Greetings, and welcome to the Electromed Third Quarter Fiscal 2024 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mike Cavanaugh, Investor Relations. Please go ahead.

Good afternoon, and thank you for joining the Electromed earnings call. Earlier today, Electromed Incorporated released financial results for the third quarter of fiscal year 2024. The quarter ended March 31, 2024. The release is currently available on the company's website at www.smartvest.com. Before we get started, I would like to remind everyone that some of the statements that management will make on this call are considered forward-looking statements, including statements about the company's future operating and financial results and plans. Such statements are subject to risks and uncertainties that could cause actual performance or achievements to be materially different from those projected. Any such statements represent management's expectations as of today's date. You should not place any undue reliance on those forward-looking statements, and the company does not undertake any obligation to update or revise forward-looking statements, whether as a result of new information, future events, or otherwise. Please refer to the company's SEC filings for further guidance on this matter. With that, I will now turn the call over to Jim Cunniff, President and Chief Executive Officer of Electromed.

Thanks, Mike, and thank you to everyone joining today's call. I'm thrilled to announce another record revenue quarter for Electromed. This is the second quarter in a row of record revenue that I've been able to share with you. Total net revenue for the third quarter of fiscal year 2024 came in at $13.9 million, representing a 15% year-over-year growth from the same period in fiscal year 2023. This is the sixth straight quarter of mid-teens or better revenue growth and resulted in quarterly earnings of $1.5 million or $0.17 per diluted share. Similarly, I'm proud to highlight that operating income for the quarter was $1.8 million, a growth of 54% over the same period in the prior fiscal year. Additionally, for a third straight quarter, we grew revenue in all three of our categories homecare, hospital, and other. I'll hand the call over to Brad to discuss the quarter's financials in more detail shortly. But first, I want to provide a business update and address the cyber attack on Change Healthcare and its impact on Electromed. First, the company's consistent growth strategies are generating positive results through our focus on developing best-in-class products, exemplary customer service, disciplined commercial expansion and operating excellence. We have continued to generate double-digit revenue growth and capture operating leverage, which we believe is a compelling combination for investors in a difficult market for small- and micro-cap companies. As discussed on last quarter's call, we believe Electromed's shares are undervalued given our prospects for growth, profitability, cash generation, and our rock-solid balance sheet with no debt, which makes us a micro-cap standout in the medtech space. Investor feedback highlighted that our story is resonating since our last earnings call, which was also reflected in our stock price as our shares were appreciated substantially since we…

Thank you, Jim. All amounts I will be discussing represent amounts for the three months ended March 31, 2024, or Q3 fiscal 2024 and compared to the prior-year amounts for the three months ended March 31, 2023, or Q3 fiscal 2023. Net revenue for our third-fiscal quarter grew 15% over last year to a record $13.9 million. Homecare revenue for the quarter increased by or 12% compared to the prior year. The increase in revenue was due to an increase in direct sales representatives and efficiencies recognized within our reimbursement department as a result of recent investments made to streamline the claims process. Q3 hospital revenue was $783,000, an increase of $343,000 or 78% compared to the prior year. The increases were primarily due to an increase in sales representatives focused on the hospital market and increased capital and disposable demand. As a reminder, the sales cycle for our hospital business is long, which can result in large revenue changes on a quarterly basis. Homecare distributor revenue for the quarter increased by $23,000 or 4.6% compared to the prior year. Homecare distributor sales are affected by the timing of distributor purchases that can cause significant fluctuations in reported revenue on a quarterly basis. Other revenue was $277,000, an increase of $121,000 or 77.6% compared to the prior year. Other sales are affected by the timing of international distributor purchases and purchases by customers that do not fall within the aforementioned markets that can cause significant fluctuations in reported revenue on a quarterly basis. Gross profit increased to $10,382,000 or 74.8% of net revenues from $9,056,000 or 75% of net revenues in the prior year. The slight decrease in gross profit as a percentage of net revenues compared to the prior year was primarily due to costs associated with the wind-down…

[Operator Instructions]. The first question comes from Brooks O'Neil with Lake Street Capital Markets.

Hi, Jim and Brad. This is Aaron on the line for Brooks. Congrats on the record -- another record quarter. Really shows the discipline you guys are implementing. Just to start, what actions have you taken in terms of bringing more awareness to bronchiectasis in the physician space? I guess a different way to phrase that is, how is the time between diagnosis from the actual pulmonologist and then actually getting patients onto the vest therapy sort of developed? I think you mentioned a little bit in your prepared remarks on a CEU webinar launch and then as well as a new clinical resource on your site. But maybe just a little bit more color on those two things would be helpful.

Well, first, off, thanks for the question. It's a difficult one because part of our challenge -- and I think you've seen this in our investor deck as well -- is that today, there's -- 824,000 people have been diagnosed with bronchiectasis, but there's really only 127,000 of those patients, Aaron, that are on the technology today. And as I mentioned on the previous quarterly call as well, this is a work in process. These physicians are seeing these patients. They are diagnosing them with this disease state. But what they're doing today is they're putting them on a combination of antibiotics to address the infection that the patient has. And then they're putting them on a probably a lower modality of airway clearance. And it's not until the patient's disease state really progresses that they then put them on HFCWO. And so our opportunity in really unlocking these patients who have this disease state and getting them on the technology sooner rather than later is getting in front of these pulmonologists and respiratory therapists and showing them the value of doing that: value and reductions in antibiotic use, value in our readmission rates into hospitals. And so that just doesn't happen overnight, but we feel great about the trajectory that we have on that. I would also tell you that we're not operating in a vacuum. Our competitors and even some of the drug companies are really active in this space in promoting the need for different treatment of these bronchiectasis patients so that their quality of life improved sooner rather than later.

