Pro-Dex, Inc. Announces Fiscal 2018 Third Quarter and Nine-Month Results

IRVINE, CA / ACCESSWIRE / May 10, 2018 / PRO-DEX, INC. (NASDAQ: PDEX) today announced financial results for its fiscal 2018 third quarter ended March 31, 2018. The Company also filed its Quarterly Report on Form 10-Q for the third quarter of fiscal year 2018 with the Securities and Exchange Commission today.

Quarter Ended March 31, 2018

Net sales for the three months ended March 31, 2018 decreased $1.1 million, or 17%, to $5.5 million from $6.6 million for the three months ended March 31, 2017, due primarily to the completion in the prior year of an engineering project for a new product for one of our medical device customers allowing us to record approximately $750,000 in non-recurring engineering service revenue coupled with the shipment of the initial product order of both batteries and handpieces in the amount of approximately $600,000. We had no similar product development launches in the third quarter of fiscal 2018.

Gross profit for the three months ended March 31, 2018 decreased $486,000, or 20%, to $2.0 million from $2.5 million for the same period in fiscal 2017. The decrease in gross profit is reflective of the decline in revenue discussed above.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended March 31, 2018 increased $230,000, or 20%, to 1.3 million from 1.1 million for the same period in fiscal 2017. This increase is primarily attributable to $227,000 in expenses associated with our ongoing internal development of a Pro-Dex branded thoracic driver utilizing our adaptive torque-limiting technology. We commenced development of this driver in March, 2017 and the corresponding expense for the quarter ended March 31, 2017 was less than $10,000.

Income from continuing operations for the quarter ended March 31, 2018 decreased by $223,000 to $480,000, compared to $703,000 in the corresponding quarter in fiscal 2017. Net income for the quarter ended March 31, 2018 was $480,000, or $0.11 per share, compared to $888,000, or $0.22 per share, for the corresponding quarter in fiscal 2017.

Nine Months Ended March 31, 2018

Net sales for the nine months ended March 31, 2018 decreased $129,000, or 1%, to $16.2 million from $16.3 million for the nine months ended March 31, 2017, due primarily to increases in medical device product revenues to three significant distributors, offset by sales of our most recently launched CMF driver during the third quarter of fiscal 2017 discussed above.

Gross profit for the nine months ended March 31, 2018 increased $358,000 or 7% compared to the same period in fiscal 2017. The gross profit increase is due to reduced lower margin non-recurring engineering services as well as management of our fixed manufacturing costs.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the nine months ended March 31, 2018 increased 13% to $3.7 million from $3.3 million in the prior fiscal year’s corresponding period, reflecting primarily increased research and development costs as we focus development efforts on a Pro-Dex branded thoracic driver described above.

Income from continuing operations for the nine months ended March 31, 2018 was $1.5 million, compared to $4.1 million for the corresponding period in fiscal 2017. The decrease reflects the tax benefit recorded in the second quarter of fiscal 2017 due to the release of the valuation allowance against our deferred tax assets. Net income for the nine months ended March 31, 2018 was $1.5 million, or $0.34 per share, compared to $4.4 million, or $1.07 per share, for the corresponding period in fiscal 2017.

CEO Comments

Richard L. (“Rick”) Van Kirk, the Company’s President and Chief Executive Officer, commented, “We are pleased with our third quarter and year-to-date results, which align with our expectations and internal plan, as well as the progress we are making on our internally developed thoracic driver, which will be available for sale in the first quarter of fiscal 2019. We continue to reinvest and focus our growth on our core medical device product and service revenue.”

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, 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.

Contact:

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

PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)

March 31,

2018

June 30,

2017

ASSETS

Current Assets:

Cash and cash equivalents

$
5,099

$
4,205

Investments

1,438

718

Accounts receivable, net of allowance for doubtful accounts of $4 and $3, at March 31, 2018 and June 30, 2017, respectively

3,434

3,538

Deferred costs

—

Assets held for sale

178

363

Inventory

3,382

3,084

Notes receivable

1,150

—

Prepaid expenses and other current assets

201

363

Total current assets

14,882

12,283

Equipment and leasehold improvements, net

1,739

1,350

Deferred income taxes

1,845

2,048

Notes receivable

800

450

Intangibles, net

145

149

Other assets

Total assets

$
19,482

$
16,351

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$
873

$
1,159

Accrued expenses

972

1,344

Deferred revenue

Notes payable

—

Capital lease obligations

Total current liabilities

1,956

2,580

Deferred rent, net of current portion

—

Notes and capital leases payable, net of current portion

Total non-current liabilities

Total liabilities

2,053

2,641

Shareholders’ equity:

