• Tactile Systems Technology, Inc. Reports Third Quarter 2024 Financial Results

    المصدر: Nasdaq GlobeNewswire / 04 نوفمبر 2024 16:05:00   America/New_York

    MINNEAPOLIS, Nov. 04, 2024 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. (“Tactile Medical”; the “Company”) (Nasdaq: TCMD), a medical technology company providing therapies for people with chronic disorders, today reported financial results for the third quarter ended September 30, 2024 and announced the adoption of a share repurchase program.

    Third Quarter 2024 Summary & Recent Business Highlights:

    • Total revenue increased 5% year-over-year to $73.1 million
      • Lymphedema product revenue increased 4% over Q3 2023
      • Airway clearance product revenue increased 10% over Q3 2023
    • Net income of $5.2 million versus $22.3 million in Q3 2023
    • Adjusted EBITDA of $10.7 million versus $7.7 million in Q3 2023
    • Operating cashflow of $24.3 million year-to-date, compared to $17.5 million in the prior year period
    • Ended Q3 2024 with $82.1 million in cash and cash equivalents
    • Launched Nimbl, our next-generation lymphedema therapy platform for upper extremity conditions
    • Announced publication of positive clinical trial results in VA lymphedema patients using Flexitouch therapy
    • Authorized a program to repurchase up to $30.0 million of the Company’s common stock

    “In the third quarter, we delivered solid gross margin expansion, drove continued improvements in profitability, and achieved double-digit growth in both our commercial and VA lymphedema channels,” said Sheri Dodd, President and Chief Executive Officer of Tactile Medical. “Operationally, we advanced key pillars of our commercial strategy, including launching our next-generation lymphedema therapy platform and announcing the publication of a positive new data set among Veterans.”

    Ms. Dodd continued, “While pleased with this performance, our revenue was impacted by changes in policy interpretation from Medicare administrators and DME buying patterns within our airway clearance business. However, we continue to see strong patient and clinician demand for our products, aided by improving CMS coverage conditions on the near horizon. We are taking a concerted approach to fortify our sales channels, simplify our front and back-office work through technology modernization, and amplify the voice of our patients and providers through product and service innovation.”

    Ms. Dodd concluded, “Finally, we are increasingly benefiting from generating free cash flow, a trend we expect to continue. This provides us the luxury of continuing to evaluate various investment opportunities to drive growth and increase shareholder value, while also initiating a share repurchase program. We believe this strategic near-term use of cash aligns with our conviction in the trajectory of our business and our ability to execute our financial and operational initiatives.”

    Share Repurchase Program

    The Company also announced today that the Board of Directors of the Company authorized a program to repurchase up to $30.0 million of common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors. The share repurchase program expires on October 31, 2026. The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice. The Company intends to finance the share repurchase program with cash on hand.

    Third Quarter 2024 Financial Results

    Total revenue in the third quarter of 2024 increased $3.5 million, or 5%, to $73.1 million, compared to $69.6 million in the third quarter of 2023. The increase in total revenue was attributable to an increase of $2.8 million, or 4%, in sales and rentals of the lymphedema product line and an increase of $0.7 million, or 10%, in sales of the airway clearance product line in the quarter ended September 30, 2024, compared to the third quarter of 2023.

    Gross profit in the third quarter of 2024 increased $5.4 million, or 11%, to $54.8 million, compared to $49.4 million in the third quarter of 2023. Gross margin was 75.0% of revenue, compared to 70.9% of revenue in the third quarter of 2023. Non-GAAP gross margin was 75.4% of revenue, compared to 71.4% of revenue in the third quarter of 2023.

    Operating expenses in the third quarter of 2024 increased $6.6 million, or 16%, to $48.0 million, compared to $41.4 million in the third quarter of 2023.

    Operating income was $6.8 million in the third quarter of 2024, compared to $8.0 million in the third quarter of 2023. Non-GAAP operating income in the third quarter of 2024 was $7.9 million, compared to $5.2 million in the third quarter of 2023.

    Other income was $0.5 million in the third quarter of 2024, compared to other expense of $0.4 million in the third quarter of 2023.

    Income tax expense was $2.1 million in the third quarter of 2024, compared to an income tax benefit of $14.7 million in the third quarter of 2023.

    Net income in the third quarter of 2024 was $5.2 million, or $0.21 per diluted share, compared to $22.3 million, or $0.94 per diluted share, in the third quarter of 2023. Non-GAAP net income in the third quarter of 2024 was $6.0 million, compared to $20.2 million in the third quarter of 2023. The change in both net income and non-GAAP net income was driven by the impact last year’s valuation allowance release had on prior-year income tax.

    Weighted average shares used to compute diluted net income per share were 24.3 million and 23.8 million for the third quarters of 2024 and 2023, respectively.

