IRVINE, CA, / ACCESSWIRE / May 7, 2020 / PRO-DEX, INC. (NasdaqCM:PDEX) today announced financial results for its fiscal 2020 third quarter ended March 31, 2020. The Company also filed its Quarterly Report on Form 10-Q for the third quarter of fiscal year 2020 with the Securities and Exchange Commission today.
Quarter Ended March 31, 2020
Net sales for the three months ended March 31, 2020 increased $1.6 million, or 24%, to $8.5 million from $6.9 million for the three months ended March 31, 2019, due primarily to the launch or our thoracic driver to one of our existing CMF driver customers. This product launch represents the expansion of our adoptive torque-limiting software algorithm into a surgical driver other than the maxocranial market.
Gross profit for the three months ended March 31, 2020 increased $947,000, or 42%, to $3.2 million from $2.3 million for the same period in fiscal 2019.
Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended March 31, 2020 increased $140,000 or 10% compared to the same period in fiscal 2019.
Net income for the quarter ended March 31, 2020 was $1.2 million or $0.30 per diluted share, compared to $732,000, or $0.17 per diluted share, for the corresponding quarter in fiscal 2019.
Nine Months Ended March 31, 2020
Net sales for the nine months ended March 31, 2019 increased $3.5 million, or 18%, to $23.7 million from $20.2 million for the nine months ended March 31, 2019, due primarily to increased repair revenues generated from our largest customer.
Gross profit for the nine months ended March 31, 2020 increased $1.6 million or 22% compared to the same period in fiscal 2019. The gross profit increase is directly related to our 18% increase in revenue and our ability to better absorb our fixed manufacturing costs.
Operating expenses (which include selling, general and administrative, and research and development expenses) for the nine months ended March 31, 2020 increased 17% to $4.0 million from $3.4 million in the prior fiscal year's corresponding period.
Net income for the nine months ended March 31, 2020 was $3.6 million or $0.88 per diluted share compared to $3.3 million, or $0.75 per diluted share.
CEO Comments
"While we are pleased with our third quarter and year-to-date results, and the shipment of the thoracic driver, Pro-Dex's priorities, in response to COVID-19, are the health and safety of our employees, our communities, customers and suppliers," said the Company's President and Chief Executive Officer Richard L. ("Rick") Van Kirk. "While we cannot predict the total impact caused by the pandemic, we remain committed to our strategy to continue to provide excellent service to our existing customers and leverage our adaptive torque-limiting and other proprietary capabilities to expand our product portfolio."
R&D Projects
The amount spent on projects under development is summarized below (in thousands):
| Three and Nine Months ended March 31, 2020 | Three and Nine Months ended March 31, 2019 | Market Launch | Est Annual Revenue | |||||||||||||||||||||
Total Research & Development costs: | $ | 620 | $ | 1,501 | $ | 603 | $ | 1,337 | ||||||||||||||||
Products in development: | ||||||||||||||||||||||||
Arthroscopic Shaver(1) | - | 11 | 160 | 221 | 06/21 | $ | 600 | |||||||||||||||||
ENT Shaver. | 136 | 291 | - | - | 01/21 | $ | 2,000 | |||||||||||||||||
Arthroscopic Attachment | - | - | 1 | 17 | (2) | $ | 150 | |||||||||||||||||
CMF Driver | 60 | 106 | - | 3 | 06/20 | $ | 350 | |||||||||||||||||
Sustaining & Other | 424 | 1,093 | 442 | 1,096 | ||||||||||||||||||||
Total. | $ | 620 | $ | 1,501 | $ | 603 | $ | 1,337 | ||||||||||||||||
Customer CMF Driver (3) | $ | 121 | $ | 303 | $ | 63 | $ | 289 | 06/20 | $ | 2,500 | |||||||||||||
(1) | This project has been internally pushed back to focus on our new internal Pro-Dex branded ENT shaver. |
(2) | Internal development of this project is now complete, but we are looking for the most attractive sales channel. |
(3) | Costs incurred related to customer contracts are included in costs of sales and deferred costs and are not included in research and development costs. |
As we previously discussed, in early fiscal 2019 we entered a development contract with a current significant customer to private-label our thoracic driver for their unique specifications. We shipped initial launch quantities of this product during the third quarter ended March 31, 2020.
