Electromed, Inc.

Previous wording

The SmartVest System is often eligible for reimbursement from major private insurance providers, health maintenance organizations (“HMOs”), state Medicaid systems, and the federal Medicare system, which we believe is an important consideration for patients considering an HFCWO course of therapy. For domestic sales, the SmartVest System may be reimbursed under the Medicare-assigned billing code (E0483) for HFCWO devices if the patient has cystic fibrosis, bronchiectasis (including chronic bronchitis or COPD that has resulted in a diagnosis of bronchiectasis), or any one of certain enumerated neuromuscular diseases and myopathies and can demonstrate that another less expensive physical or mechanical treatment did not adequately mobilize retained secretions. Private payers consider a variety of sources, including Medicare, as guidelines in setting their coverage policies and payment amounts.

Current wording

The SmartVest System is often eligible for reimbursement from major private insurance providers, health maintenance organizations (“HMOs”), state Medicaid systems, and the federal Medicare system, which we believe is an important consideration for patients considering an HFCWO course of therapy. For domestic sales, the SmartVest System may be reimbursed under the Medicare-assigned billing code (E0483) for HFCWO devices if the patient has cystic fibrosis, bronchiectasis (including chronic bronchitis or Chronic Obstructive Pulmonary Disease that has resulted in a diagnosis of bronchiectasis), or any one of certain enumerated neuromuscular diseases and myopathies and can demonstrate that another less expensive physical or mechanical treatment did not adequately mobilize retained secretions. Private payers consider a variety of sources, including Medicare, as guidelines in setting their coverage policies and payment amounts.

Previous wording

Net revenues for the three and nine months ended March 31, 2026, and 2025 are summarized in the table below.

Current wording

Net revenues for the three months ended September 30, 2026, and 2025 are summarized in the table below.

Previous wording

***Homecare revenue.***Homecare revenue increased by $2,630,000, or 18.6%, for the three months ended March 31, 2026, compared to the same period in the prior year. Approximately $1,959,000 of the increase in revenue was due to higher volume, which was driven by additional sales representatives and increased sales representative productivity, and approximately $671,000 was due to higher net revenues per approval. For the nine months ended March 31, 2026, homecare revenue increased by $6,989,000, or 16.7%, compared to the same period in the prior year. Approximately $5,699,000 of the increase in revenue was due to higher volume, which was driven by additional sales representatives and increased sales representative productivity, and approximately $1,290,000 was due to higher net revenues per approval. For the three months ended March 31, 2026, we averaged 57 homecare field sales representatives.

Current wording

***Homecare revenue.***Homecare revenue increased by $2,617,000, or 17.6%, for the three months ended September 30, 2026, compared to the same period in the prior year. The increase in revenue was due to higher volume, which was driven by additional sales representatives and increased sales representative productivity. Throughout the three months ended September 30, 2026, we averaged 63 homecare field sales representatives.

Previous wording

Homecare distributor revenue.* *Homecare distributor revenue increased by $19,000, or 2.7%, for the three months ended March 31, 2026, compared to the same period in the prior year. For the nine months ended March 31, 2026, homecare distributor revenue increased by $359,000, or 17.2%, compared to the same period in the prior year. The increases in homecare distributor sales were primarily a result of increased orders from our distribution partners.

Current wording

Homecare distributor revenue.* *Homecare distributor revenue decreased by $463,000, or 55.9%, for the three months ended September 30, 2026, compared to the same period in the prior year. The decrease in homecare distributor sales was primarily a result of timing of distributor purchases.

Previous wording

Other revenue.* *Other revenue was $96,000, a decrease of $66,000, or 40.7%, for the three months ended March 31, 2026, compared to the same period in the prior year. For the nine months ended March 31, 2026, other revenue was $281,000, a decrease of $193,000, or 40.7%, compared to the same period in the prior year. Thedecreasesin other revenue were primarily due to the lower demand for purchases by international distributors and other customers that do not fall within the markets described above.

Current wording

Other revenue.* *Other revenue was $94,000, a decrease of $28,000, or 23.0%, for the three months ended September 30, 2026, compared to the same period in the prior year. Thedecreasein other revenue was primarily due to the lower demand for purchases by international distributors and other customers that do not fall within the markets described above.

Previous wording

Gross profit dollars increased to $14,643,000, or 78.8% of net revenues, for the three months ended March 31, 2026, from $12,229,000, or 78.0% of net revenues, in the same period in the prior year. Gross profit dollars increased to $42,659,000, or 78.5% of net revenues, for the nine months ended March 31, 2026, from $36,347,000, or 78.0% of net revenues, in the same period in the prior year. The increases in gross profit were primarily a result of increased overall revenue and higher net revenues per device.

