Greetings, and welcome to the Electromed First Quarter Fiscal 2026 Earnings Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Mike Cavanaugh, Investor Relations. Thank you, Mike. You may begin.

Good afternoon, and thank you for joining the Electromed earnings call. Earlier today, Electromed, Inc. released financial results for 2026Q1. 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 as a result of new information, future events, or otherwise. 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.

Thank you, Mike, and thank you to everyone joining our call today. I'm proud to share that we started the fiscal year with strong momentum, delivering our twelfth consecutive quarter of year-over-year revenue and profit growth. This consistency reflects the strength of our business fundamentals, the dedication of our team, and the growing recognition of our SmartVest therapy as a critical element in the effective treatment of patients with bronchiectasis, a non-curable and chronic disease. In addition, I'm excited to announce that we have been recognized by Time Magazine in their inaugural ranking of America's top 100 growth leaders. This list rounds up the top-performing publicly listed companies in the United States characterized by revenue growth as well as financial security. We are proud to be part of the select group of companies across a wide range of industries. Starting with our key financials in Q1, we generated $16.9 million in revenue, representing a 15% year-over-year increase. I'm happy to report that growth was broad-based across our three primary channels. Our core home care channel grew 13% year-over-year, reflecting consistent sales force productivity gains and a continued thoughtful expansion of our sales team. Distributor sales increased 41% with continued demand from our carefully curated home medical equipment partners. Our hospital sales surged 52%, underscoring the early success of strategic investments in this emerging channel. We've long recognized that hospitals represent a critical point of intervention for patients with chronic respiratory conditions, particularly those with bronchiectasis. Hospitals are where many of these patients first present with symptoms and where early diagnosis and treatment decisions are made. As such, we will continue to invest in this market. Operating income rose to $2.7 million, a 38% increase year-over-year, and represented 16% of revenue. A strong indicator of our operational efficiency and disciplined cost…

Thanks, Jim. All amounts below are for the three months ended 09/30/2025, for Q1 fiscal year 2026, and compared to the three months ended 09/30/2024, or Q1 fiscal year 2025. Net revenues grew 15.1% to $16.9 million, up from $14.7 million. Revenue in our direct home care business increased year-over-year by 12.7% to $14.9 million, up from $13.2 million. The increase in revenue was primarily due to an increase in direct sales representatives and higher net revenues per sales representative. Throughout Q1, we averaged 57 home care sales reps across 61 territories, and the average annualized home care revenue for these reps in Q1 was $1,052,000, which is within Electromed's target range of $1 million to $1.1 million. Revenue in our non-home care businesses increased year-over-year, coming in at $2 million. Home care distributor revenue of $829,000 grew 41.2%. Hospital revenue grew 51.7%, increasing to $1,047,000. These were partially offset by a 32.2% decrease in other revenue, which decreased to $122,000. Gross profit increased to $13.2 million or 78.1% of net revenues from $11.5 million or 78.3% of net revenues. The increase in gross profit dollars was primarily a result of increased overall revenue and higher net revenues per device. The decrease in gross profit percentage was a result of higher costs, which were partially offset by higher net revenues per device. Selling, general, and administrative expenses were $10.3 million, representing an increase of $900,000 or 9.6%. The increase in the current period was primarily due to the increased salaries and incentive compensation related to the higher average number of personnel in the sales, sales support, marketing, and reimbursement teams to process higher patient referrals. Operating income was $2.7 million, or 15.8% of net revenues, compared to $1.9 million or 13.2% of net revenues. This 37.8% increase in operating income was primarily due to an increase in revenue and gross profit. Net income increased by 44.9% to $2.1 million or $0.25 per diluted share, compared to $1.5 million or $0.16 per diluted share in the first quarter of the prior fiscal year. As of 09/30/2025, Electromed had $14.1 million in cash, $24.8 million in accounts receivable, and no debt, achieving a working capital of $35.8 million, and total shareholders' equity of $44.7 million. The cash balance reflects a decrease of $1.2 million for Q1 fiscal year 2026. The decrease in cash for the quarter was driven primarily by share repurchases of $1 million of Electromed common stock. In conclusion, we are excited by the strong financial start to the fiscal year and continue to see opportunities to deliver on our objectives of double-digit top-line growth and expanded operating leverage in fiscal year 2026. With that, we'd like to move to the Q&A portion of the call. Operator, please open the call to questions.

We will now begin the question and answer session. If you're using a speakerphone, please pick up the handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. First question comes from Kyle Bauser with ROTH Capital Partners. Please go ahead.

Great. Thanks. Hey, Jim and Brad. Great results here again. Thanks for taking my question. Maybe starting with Jim, you mentioned, you know, like, 55% of eligible patients have been prescribed to VEST yet. So, obviously, a significant opportunity here. Are you seeing that in your growth profile? So, I guess, how much of your growth is coming from kind of improved awareness, new users versus existing prescribers?