    Adjusted EBITDA was $10.7 million in the third quarter of 2024, compared to $7.7 million in the third quarter of 2023.

    First Nine Months 2024 Financial Results

    Total revenue for the nine months ended September 30, 2024, increased $10.6 million, or 5%, to $207.4 million, compared to $196.8 million for the nine months ended September 30, 2023. The increase in total revenue was attributable to an increase of $10.0 million, or 6%, in sales and rentals of the lymphedema product line and an increase of $0.6 million, or 2%, in sales of the airway clearance product line for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

    Net income for the nine months ended September 30, 2024, was $7.2 million, or $0.30 per diluted share, compared to $20.3 million, or $0.88 per diluted share, for the nine months ended September 30, 2023. Non-GAAP net income for the nine months ended September 30, 2024, was $9.5 million, compared to $20.6 million for the nine months ended September 30, 2023.

    Weighted average shares used to compute diluted net income per share were 24.1 million and 23.0 million for the nine months ended September 30, 2024 and 2023, respectively.

    Adjusted EBITDA was $20.8 million in the nine months ended September 30, 2024, compared to $14.3 million in the nine months ended September 30, 2023.

    Balance Sheet Summary

    As of September 30, 2024, the Company had $82.1 million in cash and cash equivalents and $27.0 million of outstanding borrowings under its credit agreement, compared to $61.0 million in cash and cash equivalents and $29.3 million of outstanding borrowings under its credit agreement as of December 31, 2023.

    2024 Financial Outlook

    The Company is updating its 2024 financial outlook and now expects full year 2024 total revenue in the range of $292 million to $295 million, representing growth of approximately 6% to 8% year-over-year, compared to total revenue of $274.4 million in 2023. The Company’s prior 2024 guidance expectation was total revenue in the range of $293 million to $298 million, representing growth of approximately 7% to 9%.

    Conference Call

    Management will host a conference call with a question-and-answer session at 5:00 p.m. Eastern Time on November 4, 2024, to discuss the results of the quarter. Those who would like to participate may dial 877-407-3088 (201-389-0927 for international callers) and provide access code 13748661. A live webcast of the call will also be provided on the investor relations section of the Company's website at investors.tactilemedical.com.

    For those unable to participate, a replay of the call will be available for two weeks at 877-660-6853 (201-612-7415 for international callers); access code 13748661. The webcast will be archived at investors.tactilemedical.com.

    About Tactile Systems Technology, Inc. (DBA Tactile Medical)

    Tactile Medical is a leader in developing and marketing at-home therapies for people suffering from underserved, chronic conditions including lymphedema, lipedema, chronic venous insufficiency and chronic pulmonary disease by helping them live better and care for themselves at home. Tactile Medical collaborates with clinicians to expand clinical evidence, raise awareness, increase access to care, reduce overall healthcare costs and improve the quality of life for tens of thousands of patients each year.

    Legal Notice Regarding Forward-Looking Statements

    This release contains forward-looking statements. Forward-looking statements are generally identifiable by the use of words like “may,” “will,” “should,” “could,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “continue,” “confident,” “outlook,” “guidance,” “project,” “goals,” “look forward,” “poised,” “designed,” “plan,” “return,” “focused,” “prospects” or “remain” or the negative of these words or other variations on these words or comparable terminology. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties outside of the Company’s control that can make such statements untrue, including, but not limited to, the Company’s ability to obtain reimbursement from third-party payers for its products; the impacts of inflation, rising interest rates or a recession; the adequacy of the Company’s liquidity to pursue its business objectives; adverse economic conditions or intense competition; price increases for supplies and components; wage and component price inflation; loss of a key supplier; entry of new competitors and products; compliance with and changes in federal, state and local government regulation; loss or retirement of key executives, including transition matters related to the Company’s recent Chief Executive Officer change; technological obsolescence of the Company’s products; technical problems with the Company’s research and products; the Company’s ability to expand its business through strategic acquisitions; the Company’s ability to integrate acquisitions and related businesses; the effects of current and future U.S. and foreign trade policy and tariff actions; or the inability to carry out research, development and commercialization plans. In addition, other factors that could cause actual results to differ materially are discussed in the Company’s filings with the SEC. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company undertakes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

    Use of Non-GAAP Financial Measures

    This press release includes the non-GAAP financial measures of Adjusted EBITDA, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, and non-GAAP net income, which differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).

    Adjusted EBITDA in this release represents net income or loss, plus interest expense, net, or less interest income, net, less income tax benefit or plus income tax expense, plus depreciation and amortization, plus stock-based compensation expense, plus or minus the change in fair value of earn-out and plus executive transition costs. Non-GAAP gross profit in this release represents gross profit plus non-cash intangible asset amortization expense. Non-GAAP gross margin in this release represents non-GAAP gross profit divided by revenue. Non-GAAP operating income in this release represents operating income adjusted for non-cash intangible asset amortization expense, change in fair value of earn-out and executive transition expenses. Non-GAAP net income represents net income adjusted for non-cash intangible asset amortization expense, change in fair value of earn-out and executive transition expenses, and adjusted for the income tax effect on reconciling items. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are included in this press release.