Current wording

Gross profit dollars increased to $14,937,000, or 80.0% of net revenues, for the three months ended September 30, 2026, from $13,197,000, or 78.1% of net revenues, in the same period in the prior year. The increase in gross profit was primarily a result of increased overall revenue and the increase in gross profit percentage was due to revenue mix.

Previous wording

*Selling, general and administrative expenses.*Selling, general and administrative (“SG&A”) expenses were $10,516,000 and $31,617,000 for the three and nine months ended March 31, 2026, respectively, representing an increase of $704,000 and $2,584,000, or 7.2% and 8.9%, respectively, compared to the same periods in the prior year.

Current wording

*Selling, general and administrative expenses.*Selling, general and administrative (“SG&A”) expenses were $11,171,000 for the three months ended September 30, 2026, representing an increase of $885,000, or 8.6%, compared to the same period in the prior year.

Previous wording

Payroll and compensation-related expenses were $6,955,000 and $21,326,000 for the three and nine months ended March 31, 2026, respectively, representing an increase of $363,000 and $1,402,000, or 5.5% and 7.0%, respectively, compared to the same periods in the prior year. The increases in the current-year periods were primarily due to the increase in salaries and incentive compensation related to the higher average number of sales representatives and higher overall compensation costs. We have also continued to provide regular merit-based increases for our employees and are regularly benchmarking our compensation ranges, including share-based compensation, for new and existing employees to ensure we can hire and retain the talent needed to drive growth in our business.

Current wording

Payroll and compensation-related expenses were $7,413,000 for the three months ended September 30, 2026, representing an increase of $537,000, or 7.8%, compared to the same period in the prior year. The increase was primarily due to the increase in salaries and incentive compensation related to the higher average number of sales representatives and higher overall compensation costs. We have also continued to provide regular merit-based increases for our employees and are regularly benchmarking our compensation ranges, including share-based compensation, for new and existing employees to ensure we can hire and retain the talent needed to drive growth in our business.

Previous wording

Travel, meals and entertainment expenses were $1,070,000 and $3,357,000 for the three and nine months ended March 31, 2026, respectively, representing an increase of $148,000 and $477,000, or 16.1% and 16.6%, respectively, compared to the same periods in the prior year. The increases in the current year were primarily due to a higher average number of direct sales representatives, training, and increased travel to support sales activity as well as market development.

Current wording

Travel, meals and entertainment expenses were $1,502,000 for the three months ended September 30, 2026, representing an increase of $228,000, or 17.9%, compared to the same period in the prior year. The increase in the current-year period was primarily due to a higher average number of direct sales representatives, training, and increased travel to support sales activity as well as market development.

Previous wording

Total discretionary marketing expenses were $293,000 and $1,146,000 for the three and nine months ended March 31, 2026, respectively, representing a decrease of $32,000 and an increase of $203,000, or a decrease of 9.8% and an increase of 21.5%, respectively, compared to the same period in the prior year. The decrease in the three months ended March 31, 2026, was due to timing of routine marketing spend. The increase in the nine months ended March 31, 2026, was due to increased investment in our direct-to-consumer advertising and other market development initiatives.

Current wording

Total discretionary marketing expenses were $323,000 for the three months ended September 30, 2026, representing a decrease of $87,000, or 21.2%, compared to the same period in the prior year. The decrease was due to timing of routine marketing spend.

Previous wording

Professional fees were $1,452,000 and $3,708,000 for the three and nine months ended March 31, 2026, respectively, representing an increase of $167,000 and $104,000, or 13.0% and 2.9%, respectively, compared to the same periods in the prior year. Professional fees are primarily for services related to legal costs, shareowner services and reporting requirements, information technology technical support, insurance and consulting fees. The increases in the current periods were primarily due to increased legal and insurance costs.

Current wording

Professional fees were $1,187,000 for the three months ended September 30, 2026, representing an increase of $97,000, or 8.9%, compared to the same period in the prior year. Professional fees are primarily for services related to legal costs, shareowner services and reporting requirements, information technology technical support, insurance and consulting fees. The increase in the current period was primarily due to increased recruiting and consulting costs.

Previous wording

Research and development expenses. Research and development (“R&D”) expenses were $361,000 and $986,000 for the three and nine months ended March 31, 2026, respectively, representing an increase of $84,000 and $292,000, or 30.3% and 42.1%, respectively, compared to the same periods in the prior year. The increases were primarily due to increased average headcount and consulting expenses related to product enhancements and sustaining engineering.

