Pro-Dex, Inc. Announces Fiscal 2020 Third Quarter And Nine-Month Results

Companies Mentioned:

Primary Exchange: NASDAQ
Under the Symbol: PDEX

$17.34

($0.0900)

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Pro-Dex, Inc. Announces Fiscal 2020 Third Quarter And Nine-Month Results

Thursday, May 7, 2020 4:05 PM

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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