Name: DYNATRONICS CORP Q3 2024 Earnings Call
Start: 2024-05-16T00:00:00.000Z

Executive Summary

Q3 FY24 revenue was $7.66M with gross margin of 23.7%; net loss to common was $0.85M ($0.17 per share), improving from a $1.42M loss ($0.36) in Q3 FY23 as cost reductions flowed through .
Management cut FY24 revenue guidance to $32.5–$34.0M (from prior expectation anchored at the low end of $34–$37M) on slower rehab demand and changes to private label relationships; SG&A guidance narrowed to 30–32% of sales (from 29–33%) .
Operating discipline continued: SG&A fell ~30% YoY to $2.39M in Q3; gross margin held roughly flat YoY (23.7% vs. 23.9%) despite lower sales, aided by mix and cost actions .
Liquidity is tight but stable: cash ~$0.6M; LOC drawn ~$2.4M with ~$1.9M availability to support working capital; proceeds reduced payables and accrued expenses by ~$1.7M YTD .
Product catalysts: three new Hausmann lines (Timber, Titan Premier, Forged) launched with positive customer feedback; management expects Q4 to follow historical seasonal rebound, supported by rising quote volumes .

What Went Well and What Went Wrong

What Went Well
- New product momentum: three Hausmann introductions (Timber solid-wood furniture, Titan Premier hi-lo tables, Forged athletic training furniture) show “high customer interest” with positive early feedback; inventory positions are in place to support demand .
- Cost control: SG&A down ~$1.0M (30%) YoY to $2.39M in Q3; salaries/benefits drove ~$0.7M of the reduction, with additional savings across travel/repairs/pro services .
- Margin resilience: gross margin held essentially flat YoY (23.7% vs. 23.9%) despite lower sales; rehabilitation category margin improved offsetting softness in orthopedic soft bracing .
What Went Wrong
- Top-line pressure: revenue declined to $7.66M, driven by private label customer changes and softer orthopedic soft bracing demand; prior-year Q3 sales were $9.24M .
- Guidance reduction: FY24 revenue view cut to $32.5–$34.0M from prior expectations at the lower end of $34–$37M; gross margin guidance remains suspended .
- Greater reliance on the credit facility: LOC balance rose to ~$2.35M with availability down to ~$1.9M as liquidity supported working capital (payables/expenses down ~$1.7M; prepaids funded ~$0.4M) .

Metric	Q3 FY2023	Q1 FY2024	Q2 FY2024	Q3 FY2024
Revenue ($USD Millions)	$9.236	$9.352	$8.151	$7.658
Gross Margin %	23.9%	24.7%	22.3%	23.7%
Gross Profit ($USD Millions)	$2.208	$2.306	$1.820	$1.817
SG&A ($USD Millions)	$3.429	$2.546	$2.722	$2.389
Net Loss to Common ($USD Millions)	$(1.420)	$(0.528)	$(1.202)	$(0.852)
EPS (GAAP)	$(0.36)	$(0.12)	$(0.27)	$(0.17)

KPIs and Liquidity

KPI	Q1 FY2024	Q2 FY2024	Q3 FY2024
Net Cash ($USD Millions)	$0.587	$0.555	$0.596
Line of Credit Drawn ($USD Millions)	$1.804	$1.897	$2.352
Line of Credit Availability ($USD Millions)	$2.8	$2.5	$1.9
Weighted Avg. Shares (Basic & Diluted)	4.262M	4.525M	4.879M

Notes:

Management cited private label relationship changes and lower orthopedic soft bracing demand as the principal Q3 revenue headwinds; rehabilitation category margin improved .
No segment revenue breakout was provided in the press release or transcript .