About Pro-Dex, Inc.:
Pro-Dex, Inc. specializes in the design, development and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic and maxocranial facial markets. We have patented adoptive torque-limiting software and proprietary sealing solutions which appeal to our customers, primarily medical device distributors. Pro-Dex also manufactures and sells rotary air motors to a wide range of industries. Pro-Dex's products are found in hospitals and medical engineering labs around the world. For more information, visit the Company's website at www.pro-dex.com.
Statements herein concerning the Company's plans, growth and strategies may include 'forward-looking statements' within the context of the federal securities laws. Statements regarding the Company's future events, developments and future performance (including but not limited to uncertainties related to the COVID-19 pandemic), as well as management's expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. The Company's actual results may differ materially from those suggested as a result of various factors. Interested parties should refer to the disclosure concerning the operational and business concerns of the Company set forth in the Company's filings with the Securities and Exchange Commission.
(tables follow)
PRO-DEX, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)
| March 31, 2020 | June 30, 2019 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 4,378 | $ | 7,742 | ||||
Investments | 2,771 | 2,649 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $6 and $0 at March 31, 2020 and at June 30, 2019, respectively | 4,170 | 4,100 | ||||||
Deferred costs | 391 | 430 | ||||||
Inventory | 8,643 | 6,239 | ||||||
Prepaid expenses and other current assets | 225 | 623 | ||||||
Total current assets | 20,578 | 21,783 | ||||||
Equipment and leasehold improvements, net | 2,732 | 2,726 | ||||||
Right of use asset, net | 3,026 | - | ||||||
Intangibles, net | 138 | 129 | ||||||
Deferred income taxes, net | 53 | 260 | ||||||
Investments | 1,659 | 582 | ||||||
Other assets | 42 | 40 | ||||||
Total assets | $ | 28,228 | $ | 25,520 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable | $ | 1,912 | $ | 1,996 | ||||
Accrued expenses | 1,524 | 1,437 | ||||||
Deferred revenue | 360 | 215 | ||||||
Note payable and capital lease obligations | 642 | 622 | ||||||
Total current liabilities | 4,438 | 4,270 | ||||||
Deferred rent | - | 146 | ||||||
Lease liability, net of current portion | 2,857 | - | ||||||
Income taxes payable | 325 | 162 | ||||||
Notes and capital leases payable, net of current portion | 3,449 | 3,934 | ||||||
Total non-current liabilities | 6,631 | 4,242 | ||||||
Total liabilities | 11,069 | 8,512 | ||||||
Shareholders' equity: | ||||||||
Common shares; no par value; 50,000,000 shares authorized; 3,837,490 and 4,039,491 shares issued and outstanding at March 31, 2020 and June 30, 2019, respectively | 12,970 | 15,815 | ||||||
Accumulated other comprehensive loss | (1,162 | ) | (549 | ) | ||||
Retained earnings | 5,351 | 1,742 | ||||||
Total shareholders' equity | 17,159 | 17,008 | ||||||
Total liabilities and shareholders' equity | $ | 28,228 | $ | 25,520 | ||||
PRO-DEX, INC.
CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(In thousands, except per share amounts)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
Net sales | $ | 8,508 | $ | 6,854 | $ | 23,710 | $ | 20,168 | ||||||||
Cost of sales | 5,298 | 4,591 | 14,855 | 12,930 | ||||||||||||
Gross profit | 3,210 | 2,263 | 8,855 | 7,238 | ||||||||||||
Operating (income) expenses: Selling expenses | 161 | 122 | 438 | 252 | ||||||||||||
General and administrative expenses | 725 | 641 | 2,052 | 1,838 | ||||||||||||
Gain from disposal of equipment | - | - | - | (7 | ) | |||||||||||
|
Research and development costs | 620 | 603 | 1,501 | 1,337 | ||||||||||||
Total operating expenses | 1,506 | 1,366 | 3,991 | 3,420 | ||||||||||||
Operating income | 1,704 | 897 | 4,864 | 3,818 | ||||||||||||
Interest expense | (58 | ) | (67 | ) | (180 | ) | (156 | ) | ||||||||
Interest and other income | 9 | 93 | 77 | 261 | ||||||||||||
Gain on sale of investments | - | - | - | 356 | ||||||||||||
Income from operations before income taxes | 1,655 | 923 | 4,761 | 4,279 | ||||||||||||
Income tax expense | (442 | ) | (191 | ) | (1,194 | ) | (1,019 | ) | ||||||||
Net income | $ | 1,213 | $ | 732 | $ | 3,567 | $ | 3,260 | ||||||||
Other comprehensive income (loss), net of tax: Unrealized income (loss) from marketable equity investments | (1,262 | ) | 33 | (613 | ) | (163 | ) | |||||||||
Comprehensive income (loss) | $ | (49 | ) | $ | 765 | $ | 2,954 | $ | 3,097 | |||||||
Basic net income per share: | ||||||||||||||||
Net income | $ | 0.31 | $ | 0.18 | $ | 0.90 | $ | 0.77 | ||||||||
Diluted net income per share: | ||||||||||||||||
Net income | $ | 0.30 | $ | 0.17 | $ | 0.88 | $ | 0.75 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 3,871 | 4,143 | 3,944 | 4,224 | ||||||||||||
Diluted | 3,999 | 4,257 | 4,071 | 4,338 | ||||||||||||
Common shares outstanding | 3,837 | 4,136 | 3,837 | 4,136 | ||||||||||||
PRO-DEX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
| Nine Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 3,567 | $ | 3,260 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 426 | 309 | ||||||
Amortization of loan fees | 6 | 5 | ||||||
Gain from disposal of equipment | - | (7 | ) | |||||
Share-based compensation | 93 | 28 | ||||||
Non-cash lease expense | 31 | - | ||||||
Gain on sale of investments | - | (356 | ) | |||||
Deferred income taxes | 207 | 1,026 | ||||||
Bad debt expense (recovery) | 6 | (14 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable and other current receivables | (76 | ) | (773 | ) | ||||
Deferred costs | 39 | (235 | ) | |||||
Inventory | (2,404 | ) | (412 | ) | ||||
Prepaid expenses and other assets | 396 | (410 | ) | |||||
Accounts payable and accrued expenses | (301 | ) | 353 | |||||
Deferred revenue | 145 | 169 | ||||||
Income taxes payable | 163 | 142 | ||||||
Net cash provided by operating activities | 2,298 | 3,085 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchases of investments | (1,827 | ) | (2,562 | ) | ||||
Purchases of equipment and leasehold improvements | (422 | ) | (1,048 | ) | ||||
Proceeds from sale of investments | - | 1,905 | ||||||
Proceeds from dividend reclassification as return of principal | 15 | 23 | ||||||
Proceeds from collection of notes receivable | - | 1,154 | ||||||
Proceeds from sale of equipment | - | 7 | ||||||
Increase in intangibles | (19 | ) | (11 | ) | ||||
Net cash used in investing activities | (2,253 | ) | (532 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repurchases of common stock | (2,977 | ) | (2,675 | ) | ||||
Proceeds from exercise of options and ESPP contributions | 39 | 29 | ||||||
Payment of employee payroll taxes on net issuance of common stock | - | (101 | ) | |||||
Proceeds from Minnesota Bank & Trust long-term debt, net of fees | - | 4,940 | ||||||
Principal payments on notes payable and capital lease | (471 | ) | (273 | ) | ||||
Net cash provided by (used in) financing activities | (3,409 | ) | 1,920 | |||||
Net increase (decrease) in cash and cash equivalents | (3,364 | ) | 4,473 | |||||
Cash and cash equivalents, beginning of period | 7,742 | 5,188 | ||||||
Cash and cash equivalents, end of period | $ | 4,378 | $ | 9,661 | ||||
CONTACT:
Richard L. Van Kirk
Chief Executive Officer
(949) 769-3200
SOURCE: Pro-Dex, Inc.
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