PRO-DEX, INC. Announces Fiscal 2020 First Quarter Results

IRVINE, CA / ACCESSWIRE / November 7, 2019 / PRO-DEX, INC. (NasdaqCM:PDEX) today announced financial results for its fiscal 2020 first quarter ended September 30, 2019.

Net sales for the three months ended September 30, 2019, increased $324,000, or 5%, to $7.2 million from $6.9 million for the three months ended September 30, 2018. The increase is driven by increased sales to our largest customer, primarily increased repair revenue.

Gross profit for the three months ended September 30, 2019, remained fairly flat, increasing $53,000, or 2%, to $2.8 million, compared to $2.7 million for the year-ago period. Gross margin decreased by 1 percentage point to 38% during the three months ended September 30, 2019, compared to 39% during the corresponding year-ago period.

Operating expenses (which include selling, general and administrative, and research and development expenses) for the quarter ended September 30, 2019 increased $290,000 from the corresponding year-ago period. We are increasing these expenditures in an effort to release new products and garner new customer relationships.

Net income for the quarter ended September 30, 2019, was $1.1 million, or $0.27 per diluted share, compared to $1.3 million or $0.31 per diluted share, for the quarter ended September 30, 2018.

CEO Comments

Richard L. (“Rick”) Van Kirk, the Company’s President and Chief Executive Officer, commented, “We are pleased with our first quarter results, which include another record-breaking sales level in excess of $7 million. We continue to reinvest our profits in both research and development and business development to continue to grow our core medical device business. Finally,” concluded Mr. Van Kirk, “we have experienced delays in our planned product launches as we modify our thoracic driver to meet our customer’s specific needs.”

The amount spent on projects under development, along with the current estimated commercial launch date and estimated recurring annual revenue is summarized below (in thousands):

 
  For the Three Months Ended September 30,              
 
  2019     2018     Market Launch     Est. Annual Revenue  
Total Research & Development costs:
  484     408              
 
                           
Products in development:
                           
Thoracic Driver
  19     75       03/20     4,000  
Arthroscopic Shaver.
    6       22       06/20     600  
Arthroscopic Attachment
          6       12/19     150  
CMF Driver
    17             06/20     350  
Sustaining & Other
    442       305                  
Total.
  484     408                  
 
                               
Customer CMF Driver (1)
 
  99     54       12/19     2,500  
  1. Costs incurred related to customer contracts are included in costs of sales and deferred costs and are not included in research and development costs.

The completion of our thoracic driver is currently a priority for our engineering team. The costs in the table above represent our costs related to our Pro-Dex branded driver, which is substantially complete. As we previously discussed, in early fiscal 2019 we entered a development contract with a current significant customer to private-label this driver for their unique specifications. We have had technical delays related to performance of this driver with a specific customer attachment. We currently believe we will launch this product in the third quarter of this fiscal year and have delayed the anticipated launch of most other products to focus on the completion of this thoracic driver.

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 that appeal to our customers, primarily medical device distributors. Pro-Dex also sells compact pneumatic air motors for a variety of industrial applications. 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.
CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands, except share amounts)

 
  September 30,
2019
   
June 30,
2019
 
ASSETS
           
Current Assets:
           
Cash and cash equivalents
  $ 6,502     $ 7,742  
Investments
    3,127       2,649  
Accounts receivable, net of allowance for doubtful accounts of $12 and $0 at September 30, 2019 and at June 30, 2019, respectively
    3,157       4,100  
Deferred costs
    493       430  
Inventory
    6,844       6,239  
Prepaid expenses and other current assets
    232       623  
Total current assets
    20,355       21,783  
Equipment and leasehold improvements, net
    2,653       2,726  
Right of use asset, net
    3,187        
Intangibles, net
    129       129  
Deferred income taxes, net
    301       260  
Investments
    1,306       582  
Other assets
    40       40  
Total assets
  $ 27,971     $ 25,520  
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current Liabilities:
               
