Dynatronics Corp (NASDAQ:DYNT) Q2 2019 Earnings Conference Call Transcript

Feb 13, 2019 • 08:30 am ET

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Dynatronics Corp (NASDAQ:DYNT) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the Dynatronics Second Quarter 2019 Earnings Call. All lines have been placed on a listen-only mode. (Operator Instructions)

At this time, it is my pleasure to turn the floor over to your host, Christopher Von Jako, CEO.

Executive
Christopher von Jako

Good morning, and welcome to the Dynatronics Investor call. I'm Chris von Yako, Chief Executive Officer. And with me on the line is David Wirthlin, our Chief Financial Officer. We issued a press release this morning announcing the financial results of our second fiscal quarter and six months ended December 31, 2018. Later this morning, we will file our 10-Q for the quarter.

Today I will provide brief commentary of our second quarter, and then I will turn it over to David to provide a detailed analysis of our financial performance. I will follow this up by providing an update of our fiscal 2019 financial guidance. At the conclusion of our commentary, we will have the operator open the phone lines for questions.

Before we begin , let me remind you that during the course of this call we will make forward-looking statements regarding our current expectations, plans, projections, and financial performance relating to our business. These forward-looking statements reflect our view as of today only, and they will involve risks and uncertainties that could cause our actual results to differ materially from those discussed today.

Important factors that could cause actual results to differ materially from those projected or implied by our forward-looking statements today are included in our most recent 10-K filed with the SEC. I caution you not to place undue reliance on forward-looking statements we make this morning. We undertake no obligation to update or revise forward-looking statements.

The second quarter of fiscal 2019 was rewarding strategically, but our financial performance was somewhat weaker-than-expected, as we continue to position Dynatronics for long-term success. Our focus remains twofold. First, we have been driving profitability with continued operational improvements in our therapy products business; and second, we're continuing our efforts to scale the Company by organic growth and by acquisition.

Our sales for the quarter declined somewhat more than expected, primarily due to reduced sales of our physical therapy and rehabilitation products in our direct channel. As expected, sales decrease due to transition to the sales force and the product rationalization project we implemented at the beginning of the fiscal year. In addition, we experienced general softness in demand through our direct channel.

The decline in sales in the direct channel also had the impact of reducing our gross margin percentage. As the mix of sales was weighted more heavily to the dealer channel, the average selling price decreased, thus reducing gross margin percentage. A corresponding reduction in the selling expenses partially offset the decline in gross profit.

In the last several quarters, we have significantly reduced general and administrative expenses in selling overhead in unproductive direct sales territories for our physical therapy and rehabilitation products. Focusing the organization on a streamlined, more customer-focused