Current wording

Research and development expenses. Research and development (“R&D”) expenses were $277,000 for the three months ended September 30, 2026, representing an increase of $36,000, or 14.9%, compared to the same period in the prior year. The increase was primarily due to increased average headcount and consulting expenses related to product enhancements and sustaining engineering.

Previous wording

Operating income increased by $1,626,000 or 76.0% to $3,766,000, or 20.3% of net revenues, for the three months ended March 31, 2026, compared to the same period in the prior year. Operating income increased by $3,436,000 or 51.9% to $10,056,000, or 18.5% of net revenues, for the nine months ended March 31, 2026, compared to the same period in the prior year. The increases were primarily due to an increase in revenue and gross profit.

Current wording

Operating income increased by $819,000, or 30.7%, to $3,489,000, or 18.7% of net revenues, for the three months ended September 30, 2026, compared to the same period in the prior year. The increase was primarily due to an increase in revenue and gross profit.

Previous wording

Net interest income for the three and nine months ended March 31, 2026, was $100,000 and $343,000, respectively, compared to $142,000 and $489,000, respectively, for the same period in the prior year. The decreases were primarily due to decreased interest rates and lower average cash balances throughout the period.

Current wording

Net interest income for the three months ended September 30, 2026, was $148,000, compared to $134,000 for the same period in the prior year. The increase was primarily due to an increase in average cash balances, partially offset by a decrease in interest rates.

Previous wording

Income tax expense was estimated at $391,000 and $1,776,000, and the effective tax rate was 17.1% and 25.0%, for the three and nine months ended March 31, 2025, respectively. Estimated income tax expense for the three and nine months ended March 31, 2025, includes a discrete current tax benefit of $338,000 and $478,000, respectively, primarily related to the exercise of stock options.

Current wording

Income tax expense was estimated at $876,000, and the effective tax rate was 24.1%, for the three months ended September 30, 2026. Estimated income tax expense for the three months ended September 30, 2026, includes a discrete current tax benefit of $75,000, primarily related to the windfall tax benefit of vested stock awards and vested restricted stock units.

Previous wording

Income tax expense was estimated at $863,000 and $2,499,000, and the effective tax rate was 22.3% and 24.0%, for the three and nine months ended March 31, 2026, respectively. Estimated income tax expense for the three and nine months ended March 31, 2026, includes a discrete current tax benefit of $94,000 and $197,000, respectively, primarily related to the windfall tax benefit of vested stock awards, the exercise of stock options, and the true up for the prior year Federal R&D credit.

Current wording

Income tax expense was estimated at $668,000, and the effective tax rate was 23.8%, for the three months ended September 30, 2025. Estimated income tax expense for the three months ended September 30, 2025, includes a discrete current tax benefit of $81,000, primarily related to the windfall tax benefit of vested stock awards and the exercise of stock options.

Previous wording

Net income for the three and nine months ended March 31, 2026, was $3,003,000 and $7,900,000, representing an increase of 58.8% and 48.1%, respectively, compared to $1,891,000 and $5,333,000 for the same periods in the prior year. The increases in net income were primarily due to increased revenue and gross profit.

Current wording

Net income for the three months ended September 30, 2026, was $2,761,000, representing an increase of 29.3% compared to $2,136,000 for the same period in the prior year. The increase in net income was primarily due to increased revenue and gross profit.

Previous wording

For the nine months ended March 31, 2026, net cash provided by operating activities was $6,671,000. Cash flows provided by operating activities consisted of net income of $7,900,000, non-cash expenses of $2,764,000, a decrease in income tax receivable, net of $393,000, and an increase in accounts payable and accrued expenses of $291,000. These cash flows from operating activities were offset by an increase in accounts receivable of $3,591,000, a decrease in accrued compensation of $549,000, an increase in prepaid expenses and other assets of $364,000, an increase in inventories of $123,000, and an increase in contract assets of $50,000.

Current wording

For the three months ended September 30, 2026, net cash provided by operating activities was $373,000. Cash flows provided by operating activities consisted of net income of $2,761,000, non-cash expenses of $701,000, a decrease in income tax receivable, net of $763,000, a decrease in prepaid expenses and other assets of $284,000, and a decrease in contract assets of $68,000. These cash flows from operating activities were offset by a decrease in accrued compensation of $3,241,000, an increase in accounts receivable of $462,000, a decrease in accounts payable and accrued expenses of $347,000, and an increase in inventories of $154,000.

