Corporate Presentation. November 2018

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Transcription:

Corporate Presentation November 2018 1

Safe Harbor / Non-GAAP Financial Measures This presentation contains, and our officers and representatives may from time to time make, "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding expectations of the Company s future valuation and financial performance, future prospects, projections for revenues, market growth, adjusted EBITDA, adjusted margins, adjusted earnings per share and similar statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the factors as discussed throughout Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended June 30, 2018. Such risk factors include, but are not limited to: (i) history of recent losses; (ii) level of indebtedness; (iii) inability to acquire and integrate other businesses, products or technologies. Please refer to the filings reference above for additional factors. Results from prior periods are not necessarily indicative of results to be expected for future periods. Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise. To supplement our condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP) in this presentation, we provide or may reference additional financial measures that exclude or include amounts, or are subject to adjustments, so as to be different from the most directly comparable financial measures calculated and presented in accordance with GAAP. Our management believes that these non-gaap financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any particular period. Our management also believes that these non-gaap financial measures enhance the ability of investors to analyze business trends and understand our performance. In addition, we may utilize non-gaap financial measures as guides in our forecasting, budgeting, and long-term planning processes and to measure operating performance for some management compensation purposes. Any analysis of non-gaap financial measures should be used only in conjunction with results presented in accordance with GAAP. A reconciliation of these non-gaap financial measures accompanies any reference to them in the presentation. 2

Investment Highlights NASDAQ:DYNT Market Leader Orthopedic Soft Goods Physical Therapy and Rehabilitation Products Athletic Training Products Industry Strong Fundamentals Revenue Growth Opportunities Identified at each Division Margin Expansion Cost Savings Opportunities Across the Platform Expertise Proven Merger and Acquisition Expertise 3

Favorable Market Demographics Strong Industry Tailwinds Aging Population* 2035 +13% +24% +78% 2015 Ages 30-49 50-64 65+ * U.S. Census Bureau projection 2015 to 2035. Employment Growth* Percent change in employment, 2016 2026 +25% +22% Physical Therapists Athletic Trainers Third Party Payors Seeking cost-effective therapies without reducing quality of care Focus on outcomes and preventing hospital readmissions Urgent need to find alternatives to opioids for pain management Consumer Driven Health Plans Developing trend to encourage wellness and prehabilitative procedures over medication and surgery Direct access to Physical Therapy services +16 % +7% Health Diagnosing and Treating Practitioners Total, All Occupations * U.S. Bureau of Labor Statistics, Employment Projections program. 4

Large, Highly Fragmented Market Estimated PT and Rehab Industry $6B WW Market DYNT products address $3.4B Objective: Grow to capture 5% - 10% of the market within five years, primarily through M&A strategy DYNT presently captures 2% v $1B ( U.S.) 5

Competitor s Focus Areas Focus on Manufacturing and the PT and Rehabilitation Market Performance Health Est. Total Revenue DJO Global $250M+ Mettler Compass Health Bailey North Coast Scrip Meyer AliMed $50-250M < $50M < $25M Clinton Industries Inc. Pivotal Medline, Henry Schein, Owens & Minor, and Cardinal Health 6

Dynatronics at a Glance Leading Provider of Orthopedic, Physical Therapy, and Rehab Products Comprehensive suite of products Strong reputation for premium brands Extensive national and regional dealer network with targeted direct sales effort Over 200,000 square feet of vertically integrated manufacturing Two acquisitions in 2017 Strategic equity partners, Prettybrook Partners 7

Comprehensive Suite of Products Leading Provider of Orthopedic, Medical Supplies, Physical Therapy and Rehab Products Therapy Products Division Comprehensive Line of Premium Orthopedic Soft Goods with 30+ Categories Premium Suite of Treatment Tables and Athletic Training Equipment Full Line of Physical Therapy Products 8

Diversified Customer Base Customer Base Consisting of Hospitals, Clinics, Dealers, Distributors, and Private Label Dealers and Distributors Athletics Teams Hospitals and Clinics 5,900+ Hospitals 4,000+ Private Practice Clinics 9

Experienced Management Team Strong Management Team with Decades of Industry Experience Jason Anderson & Mike Cronin Co-Presidents David Hausmann President Christopher von Jako, PhD CEO CFO CIO Controller Therapy Products Division Brian Baker President VP Corporate Development 10

Organic Growth Opportunities Management is Pursuing a Dynamic, Multi-faceted Growth Strategy Enhancing Product Offering Exclusive Distribution Agreements Private Label Initiatives Strengthening Distribution Strengthening and Expanding Sales Channels Cross-selling Opportunities Marketing Initiatives Direct to Consumer / Wellness Market Leverage Efforts Across Brands 11

