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Pro-Dex, Inc. Announces Fiscal 2020 Fourth Quarter and Full-Year Results

IRVINE, CA / ACCESSWIRE / August 27, 2020 / PRO-DEX, INC. (NASDAQ:PDEX) today announced financial results for its fiscal 2020 fourth quarter and full-year ended June 30, 2020.

Quarter Ended June 30, 2020

Net sales for the three months ended June 30, 2020 increased $4.1 million, or 59%, to $11.1 million from $7.0 million for the three months ended June 30, 2019, due primarily to increased medical device sales related to two new product launches as well as increased revenue generated from our largest customer. Revenue to our largest customer increased by $1.7 million for the quarter ended June 30, 2020 compared to the fourth quarter of the prior year. In the third quarter of fiscal 2020 we began shipping a thoracic driver to one of our existing craniomaxillofacial ("CMF") customers and sales generated in the fourth quarter of fiscal 2020 related to this new product totaled $1.0 million. In the fourth quarter of fiscal 2020 we completed the development of a next generation CMF driver for an existing customer and same quarter sales related to this new product totaled $600,000. Gross profit for the three months ended June 30, 2020 increased $1.7 million or 69%, to $4.3 million from $2.5 million for the same period in 2019. The increase in gross margin is due to better absorption of our fixed costs resulting from higher sales volumes.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended June 30, 2020 increased 53% to $2.1 million from $1.4 million in the prior year's corresponding quarter, due primarily to increased expenditures of $483,000 in general and administrative expenses due to increased equity compensation expense and increased bonus accruals and $270,000 in research and development costs to support our continued efforts to further grow our business.

Net income for the quarter ended June 30, 2020 increased by $1.7 million to $2.5 million, or $0.64 per diluted share, compared to $888,000, or $0.21 per diluted share, in the corresponding quarter in 2019.

Year Ended June 30, 2020

Net sales for the fiscal year ended June 30, 2020 increased $7.7 million, or 28%, to $34.8 million from $27.2 million for the fiscal year ended June 30, 2019, due primarily to increases in medical device revenues. Specifically, our largest customer accounted for an increase of $5.6 million in revenue during fiscal 2020 and we generated sales of $3.1 million in fiscal 2020 due to the new thoracic driver and next generation CMF driver described above.

Gross profit for the fiscal year ended June 30, 2020 increased $3.4 million, or 34%, to $13.1 million compared to $9.8 million for fiscal 2019, due to increased revenues and manufacturing efficiencies.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the fiscal year ended June 30, 2020 increased 27% to $6.1 million from $4.8 million in the prior fiscal year, due to increased personnel expenses across all departments and increased equity compensation expense, bonus accruals and professional services.

Net income for the fiscal year ended June 30, 2020 was $6.1 million, or $1.50 per diluted share, compared to $4.2 million, or $0.97 per diluted share, for fiscal 2019.

Although the Company has released its earnings prior to the filing of its annual Form 10-K with the Securities and Exchange Commission, we are able to do this because we are a non-accelerated filer and as a result have more time to do so at fiscal year-end. During our quarterly reporting periods we anticipate that our earnings releases will continue to be released at the same time as our Form 10-Q's are filed with the Securities and Exchange Commission. We anticipate filing our Form 10-K with the Securities and Exchange Commission on September 10, 2020.

Guidance

Pro-Dex typically provides neither sales nor earnings guidance, and while the COVID-19 pandemic did not materially adversely affect our financial results in our fiscal year ended June 30, 2020, we cannot predict the longer-term impact of the pandemic on our business. Additionally, as described above, we released two new products in the second half of fiscal 2020 and while we expect to have future orders for these new products, often the launch or initial quantities are such that our customer can comfortably fill its distribution network and follow on orders may not occur for many months. As a result, fiscal 2020 sales of these products may not be indicative of what sales of these products may be in the future.

CEO Comments

"We are very pleased with our fourth quarter and fiscal year results, and the shipment of the thoracic driver and newly developed next-generation CMF driver. These two product releases occurred in quick succession and demonstrate the culmination of long periods of research and development as well as verification and validation. The timing of these product releases led to a record quarter. While we do not expect every quarter to have two launches and meet such record levels, we still plan to build our business year over year. Pro-Dex's priorities, in response to COVID-19, remain 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 a safe workplace for our employees, excellent service to our existing customers, and new product introductions to continue to grow our business."

R&D Projects

The amount spent on projects under development is summarized below (in thousands):

Years Ended June 30,

2020

2019

Expected

Market
Launch

Estimated Annual

Revenue

Dollars in thousands

Total Research and development costs:

$

2,315

$

1,882

Products in development:

Thoracic Driver

$

41

$

339

*

$

4,000

Arthroscopic Shaver (1)

6

297

06/21

$

600

ENT Shaver

475

11

01/21

$

1,000

Arthroscopic Attachment

-

17

(2

)

$

150

CMF Driver

194

9

12/20

$

1,000

Sustaining & Other

1,599

1,209

Total

$

2,315

$

1,882

* We substantially completed this product and began initial shipments of a private-labeled version to an existing CMF customer during the third quarter of fiscal 2020, generating $3.1 million in revenue during fiscal 2020.

(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 complete, but we are looking for the most attractive sales channel and have yet to sell this product.