    These non-GAAP financial measures are presented because the Company believes they are useful indicators of its operating performance. Management uses these measures principally as measures of the Company’s operating performance and for planning purposes, including the preparation of the Company’s annual operating plan and financial projections. The Company believes these measures are useful to investors as supplemental information and because they are frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company also believes these non-GAAP financial measures are useful to its management and investors as a measure of comparative operating performance from period to period. In addition, Adjusted EBITDA is used as a performance metric in the Company’s compensation program.

    The non-GAAP financial measures presented in this release should not be considered as an alternative to, or superior to, their respective GAAP financial measures, as measures of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP, and they should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating non-GAAP financial measures, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on the Company’s GAAP results in addition to using non-GAAP financial measures on a supplemental basis. The Company’s definition of these non-GAAP financial measures is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

             
    Tactile Systems Technology, Inc.
    Condensed Consolidated Balance Sheets
    (Unaudited)
      September 30, December 31,
    (In thousands, except share and per share data) 2024 2023
    Assets      
    Current assets        
    Cash and cash equivalents $82,146  $61,033 
    Accounts receivable  39,970   43,173 
    Net investment in leases  13,953   14,195 
    Inventories  21,176   22,527 
    Prepaid expenses and other current assets  5,127   4,366 
    Total current assets  162,372   145,294 
    Non-current assets        
    Property and equipment, net  5,878   6,195 
    Right of use operating lease assets  17,553   19,128 
    Intangible assets, net  43,708   46,724 
    Goodwill  31,063   31,063 
    Accounts receivable, non-current  3,628   10,936 
    Deferred income taxes  19,719   19,378 
    Other non-current assets  3,803   2,720 
    Total non-current assets  125,352   136,144 
    Total assets $287,724  $281,438 
    Liabilities and Stockholders' Equity        
    Current liabilities        
    Accounts payable $7,290  $6,659 
    Note payable  2,956   2,956 
    Accrued payroll and related taxes  13,086   16,789 
    Accrued expenses  7,088   5,904 
    Income taxes payable  611   1,467 
    Operating lease liabilities  2,883   2,807 
    Other current liabilities  3,240   4,475 
    Total current liabilities  37,154   41,057 
    Non-current liabilities        
    Note payable, non-current  23,959   26,176 
    Accrued warranty reserve, non-current  1,448   1,681 
    Income taxes payable, non-current  495   446 
    Operating lease liabilities, non-current  16,767   18,436 
    Total non-current liabilities  42,669   46,739 
    Total liabilities  79,823   87,796 
             
    Stockholders’ equity:        
    Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2024 and December 31, 2023      
    Common stock, $0.001 par value, 300,000,000 shares authorized; 23,997,089 shares issued and outstanding as of September 30, 2024; 23,600,584 shares issued and outstanding as of December 31, 2023  24   24 
    Additional paid-in capital  181,739   174,724 
    Retained earnings  26,138   18,894 
    Total stockholders’ equity  207,901   193,642 
    Total liabilities and stockholders’ equity $287,724  $281,438 
             


                   
    Tactile Systems Technology, Inc.
    Condensed Consolidated Statements of Operations
    (Unaudited)
                   
                   
      Three Months Ended Nine Months Ended
      September 30, September 30,
    (In thousands, except share and per share data) 2024 2023 2024 2023
    Revenue              
    Sales revenue $63,168  $58,866  $180,742  $171,459 
    Rental revenue  9,925   10,720   26,657   25,312 
    Total revenue  73,093   69,586   207,399   196,771 
    Cost of revenue              
    Cost of sales revenue  15,603   17,016   46,810   48,523 
    Cost of rental revenue  2,703   3,211   8,270   9,122 
    Total cost of revenue  18,306   20,227   55,080   57,645 
    Gross profit              
    Gross profit - sales revenue  47,565   41,850   133,932   122,936 
    Gross profit - rental revenue  7,222   7,509   18,387   16,190 
    Gross profit  54,787   49,359   152,319   139,126 
    Operating expenses              
    Sales and marketing  26,838   26,030   82,803   80,538 
    Research and development  2,417   1,964   6,794   6,030 
    Reimbursement, general and administrative  18,118   16,449   51,158   46,874 
    Intangible asset amortization and earn-out  633   (3,073)  1,898   (557)
    Total operating expenses  48,006   41,370   142,653   132,885 
    Income from operations  6,781   7,989   9,666   6,241 
    Other income (expense)  452   (404)  832   (2,235)
    Income before income taxes  7,233   7,585   10,498   4,006 
    Income tax expense (benefit)  2,078   (14,714)  3,254   (16,307)
    Net income $5,155  $22,299  $7,244  $20,313 
    Net income per common share              
    Basic $0.21  $0.95  $0.30  $0.89 
    Diluted $0.21  $0.94  $0.30  $0.88 
    Weighted-average common shares used to compute net income per common share              
    Basic  23,985,364   23,483,269   23,842,049   22,714,574 
    Diluted  24,254,176   23,848,729   24,070,084   22,987,667 
                     