That's a great question, and thanks for asking it, Kyle, and hope you're well. We feel like adding sales reps, which we've been doing pretty consistently year over year, is part of our secret sauce. We still really believe that this is largely a clinical sale. But I think this is a terrific time and place for bronchiectasis. During this quarter, so our fiscal 2026Q2, as I mentioned in my prepared remarks, we've attended multiple trade shows. Starting to see more and more people, you know, physicians on podiums speaking about bronchiectasis treatment paradigms. We have a new entrant in the market, as you know, on the pharmaceutical side, who's invested a lot of money on market awareness, both for patients as well as physicians, which really augments what we've been doing. And so, I think there's just a great deal of awareness. So I think we're getting some tailwinds from that. But I also think that we're continuing to gain market share as a single product company that's focused on this space.

Got it. Got it. And in our checks, it kind of seems like there's quite a significant opportunity in treating patients earlier and, you know, as their disease progresses. I think one doctor mentioned that a lot of patients, many times, are finally getting treated for the disease once the house is already kind of burned down, which you sort of alluded to in your comment. Of course, being able to treat earlier hinges on reimbursement and indications for use and, of course, building awareness and maybe market development efforts are pretty cost prohibitive to try to treat earlier. But, I guess, do you envision pathways to being able to treat the broader patient population, you know, from a reimbursement standpoint, you know, not having to do a scan, etcetera? It just seems like the, you know, patients could benefit from this before kind of crashing.

Oh, no. We totally agree with you. I think that is part of the education campaign. And, you know, one of the things that I mentioned in my prepared remarks was the manuscript which we're looking to get published. And yeah, the shameful thing is that, you know, when we took a look at the NTM registry data, you know, 58% of the patients qualified. So all the things that you just mentioned, you know, having a CT scan, having a daily productive cough for six months, and, you know, having tried and failed something, they qualified for that, and yet they weren't put on the HFCWO therapy sooner. And so we think that manuscript and, you know, making more awareness of clearing the airways sooner and the fact that many of these patients already meet reimbursement guidelines, I think, is going to be a real benefit. I don't think that the reimbursement criteria for HFC, whether it's our device or anyone else's, is going to change. I just think that the prescribing physicians are going to be a lot more open to putting patients on the therapy sooner rather than later. I think that's a big benefit, not only to the patients but also to the space in general.

Sure. Yeah. Agreed. And I think in the deck, you call out 22% of home care qualified referral volume coming from neuromuscular. Anything to call out there in terms of additional opportunities for growth?

Oh, definitely. I mean, there's a lot of ICD-10 codes right now, Kyle, that can't, you know, there will be a reimbursement for HFCWO. The challenge is the reimbursement guidelines aren't as clear as they are for bronchiectasis. And, you know, as I've mentioned time and time again, there's still this just great unmet need. You know, there's basically 800,000 patients across the country today that have the disease, have been diagnosed with it, but they're not on, you know, SmartVest therapy. And so we want to unlock that market opportunity. And that doesn't even include the additional 4.1 million people who have bronchiectasis COPD overlap that have not been diagnosed. And so I think if we can unlock that iceberg of opportunity, you know, we're going to take advantage of that. That's just in the bronchiectasis space. But there's other, you know, diseases like cystic fibrosis, and there's neuromuscular diseases, you know, that patients can benefit from this technology. And so we're going to be, as we pivot into calendar year '26, one of the things that we're going to be doing with our sales reps is really having them bear down on some of those more prevalent disease states where, you know, we can get reimbursed for the technology.

Okay. Got it. And maybe just one more. Nice growth in the hospital channel. Do you have dedicated reps for the hospital, or are your direct reps and maybe even distributors going after this channel? Just curious.

Yeah. No. Great question. You know, we don't have distributors that are going after this channel for us. Predominantly, as you know, our model is direct to patient. And in the case of hospitals, you know, we've been really probably for the last couple of years, very deliberate about investing in the space. We feel like this is a gateway for getting the patients on the technology in the hospital when they present there, as I mentioned in my prepared remarks. And then, you know, as they get discharged, we want them on our technology going to the home. So we've got three sales reps that are focused on that channel right now. You know, we are looking to judiciously add reps in that space. Yeah. The sales cycle is very different in the hospital market versus the home market. You know, the home market, it's a capitated rental model. It's pretty easy. Not easy, but, you know, when our sales reps are calling on a clinic and they're engaging with the physician, they can work with that physician in identifying patients that would benefit from our technology. In the case of the hospital, you know, it's really a capital sale. And so, you know, the time to revenue can, in some instances, be years, based on the buying cycle of the facility. So we, you know, we're getting a lot of interest as hospitals are updating their fleets and as their capital budgets accommodate, you know, them buying high-frequency chest wall oscillation devices. We also have a contract with Visient, which represents, you know, half the health systems across the country. We feel like we're really well-positioned, with some of the dynamics in the market right now, coupled with the fact that, you know, we have a best-in-class technology that we think the hospitals would benefit from and their staff because it's very intuitive to use. And the patients that we would put on the product.