Previous wording

For the nine months ended March 31, 2026, cash used for investing activities was $1,077,000. Cash used for investing activities consisted of $1,033,000 in expenditures for property and equipment and $44,000 in expenditures for intangible assets.

Current wording

For the three months ended September 30, 2026, cash used for investing activities was $202,000. Cash used for investing activities consisted of $165,000 in expenditures for property and equipment and $37,000 in expenditures for intangible assets.

Previous wording

For the nine months ended March 31, 2026, cash used for financing activities was $3,896,000. Cash used for financing activities consisted of $3,918,000 used for our share repurchase program and $246,000 for taxes paid on net share settlement of stock awards, partially offset by $268,000 from the issuance of common stock upon exercise of options.

Current wording

For the three months ended September 30, 2026, cash used for financing activities was $4,746,000. Cash used for financing activities consisted of $4,328,000 used for our share repurchase program and $466,000 for taxes paid on net share settlement of stock awards, partially offset by $48,000 received from the issuance of common stock upon exercise of options.

Previous wording

Our primary working capital requirements relate to adding employees to our sales force and support functions, continuing infrastructure investments, and supporting general corporate needs, including financing equipment purchases and other capital expenditures incurred in the ordinary course of business. Based on our current operational performance, we believe our working capital of approximately $40,002,000 and available borrowings under our existing credit facility will provide sufficient liquidity to meet our anticipated working capital and other liquidity needs for the next twelve months from the date of this report.

Current wording

Our primary working capital requirements relate to adding employees to our sales force and support functions, continuing infrastructure investments, and supporting general corporate needs, including financing equipment purchases and other capital expenditures incurred in the ordinary course of business. Based on our current operational performance, we believe our working capital of approximately $44,933,000 and available borrowings under our existing credit facility will provide sufficient liquidity to meet our anticipated working capital and other liquidity needs for the next twelve months from the date of this report.

Previous wording

We maintain a credit facility that was entered into in December 2025, which provides us with a revolving line of credit. The credit agreement provides the Company with a senior security credit facility with a $10,000,000 revolving line of credit. Any borrowings under the credit facility will bear interest at the applicable one-month Term SOFR (3.67% on March 31, 2026), plus 1.75%, payable monthly. The credit agreement provides that the credit facility will mature on December 16, 2026, if not renewed before such date. There was no outstanding principal balance on the line of credit as of March 31, 2026. The Company provided a first priority security interest in substantially all of its existing and future assets to secure the payment obligations under the credit agreement.

Current wording

We maintain a credit facility that was entered into in December 2025, which provides us with a revolving line of credit. The credit agreement provides the Company with a senior secured credit facility with a $10,000,000 revolving line of credit. Any borrowings under the credit facility will bear interest at the applicable one-month Term SOFR (3.68% on September 30, 2026), plus 1.75%, payable monthly. The credit agreement provides that the credit facility will mature on December 16, 2026, if not renewed or replaced before such date. There was no outstanding principal balance on the line of credit as of September 30, 2026. The Company provided a first priority security interest in substantially all of its existing and future assets to secure the payment obligations under the credit agreement.

Previous wording

For the nine months ended March 31, 2026, and 2025, we spent approximately $1,033,000 and $117,000, respectively, on property and equipment. We currently expect to finance planned equipment purchases with cash flows from operations or borrowings under our credit facility. We may need to incur additional debt if we have an unforeseen need for additional capital equipment or if our operating performance does not generate adequate cash flow.

Current wording

For the three months ended September 30, 2026, and 2025, we spent approximately $165,000 and $252,000, respectively, on property and equipment. We currently expect to finance planned equipment purchases with cash flows from operations or borrowings under our credit facility. We may need to incur additional debt if we have an unforeseen need for additional capital equipment or if our operating performance does not generate adequate cash flow.

Previous wording

While the impact of macroeconomic factors such as inflation are difficult to predict, we believe our cash, cash equivalents and cash flows from operations will be sufficient to meet our working capital, capital expenditure, and operational cash requirements for fiscal 2026 and the foreseeable future. We will continue to evaluate our projected expenditures relative to our available cash and evaluate financing alternatives to satisfy our working capital and other cash requirements.

Current wording

While the impact of macroeconomic factors such as inflation is difficult to predict, we believe our cash, cash equivalents and cash flows from operations will be sufficient to meet our working capital, capital expenditure, and operational cash requirements for fiscal 2027 and the foreseeable future. We will continue to evaluate our projected expenditures relative to our available cash and evaluate financing alternatives to satisfy our working capital and other cash requirements.