Understood. That's definitely helpful. Thank you for that. I guess moving towards Clearway. Has that, in the hospital setting, been sort of tracking to your liking? I'm definitely recognizing that it's still early stages on that front, but maybe just a little bit more info on that would be great, Jim.

No, that's a great question. It's really -- our hospital market is a nascent market for us. Most of our resources are focused on the clinical sale. And that's mainly because the pulmonologists are the ones primarily who are writing the prescriptions for -- in fact, really the only people write the prescriptions for our technology outside of the VA hospitals. The hospitals, in our mind, it's a different type of sale for us because instead of it being a one-to-one relationship between us and the patient, basically what you're doing is you are selling capital into these facilities. And so it's a focus for us in that there's demand there, Aaron. But really where our sales team is focused -- that isn't the primary focus that they have -- we really see the hospital market more as a gateway to the home. So if a patient does get admitted to the hospital, they do need airway clearance technology, and we believe we've got the best-in-class technology in the marketplace. We certainly want to have that available for those patients. But really with the hope that as they get discharged, if they need to continue to be on that technology that they go home on a Clearway. Our results this year have been really in line with what our expectations had been. Our hospital business in the quarter was up substantially, and for the year, it's over 30% up over prior year. So we're getting good traction there, and we hope to continue that. But we only have a few resources focused on that market today.

Understandable. And like you mentioned, you're obviously showing great traction there. So that's good to see on. Maybe Brad can jump in on this one, too. I'm just wondering on specific uses of cash. Have you had any specific conversations or avenues that you've explored for uses of cash? I mean, just any sort of ideas that you guys have been talking about recently.

Yeah. As we said in the past here -- and what we like about the ability to generate cash as a business is that it gives us more options. First and foremost, we want to be able to reduce our risk. And like we saw this quarter with Change Healthcare, things can move quickly and cause headwinds for us, and our cash reserves allow us to weather those storms without any really material impact on the business. Looking forward, as our cash balance continues to grow, we do continue to consider any and all options to make the most use of that cash, including reinvesting into the business and thinking through ways that we can provide more value to shareholders.

Absolutely. Completely understood. And then, last one from me. Just with all the new leadership being incorporated within the last year or so -- and I guess you guys you can both comment on this -- but how have you sort of just developed the company into what it is today? I guess what are one or two sort of significant or vital things that you're looking at that you can maybe do better or are currently doing to sort of accelerate growth and improve the profitability you guys are seeing going forward here.

Yeah. I think I mentioned this on the previous call and gave a shout out to Kristine Beyersdorf during my prepared remarks as well, who's in charge of reimbursement and payer relations. But I must say -- and Brad can perhaps echo this, maybe not --but I would tell you I feel great about the talent that we have on the team. I feel great about the talent that we're hiring into our sales ranks as well. Aaron, I think as you know, my background is really in commercial roles in addition to leading businesses, and I feel really good about the talent that we're bringing on board to represent the company. But I would also tell you that it's nice having a shared vision. Everybody that joins Electromed, I think, is fired up about the impact that we can have on patients' lives and the impact that our technology does in serving that mission. But I would also tell you that we are, in literally every functional facet of the business, improving our productivity; we're improving our insights into the business. And we're really just going from strength to strength. So I wouldn't point to one specific thing. I would say that our systems -- thanks to Brad and his team implementing a ERP system a while back, which is really paying dividends for us, to give us different insights to our business, both financially and operationally, as well as what we've been able to do to improve our productivity within our reimbursement team. Before, that was an area of our business where it was a one-to-one correlation almost between when we hired a sales rep, providing that same level of back-office support, and what we're finding is we're getting a lot more a one-to-many leverage within that ratio. So we don't need the same ratio of one to one between our sales reps and our reimbursement personnel. And I think that's giving us terrific leverage in our P&L. Brad, I'm not sure if there's anything else you want to add to that?

No. Well said, Jim. I think we have been blessed with a lot of great talent across the commercial, operational and even the back-office functions of the business. And as those new people come in and bring great ideas to the business that fuel our financial success, it makes the story easier to tell. And the financial success combined with the great culture that we have here at Electromed allows us to continue to attract great talent into the team. So really excited to be a part of it.

Absolutely. That's all great color and commentary. Thank you, guys, for taking the questions. And again, congrats on the continued momentum here.

Thanks, Aaron. We appreciate it.

This concludes our question-and-answer session. I would like to turn the conference back over to Jim Cunniff for any closing remarks.

Thank you very much, operator, and thank you very much for everyone who joined the call today and for your continued support of Electromed. As I mentioned, I'm really excited about the trajectory of the business and our continued growth and improved profitability with the end goal of optimizing long-term shareholder value. If you're interested in a follow-up call, please contact our Investor Relation partners at ICR Westwicke. I appreciate your time today and appreciate your investment in Electromed. And with that, thank you, everyone. Have a great rest of the day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.