out to doctors that this is a better way to go than to just stick with the antibiotics? Well, you know, we are investing in societies, and within those societies, they develop guidelines, Jim. And so today there are really no guidelines for prescribing HFCWO. So we think that having a position statement that's coming from a society is gonna help with that. And also, you know, we're doing KOL education to help them understand when you see these types of patients with these kind of symptoms, they're a candidate for HFCWO. So it's really a two-pronged approach on that. Is the reimbursement process relatively straightforward? It sounds like you have the right codes in place, so, and I assume you have a revenue cycle management team in place to- We do ... to work that. Yeah, we do. Is that, is that a pretty, pretty easygoing process at this point? It is. You know, there's paperwork that needs to be done from the physician's staff, and as I mentioned before, what we're doing, and we just introduced last quarter what we call Smart Advantage, Jim, and it's really to streamline that process for the medical assistants, most notably, who are doing a lot of the prescribing for this technology. The prescription comes from the pulmonologist, but the paperwork is done typically by a medical assistant within their clinic. Once a patient starts the therapy, do they tend to remain on therapy for the remainder of their life? ... They do. It's a, you know, it's a chronic, irreversible condition, and, you know, as long as they're compliant, they won't get the results, you know, day one. It'll take a while, not a while, but it'll take, you know, a week or so for them to see that their condition is improving. But provided that they're consistent with it, it's something that they're gonna use forever. And how often are the vests replaced? You know, it really depends on, you know, the care that the patient is giving to the vest. So we have a lifetime warranty on our product, which includes the hose and the vest, and we will replace those, you know, if they get damaged. But typically, you know, we find that most of the patients actually treat their technology very well. The garment is something that's washable, and so, you know, we don't see a big warranty issue with that. Okay. But in general, the sale, it's basically an upfront sale. There's not a recurring revenue stream from the vest? Right. So the only area, as I mentioned in the presentation, where we have that is in the hospital space. As you can imagine, to eliminate cross contamination, the hospitals will buy our generator, but the components that they switch out when they have new patients are the hose and the vest. Also, for the hospital market, we have a wrap, which they can use as well. Okay, and in those cases, the hospital works out the reimbursement for the patient? You're out of the loop on that, I assume. They do, yeah. Okay. It's usually, it's part of the DRG. Right. Right. Okay, we have a couple questions from the audience on cash. You know, you are a little bit unusual in this space. You're a growing medical device company, but you're profitable, and you have a clean balance sheet, you know, and generating cash. So, you know, what are the plans for the use of cash going forward? Yeah, so in our most recent quarter, you saw our cash tick up above $10 million, and it's a question that we've gotten often from our investors: "Will you do buybacks? Are you considering M&A?" All of those types of questions around cash deployment, and we take a balanced view on it. We recognize that as a one-product company that is dependent on the reimbursement landscape, that is our top risk, and so we think it's appropriate to hold on to a healthy amount of cash. That said, our reimbursement has been strong, and over time has actually increased. So we feel like we're in a good position there. Historically, what you've seen us do is, if we get much more above $10 million, we have instituted buybacks. As we look forward, we're not ready to share any specifics on what we're going to do as we continue to grow that cash balance, but can assure you that, shareholder value is at the top of our minds, with all of those options that are out on the table. Right. And I've, I've you know, followed the company for the last few years, and one of the consistent things I've heard is sales force expansion. You seem to do that every year. Can you just talk about that? Are you taking territories like Boston and New York and dividing them up, or are you expanding geographically to new territories? And, you know, are there other opportunities available for that? You know, it's really compressing, you know. The best market, Jim, for us is the U.S., and so to your point, we are shrinking the territories that reps have today. You know, we've got coverage across the United States right now, but we think by shrinking those territories, we can allow the sales reps to have more focus, and we can generate more revenue. And that's a model that has served us well, and I think will continue to serve us well. The other thing we are looking at, though, is selectively using DMEs in certain markets that augment our direct sales teams, and we feel like that's a winning model, whether it's. You know, I talked before about our hospital business. We don't have a huge presence there. We feel like some distributors may have a better presence and footprint and would like a product like ours for that, that business, and also in the, in some of these rural areas where we're just not getting to all the prescribers that we would like to. And then just to wrap it up, you know, as I said before, you are a little bit unusual in this space. You're profitable, you're growing, you've got a good balance sheet, but yet, you know, stocks that, you know, have significantly more challenges in front of them trade at much higher valuations. So, you know, what do you think you have to do to get the attention of the analysts on Wall Street, or the investors on Wall Street? Well, I know we're out of time here, but I think, performance is key. So, you know, we've been inconsistent in our performance, Jim, and I think we just need to continue to deliver on what we're communicating and, you know, improving our revenue, improving our profitability profile, and I think a consequence of that is we will get rewarded. And we've seen, you know, a jump in our stock in the last month, and we think that's due to the fact that, you know, people are excited about the fact that of all the things that you've mentioned, we're growing, we're profitable, and we're generating cash. All right. All right, well, thank you again for the presentation, and we hope to see you in, you know, at a future conference, get another update. But it seems like you've definitely both, you know, made some significant progress since you've been there. Thanks so much, Jim, and thanks to everybody who's been on the call. We appreciate it. Thank you. Thanks, Jim. Thanks, everybody. Bye, everyone.