Metric	Period	Previous Guidance	Current Guidance	Change
Net Revenue	FY2024	“Lower end” of $34–$37M due to slower rehab demand	$32.5–$34.0M (slower rehab demand; private label changes)	Lowered
SG&A (% of Net Sales)	FY2024	29%–33%	30%–32%	Narrowed range
Gross Margin Guidance	FY2024	Not provided	Not provided	Unchanged (no guidance)
Seasonality Commentary	FY2024	Q1 highest, Q2–Q3 lower, Q4 rebound	Reiterated; Q4 expected to align with historical trends	Maintained

Topic	Q1 FY24 (Prior-2)	Q2 FY24 (Prior-1)	Q3 FY24 (Current)	Trend
New product initiatives	Identified 6–12 month pipeline; focus on largest opportunities	Limited launches in Q3; full launches in Q4 planned	Three Hausmann lines launched (Timber, Titan Premier, Forged) with positive feedback; inventory ready	Accelerating launches
Demand environment (Rehab)	—	Clinic opening slowdown; PT staffing constraints; replacement demand intact	Slower rehab demand impacting FY24 guide	Persistent headwind
Private label/customer changes	Large customer’s acquisition hurt volumes	Continued impact on sales/margins	Change in private label relationships cited for sales decline	Ongoing impact
Cost discipline (SG&A)	SG&A $2.5M; sub-28% of sales; leverage as revenue grows	SG&A down 29% YoY to $2.7M	SG&A down 30% YoY to $2.4M	Sustained discipline
Inventory/supply chain	Inventory reduced to $/$7M from ~$12M YoY; optimized levels	Backorders low; sufficient pipeline	Strong inventory for new lines	Stable/ready
Liquidity/LOC	LOC $1.8M drawn; $2.8M availability	LOC $1.9M drawn; $2.5M availability	LOC $2.4M drawn; $1.9M availability	Rising utilization

“We continue to make progress on achieving our sales goals and finding our path to positive EBITDA… We worked closely with our customers and key distributors to design three new additions to our rehabilitation furniture line… While it is too early to estimate the level of revenue contribution from these new product lines, we are optimistic that they will enhance our existing sales base.” — Brian Baker, CEO .
“Selling, general and administrative expenses decreased $1 million or 30 percent to $2.4 million… led by a reduction of $0.7 million in salaries and benefits… Gross profit… 23.7%… decrease driven primarily by reduction in net sales and decreases in product margin rates in orthopedic soft bracing, partially offset by an increase… in rehabilitation.” — Gabe Ellwein, CFO .
“We estimate net revenues to be $32.5 million to $34 million due to slower demand in the rehabilitation space and changes to our private label customer relationships… SG&A is anticipated to be in the range of 30 percent to 32 percent of net sales.” — Brian Baker, CEO .

There were no questions on the Q3 FY24 call; the operator ended the session after no participants queued .

Wall Street consensus estimates (S&P Global) for Q3 FY24 could not be retrieved at report time; as a result, explicit “vs. consensus” comparisons are omitted. Where available in future periods, we will anchor to S&P Global consensus.

Revenue pressure persisted in Q3, but margin resilience and SG&A execution limited losses; gross margin stability and lower OpEx provide operating leverage if volumes recover in Q4 seasonally .
FY24 revenue guidance was cut to $32.5–$34.0M on softer rehab demand and private label dynamics; monitor conversion of the growing quote pipeline into firm orders in Q4 .
New product launches (Timber, Titan Premier, Forged) are near-term commercial catalysts; early feedback is favorable and inventory is in place to fulfill demand .
Liquidity remains a watch item: cash is minimal and LOC utilization increased; availability (~$1.9M) provides headroom but leaves limited cushion if volumes slip further .
Mix remains important: rehabilitation category margin improved while orthopedic soft bracing weighed on product margin rates; product roadmap and customer-led portfolio fills could support mix and margin over time .
No Q&A this quarter reduces external color; use prior quarters’ commentary for context on demand drivers (clinic openings, staffing) and execution focus (OpEx control, inventory optimization) .
Near-term trading setup hinges on evidence of Q4 seasonal rebound, order conversion from elevated quote activity, and any updates on private label customer relationships and product uptake .

Other relevant disclosures

Administrative listing matter resolved: the company paid past-due Nasdaq fees and received confirmation withdrawing the delisting fee notice in April 2024 .