Common shares; no par value; 50,000,000 shares authorized; 4,361,479 and 4,025,193 shares issued and outstanding at March 31, 2018 and June 30, 2017, respectively

20,034

17,704

Accumulated other comprehensive income

(31
)

Accumulated deficit

(2,574
)

(4,027
)

Total shareholders’ equity

17,429

13,710

Total liabilities and shareholders’ equity

$
19,482

$
16,351

PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Unaudited)
(In thousands, except per share amounts)

Three Months Ended

March 31,

Nine Months Ended

March 31,

2018

2017

2018

2017

Net sales

$
5,494

$
6,618

$
16,217

$
16,346

Cost of sales

3,518

4,156

10,663

11,150

Gross profit

1,976

2,462

5,554

5,196

Operating expenses:

Selling expenses

132

257

439

General and administrative expenses

701

725

1,781

1,894

Impairment of goodwill and long-lived assets

—

230

113

Research and development costs

560

257

1,445

839

Total operating expenses

1,344

1,114

3,713

3,285

Operating income

632

1,348

1,841

1,911

Interest expense

(2
)

(3
)

(6
)

(10
)

Interest income

166

Gain from disposal of equipment

—

Income from continuing operations before income taxes

703

1,353

2,017

1,923

Income tax (expense) benefit

(223
)

(650
)

(564
)

2,202

Income from continuing operations

480

703

1,453

4,125

Income from discontinued operations,net of income taxes

—

185

—

243

Net income

$
480

$
888

$
1,453

$
4,368

Other comprehensive income, net of tax:

Unrealized gain (loss) from marketable equity investments, net of income taxes

(86
)

—

Comprehensive income

$
539

$
894

$
1,367

$
4,368

Basic net income per share:

Income from continuing operations

$
0.11

$
0.17

$
0.34

$
1.02

Income from discontinued operations

—

0.05

—

0.06

Net income

$
0.11

$
0.22

$
0.34

$
1.08

Diluted net income per share:

Income from continuing operations

$
0.11

$
0.17

$
0.34

$
1.01

Income from discontinued operations

—

0.05

—

0.06

Net income

$
0.11

$
0.22

$
0.34

$
1.07

Weighted average common shares outstanding:

Basic

4,363

4,021

4,290

4,047

Diluted

4,403

4,055

4,330

4,085

Common shares outstanding

4,361

4,014

4,361

4,014

PRO-DEX, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Nine Months Ended

March 31,

2018

2017

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
1,453

$
4,368

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

Depreciation and amortization

472

418

Gain on disposal of equipment

(16
)

(3
)

Gain on sale of OMS

—

(327
)

Share-based compensation

191

Impairment of goodwill and long-lived assets

230

113

Deferred income taxes

203

(2,232
)

Income tax effect of unrealized gains and losses

—

Bad debt recovery

—

(16
)

Changes in operating assets and liabilities:

Accounts receivable, due from factor and other current receivables

103

(981
)

Deferred costs

235

Assets held for sale

(84
)

(27
)

Inventory

(298
)

389

Prepaid expenses and other assets

(117
)

Accounts payable, accrued expenses and deferred rent

(576
)

118

Deferred revenue

(153
)

Income taxes payable

—

132

Net cash provided by operating activities

1,789

1,920

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of investments

(806
)

(336
)

Purchases of equipment and leasehold improvements

(820
)

(552
)

Increase in notes receivable

(1,500
)

—

Proceeds from liquidation of Ramsey assets

—

Proceeds from sale of OMS

—

636

Proceeds from sale of equipment

Increase in intangibles

(11
)

(20
)

Net cash used in investing activities

(3,107
)

(183
)

CASH FLOWS FROM FINANCING ACTIVITIES:

Repurchases of common stock

(18
)

(312
)

Proceeds from shares issued under ATM, net of commissions and fees

2,262

—

Proceeds from exercise of options and ESPP contributions

Borrowings from Summit Loan

—

600

Repayments on Summit Loan

—

(600
)

Principal payments on notes payable and capital lease

(70
)

(44
)

Net cash provided by (used in) financing activities

2,212

(332
)

Net increase in cash and cash equivalents

894

1,405

Cash and cash equivalents, beginning of period

4,205

2,294

Cash and cash equivalents, end of period

$
5,099

$
3,699

SOURCE: Pro-Dex, Inc.

ReleaseID: 499278

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