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

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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