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. Additionally, the customer CMF driver listed in the prior year was completed during fiscal 2020 and we began shipping initial quantities to this customer during the fourth quarter of fiscal 2020 and generated $556,000 in revenue related to this new product.

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, thoracic, 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 sells rotary air motors. 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, 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.
BALANCE SHEETS
(In thousands, except share data)

June 30,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

6,421

$

7,742

Investments

2,560

1,711

Accounts receivable, net of allowance for doubtful accounts of $6 and $0 at June 30, 2020 and 2019, respectively

5,155

4,100

Deferred costs

155

430

Inventory

8,238

6,239

Prepaid expenses and other current assets

145

623

Total current assets

22,674

20,845

Plant, equipment and leasehold improvements, net

2,686

2,726

Right of use asset, net

2,943

-

Intangibles, net

162

129

Deferred income taxes, net

259

260

Investments

2,360

1,520

Other assets

42

40

Total assets

$

31,126

$

25,520

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,965

$

1,996

Accrued liabilities

2,411

1,437

Deferred revenue

200

215

Note payable and capital lease obligations

651

622

Total current liabilities

5,227

4,270

Non-current liabilities:

Deferred rent

-

146

Lease liability, net of current portion

2,750

-

Income taxes payable

804

162

Notes and capital lease payable, net of current portion

3,283

3,934

Total non-current liabilities

6,837

4,242

Total liabilities

12,064

8,512

Commitments and Contingencies:

Shareholders' equity:

Common stock, no par value, 50,000,000 shares authorized; 3,811,137 and 4,039,491 shares issued and outstanding at June 30, 2020 and 2019, respectively

12,752

15,815

Accumulated other comprehensive loss

(1,586

)

(549

)

Retained earnings

7,896

1,742

Total shareholders' equity

19,062

17,008

Total liabilities and shareholders' equity

$

31,126

$

25,520

PRO-DEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three Months Ended
June 30,

(Unaudited)

Years Ended
June 30,

2020

2019

2020

2019

Net sales

$

11,125

$

7,003

$

34,834

$

27,172

Cost of sales

6,837

4,461

21,692

17,392

Gross profit

4,288

2,542

13,142

9,780

Operating (income) expenses:

Selling expenses

138

162

577

415

General and administrative expenses

1,137

654

3,189

2,492

Gain from disposal of equipment

(5

)

-

(5

)

(7

)

Research and development costs

815

545

2,315

1,882

Total operating expenses

2,085

1,361

6,076

4,782

Operating profit

2,203

1,181

7,066

4,998

Interest expense

(56

)

(65

)

(236

)

(220

)

Other income

935

10

952

45

Gain on sale of investments

25

-

25

356

Interest and dividend income

35

42

95

268

Income before income taxes

3,142

1,168

7,902

5,447

Income tax expense

596

280

1,790

1,299

Net income

$

2,546

$

888

$

6,112

$

4,148

Basic & Diluted income per share:

Basic net income per share

$

0.67

$

0.22

$

1.56

$

0.99

Diluted net income per share

$

0.64

$

0.21

$

1.50

$

0.97

Weighted average shares outstanding:

Basic

3,812,145

4,098,450

3,910,940

4,192,365

Diluted

3,979,944

4,204,365

4,078,087

4,298,332

PRO-DEX, INC.
STATEMENTS OF CASH FLOWS
(In thousands)

Years Ended June 30,

2020

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

6,112

$

4,148

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

573

438

Gain on sale of investments

(25

)

(356

)

Non-cash lease expense

41

-

Gain on sale or disposal of equipment

(5

)

(7

)

Amortization of loan fees

9

7

Share-based compensation

286

37

Deferred income taxes

(22

)

1,418

Bad debt expense (recovery)

6

(14

)

Changes in operating assets and liabilities:

Accounts receivable

(1,061

)

(1,131

)

Deferred costs

275

(398

)

Inventory

(1,999

)

(1,846

)

Prepaid expenses and other assets

476

(326

)

Accounts payable, accrued expenses and deferred rent

604

1,133

Deferred revenue

(15

)

184

Income taxes payable

642

39

Net cash provided by operating activities

5,897

3,326

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of equipment and leasehold improvements

(519

)

(1,387

)

Proceeds from dividend reclassified as return of principal

15

23

Proceeds from sale of equipment

5

7

Proceeds from collection of notes receivable

-

1,219

Proceeds from sale of investments

128

1,905

Increase in intangibles

(46

)

(11

)

Purchase of investments

(2,822

)

(2,978

)

Net cash used in investing activities

(3,239

)

(1,222

)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on capital lease and note payable

(630

)

(433

)

Borrowing from Minnesota Bank & Trust, net of loan origination fees

-

4,940

Repurchases of common stock

(3,388

)

(3,984

)

Payments of employee taxes on net issuance of common stock

-

(101

)

Proceeds from exercise of stock options and ESPP contributions

39

28

Net cash provided by (used in) financing activities

(3,979

)

450

Net increase (decrease) in cash and cash equivalents

(1,321

)

2,554

Cash and cash equivalents, beginning of year

7,742

5,188

Cash and cash equivalents, end of year

$

6,421

$

7,742

Contact: Richard L. Van Kirk, Chief Executive Officer
(949) 769-3200

SOURCE: Pro-Dex, Inc.



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https://www.accesswire.com/603491/Pro-Dex-Inc-Announces-Fiscal-2020-Fourth-Quarter-and-Full-Year-Results