Drive Margin Expansion Opportunities to Scale Streamline Operations Product Rationalization Longer-Term Opportunities as We Execute on Integration Leverage Corporate Overhead Finance Department Integration Information Technology Synergies from Future Acquisitions Freight / Shipping Consolidation Insurance and Benefits Site Optimization 12

External Growth Opportunities Opportunities in Existing and Adjacent Markets M&A Criteria: Consolidation of other small manufacturers in our core markets Products focused on existing or adjacent market segments to leverage existing distribution channels Focused on acquiring manufacturers (although distributors also possible) $5 to $30 million of revenue Gross margin accretive (driving toward target of >40%) Cash flow contribution by year two Leverage Prettybrook Partners network One acquisition per year Good cultural fit 13

M&A Execution description strategy summary Customers Leading manufacturer of Physical Therapy and Athletic Training equipment Premium priced products with a reputation for on-time delivery, high quality and excellent customer service Consistently profitable for 60+ years Has provided access to large national accounts and buying groups Leverage our manufacturing capability across a larger base of customers Revenue increase without additional selling costs Leveraged Prettybrook Partners acquisition and financing experience Relationship built over decades with seller Owner co-invested significant equity Disciplined valuation Closed April 2017 $14.8M in Revenue / $1.1M in EBITDA* 14 * Revenue and EBITDA from December 31, 2016 audited financial statements.

M&A Execution description strategy summary Customers Leading designer and manufacturer of orthopedic soft goods and specialty patient care products Premium brand with a deep portfolio of branded / private label products Diverse customer base w/ 2,000+ customers Consistently profitable Gross Margin and Adjusted EBITDA Margin accretive Opportunity to expand distribution of B&C product into PT and AT channels Opportunity to sell into the hospitals and orthopedic clinics Strong management team with desire to continue Leveraged Prettybrook Partners sourcing, acquisition, and financing experience Significant equity consideration by seller Disciplined valuation Closed October 2017 $24M in Revenue / $2.2M in EBITDA* 15 * Revenue and EBITDA from December 31, 2016 audited financial statements.

Financial Overview ($ in millions) $47.5 Year Ended June 30, 3-Months Ended Corporate 2017 2018 Sept. 30, 2018 Objectives Total Revenue $35.8 $64.4 $17.1 Revenue Growth YoY 17.6% 80.1% 33.3% Annual Growth of 4% to 6% Gross Profit (1) $11.8 $20.8 $5.5 Gross Margin (% of Revenue) 33.1% 32.3% 32.5% SG&A $13.2 $21.7 $5.5 Total Operating Expenses $13.2 $21.7 $5.5 % of Revenue 36.9% 33.6% 32.2% Margin of >40% Op Ex of <30% Operating Profit ($1.3) ($0.9) $0.1 Depreciation and Amortization $0.6 $1.2 $0.4 EBITDA ($0.8) $0.4 $0.4 Adjustments (2) $0.9 $2.0 $0.3 Adjusted EBITDA * $0.1 $2.4 $0.7 Adjusted EBITDA (% of Revenue) * 0.2% 3.7% 3.9% Adj. EBITDA of >10% (1) Gross Profit adjusted for inventory write-offs of $315k in 2017, and $385k in 2018. (2) 2017 adjustments include transaction costs, stock based compensation, and other one-time charges; 2018 adjustments include severance, transaction costs, and other onetime charges. *These are non-gaap financial measures. 16

Capitalization / Ownership Table Common Shares Outstanding 8,161,029 Convertible Preferred Stock - A (1) 2,000,000 Convertible Preferred Stock - B (1) 1,459,000 Convertible Preferred Stock - C (2) 1,440,000 Total Shares (Before Options & Warrants) 13,060,029 2,000,000 Total Options and Warrants (3) 6,886,112 Line of Credit $6,286,037 1,459,000 Less: Cash $1,696,116 Net Bank Debt as of 06/30/2018 $4,589,921 1,440,000 (1) Convertible one for one into Common. 8% annual dividend payable in cash or stock at Company preference. (2) Convertible one for one into Common. Contain no dividend or liquidation preferences, and have no redemption or voting rights. (3) Weighted average exercise price for options and warrants of $3.14 and $2.75 respectively. Warrants are not calculated using the treasury stock method. Cash proceeds if all options and warrants were exercised would generate ~$14.4 million. 1.5 million warrants are convertible on a cashless basis one for one. 17

A leading publicly-traded manufacturer in highly fragmented markets Orthopedic Soft Goods PT and Rehabilitation Athletic Training Favorable market demographics Aging Population Focus on prehab Need for pain management alternatives Well regarded brands known for quality Investment Considerations Growth opportunities through M&A Prettybrook Partners relationship enables acquisition strategy 18