Dynatronics Announces Fiscal 2017 Third Quarter Results

COTTONWOOD HEIGHTS, Utah, May 15, 2017

For the quarter, net sales increased 4.1% to $7.7 million, compared to $7.4 million in the same period of the prior year.  The increase was driven by a 14% improvement in sales of therapeutic modalities, up $243,000, and a 13% increase in sales of distributed capital, up $269,000 over the prior year period.  Sales within other product categories decreased by $205,000 compared to the third quarter of 2016. 

Gross profit for the quarter increased by 8.7% to $2.7 million, or 35.0% of net sales, compared to 33.6% of sales for the quarter ended March 31, 2016.  Gross profit and gross margin during the quarter were positively impacted by a greater proportion of sales derived from therapeutic modalities, which generate a higher gross margin than the company's combined average gross margin.

"The $215,000 increase in gross profit for the quarter reflects our strategy to focus on our core competency, proprietary capital equipment, with an emphasis on therapeutic modalities," explained Jeff Gephart, Senior Vice President of Sales.  "We continue to refine our sales strategies to achieve the best results for our customers and our shareholders.  We will continue to focus on sales growth, margin growth, and expanded coverage in the markets we serve."

Selling, general and administrative expense for the quarter were up $533,000.  Selling expenses accounted for $118,000 of the increase and were related primarily to the hiring of additional sales management and marketing personnel to implement the company's strategic growth plans.  General and administrative expenses for the quarter included acquisition related costs of $486,000, including legal, accounting, and other professional fees incurred in connection with the company's acquisition of Hausmann Industries, Inc. which closed on April 3, 2017.

Net loss for the quarter ended March 31, 2017, was approximately $755,000, compared to a net loss of $451,000 for the quarter ended March 31, 2016, attributable primarily to the acquisition expenses incurred in the quarter.  Net loss applicable to common stockholders for the quarter was approximately $849,000, compared to $531,000 for the prior year period, primarily due to the acquisition expenses in the current period.  Net loss applicable to common stockholders also includes $94,000 of dividends accrued on preferred stock during the quarter.  These dividends were paid partially in common stock ($78,000) and partially in cash ($16,000).

As reported previously, on March 21, 2017, the company entered into a definitive agreement to acquire the assets of Hausmann Industries, Inc., a New Jersey corporation.  Financing for the acquisition was provided by the sale of equity securities in a private offering and borrowings under an asset-based credit facility with Bank of the West.  The acquisition transaction and private offering closed on April 3, 2017.  The credit facility funded on March 31, 2017, adding cash of $2.5 million to increase cash at the end of the period to approximately $3.4 million.  The line of credit provides for revolving credit borrowings by the company in an amount up to the lesser of $8.0 million and a borrowing base computed as provided in the terms of the loan agreement with the bank.  Amounts outstanding bear interest at LIBOR plus 2.25%.