Accounts payable
  $ 1,376     $ 1,996  
Accrued expenses
    1,306       1,437  
Deferred revenue
    240       215  
Note payable and capital lease obligations
    624       622  
Total current liabilities
    3,546       4,270  
Deferred rent
          146  
Lease liability, net of current portion
    3,015        
Income taxes payable
    191       162  
Notes and capital leases payable, net of current portion
    3,775       3,934  
Total non-current liabilities
    6,981       4,242  
Total liabilities
    10,527       8,512  
Shareholders’ equity:
               
Common shares; no par value; 50,000,000 shares authorized; 3,990,995 and 4,039,491 shares issued and outstanding at September 30, 2019 and June 30, 2019, respectively
    15,161       15,815  
Accumulated other comprehensive loss
    (606 )     (549 )
Retained earnings
    2,889       1,742  
Total shareholders’ equity
    17,444       17,008  
Total liabilities and shareholders’ equity
  $ 27,971     $ 25,520  
 
               

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

 
  Three Months Ended September 30,  
 
  2019     2018  
 
           
Net sales
  $ 7,240     $ 6,916  
Cost of sales
    4,460       4,189  
Gross profit
    2,780       2,727  
 
               
Operating (income) expenses:
               
Selling expenses
    142       33  
General and administrative expenses
    663       565  
Gain on disposal of equipment
          (7 )
Research and development costs
    484       408  
Total operating expenses
    1,289       999  
Operating income
    1,491       1,728  
Other income (expense):
               
Interest and miscellaneous income
    35       74  
Interest expense
    (59 )     (20 )
Total other income (expense)
    (24 )     54  
 
               
Income before income taxes
    1,467       1,782  
Provision for income taxes
    363       433  
Net income
    1,104       1,349  
Other comprehensive income (loss), net of tax:
               
Unrealized gain (loss) from marketable equity investments, net of taxes
    (57 )     298  
Comprehensive income
  $ 1,047     $ 1,647  
 
               
Basic and diluted income per share:
               
Basic net income per share
  $ 0.28     $ 0.31  
Diluted net income per share
  $ 0.27     $ 0.31  
 
               
Weighted average common shares outstanding:
               
Basic
    4,008,017       4,330,636  
Diluted
    4,110,414       4,372,893  
Common shares outstanding
    3,990,995       4,249,548  

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

 
 
Three Months Ended
September 30,
 
 
  2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 1,104     $ 1,349  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    138       88  
Share-based compensation
    12       10  
Non-cash lease expense
    13        
Amortization of loan fees
    2        
Gain on disposal of equipment
          (7 )
Deferred income tax
    (41 )     404  
Bad debt expense (recovery)
    12       (13 )
Changes in operating assets and liabilities:
               
Accounts receivable and other receivables
    931       (655 )
Deferred costs
    (63 )     (50 )
Inventory
    (605 )     (172 )
Prepaid expenses and other assets
    391       (152 )
Accounts payable and accrued expenses
    (1,040 )     (82 )
Deferred revenue
    25       39  
Income taxes payable
    29       (123 )
Net cash provided by operating activities
    908       636  
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Purchases of equipment
    (61 )     (477 )
Purchases of investments
    (1,258 )     (824 )
Decrease (increase) in intangibles
    (4 )     1  
Proceeds from disposal of equipment
          7  
Net cash used in investing activities
    (1,323 )     (1,293 )
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Principal payments on capital lease and notes payable
    (159 )     (10 )
Borrowings from Minnesota Bank & Trust
          5,000  
Payment of employee payroll taxes on net issuance of common stock
          (101 )
Proceeds from ESPP Contributions
    15       10  
Repurchases of common stock
    (681 )     (1,115 )
Net cash provided by (used in) financing activities
    (825 )     3,784  
 
               
Net increase (decrease) in cash and cash equivalents
    (1,240 )     3,127  
Cash and cash equivalents, beginning of period
    7,742       5,188  
Cash and cash equivalents, end of period
  $ 6,502     $ 8,315  
 
               

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

SOURCE: PRO-DEX, INC.

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