Okay. Thank you. Great results. I will jump back in queue.

Terrific. Thanks, Kyle.

Your next question comes from Ben Haynor with Lake Street Capital Markets.

Good afternoon, guys. Thanks for taking the questions. First off, following up on kind of the hospital discussion there. You know, knowing that there's a longer sales cycle, you know, also implies that you kind of know the pipeline that you have out there. How great, how good is your visibility there? And should investors kind of think about this million-dollar-ish a quarter as kind of a new baseline for that area of the business?

That's a great question. And thank you for being on the call. So, you know, from our standpoint, Ben, you know, that's why we're not putting all of our eggs into that basket. You know, our primary focus as a company is still going to be on the home care segment, and that's calling on clinics and calling on pulmonologists within those clinics. Because we feel like that still has not been unlocked. The hospital business is a little unpredictable because you're really at the whim of operating budgets within the hospitals. You're at the whims of standardization committees. You know, you have a lot more decision-makers in the fold. We do think by putting focus there and, you know, in doing so in areas where we feel like fleets are being upgraded or people are investing in new equipment, yeah, that we should be able to continue to have certainly, you know, 20% plus growth in that segment. How it comes, that's a little bit less predictable. But we think, you know, when the dust settles year over year, for the fiscal year, we should be growing that market certainly at a higher rate than what our home care business growth is, albeit on a very small base.

Got it. So if you're just in the mix there, you got a good chance of something falling out.

Yeah. We feel we've, you know, we've got a great product, and, you know, we're going to cover the entire landscape with only a few people. But that's also giving us a lot of knowledge, you know, as we look to expand in that market. You know, we, much like with our home reps, we just don't, you know, we've seen companies add a lot of fuel to an opportunity only for it not to materialize, and then they have to back off. We think the approach that we're taking is the right one. But if, you know, we see the algorithm where we can add more reps sooner rather than later, we'll certainly, you know, be doing that.

Got it. And then, on the subject of the new pharmaceutical option, discussed it a bit here already. You know, how do you see kind of the stance of clinicians evolving their treatment algorithms to, you know, get people on the drug, you know, obviously, the infection, you gotta clear and bring more folks to your device?

You know, Ben, that's a great question. Look, they've brought a lot of awareness to bronchiectasis, which has been fantastic. But what the drug doesn't do is it doesn't clear the mucus. And so that's really where we come into play. And as I mentioned with our Triple Down on Bronchiectasis campaign, you know, first and foremost, for the patient to be able to breathe easier, you've got to remove that mucus, which is the fuel for a future infection. These patients already have bronchiectasis. It's chronic. It's irreversible. And so, you know, as mucus builds up within their airways, we want to clear that out. You know, if they do have an infection, the paradigm today is they get treated with an antibiotic, and then the drug is really to help minimize future inflammation. But it doesn't cure the disease. And so we think it's complementary to what we do. And as far as the prescribing habits, I think, you know, for prescribing physicians, they're excited about it. You know, if they have a patient that has, you know, exacerbations routinely, you know, maybe they'll look to prescribe this. I think there's some that are on the sidelines just kind of taking a wait-and-see approach. I think the other challenge with the drug, though, is it's an expensive proposition, both from the payer standpoint. You know, it's $85,000 per patient per year. Our technology, on the other hand, is, you know, over $10,000 for life. You know? And these are patients who have a chronic illness. So it's early innings relative to the drug, but they have created a lot of awareness. And, to date, they don't have reimbursement from either CMS or from commercial payers. So we'll see.

So maybe the way to think about it is that the drug is maybe some really expensive snow tires, but there's still other things that you need to be cognizant of when you're driving in the snow.

That's a very good analogy.

Local Minnesota. There we go.

I think that's all I have. Thank you for taking the questions, gentlemen.

Hey. Pleasure. Thanks for being on the call. Thank you.

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

Well, thank you all for joining today's call. I would think that you should be pleased with how Electromed is really executing with precision across all areas of our business. We're growing revenues, profits, expanding our commercial footprint, and we're investing in strategic initiatives that position us for long-term success. And I mentioned some of those on the call today, including the manufacturing optimization program that we just concluded. We've also implemented a new CRM system, which we're very excited about. And we remain committed to delivering value to our patients, providers, and our shareholders, and we're excited about the opportunities that lie ahead. So thank you all, and appreciate you being on the call.

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