           
    Tactile Systems Technology, Inc.
    Condensed Consolidated Statements of Cash Flows
    (Unaudited)
       
      Nine Months Ended September 30,
    (In thousands) 2024 2023
    Cash flows from operating activities      
    Net income $7,244  $20,313 
    Adjustments to reconcile net income to net cash provided by operating activities:      
    Depreciation and amortization  5,079   4,916 
    Deferred income taxes  (341)  (20,717)
    Stock-based compensation expense  5,969   5,597 
    Loss on disposal of property and equipment and intangibles  308   3 
    Change in fair value of earn-out liability     (2,475)
    Changes in assets and liabilities, net of acquisition:      
    Accounts receivable  3,203   10,947 
    Net investment in leases  242   2,527 
    Inventories  1,351   (374)
    Income taxes  (807)  (99)
    Prepaid expenses and other assets  (1,844)  (369)
    Right of use operating lease assets  (18)  292 
    Accounts receivable, non-current  7,308   8,425 
    Accounts payable  582   (3,622)
    Accrued payroll and related taxes  (3,703)  (2,316)
    Accrued expenses and other liabilities  (251)  (5,545)
    Net cash provided by operating activities  24,322   17,503 
    Cash flows from investing activities      
    Purchases of property and equipment  (1,932)  (1,424)
    Proceeds from sale of property and equipment  12    
    Intangible assets expenditures  (85)  (117)
    Net cash used in investing activities  (2,005)  (1,541)
    Cash flows from financing activities      
    Proceeds from issuance of note payable     8,250 
    Payments on earn-out     (5,000)
    Payments on note payable  (2,250)  (2,250)
    Payments on revolving line of credit     (8,250)
    Payments of deferred debt issuance costs     (125)
    Proceeds from exercise of common stock options  2   13 
    Proceeds from the issuance of common stock from the employee stock purchase plan  1,044   882 
    Proceeds from issuance of common stock at market     34,625 
    Net cash (used in) provided by financing activities  (1,204)  28,145 
    Net increase in cash and cash equivalents  21,113   44,107 
    Cash and cash equivalents – beginning of period  61,033   21,929 
    Cash and cash equivalents – end of period $82,146  $66,036 
           
    Supplemental cash flow disclosure      
    Cash paid for interest $1,612  $2,810 
    Cash paid for taxes $4,428  $3,006 
    Capital expenditures incurred but not yet paid $49  $40 
             

    The following table summarizes revenue by product line for the three and nine months ended September 30, 2024 and 2023:

      Three Months Ended Nine Months Ended
      September 30, September 30,
    (In thousands) 2024 2023 2024 2023
    Revenue            
    Lymphedema products $65,282  $62,506  $182,278  $172,257 
    Airway clearance products  7,811   7,080   25,121   24,514 
    Total $73,093  $69,586  $207,399  $196,771 
                 
    Percentage of total revenue            
    Lymphedema products  89%  90%  88%  88%
    Airway clearance products  11%  10%  12%  12%
    Total  100%  100%  100%  100%
                     

    The following table contains a reconciliation of GAAP gross profit and margin to non-GAAP gross profit and margin:

    Tactile Systems Technology, Inc.
    Reconciliation of Gross Profit and Margin to Non-GAAP Gross Profit and Margin
    (Unaudited)
                     
      Three Months Ended Nine Months Ended
      September 30,September 30,
    (Dollars in thousands) 2024 2023 2024 2023
    Gross profit, as reported $54,787  $49,359  $152,319  $139,126 
    Gross margin, as reported  75.0%  70.9%  73.4%  70.7%
    Reconciling items:                
    Non-cash intangible asset amortization expense $317  $316  $950  $945 
    Non-GAAP gross profit $55,104  $49,675  $153,269  $140,071 
    Non-GAAP gross margin  75.4%  71.4%  73.9%  71.2%
                     

    The following table contains a reconciliation of GAAP operating income to non-GAAP operating income:

    Tactile Systems Technology, Inc.
    Reconciliation of GAAP Operating Income to Non-GAAP Operating Income
    (Unaudited)
                   
      Three Months Ended Nine Months Ended
      September 30,September 30,
    (Dollars in thousands) 2024 2023 2024 2023
    GAAP operating income $6,781  $7,989  $9,666  $6,241 
    Reconciling items:              
    Non-cash intangible asset amortization expense impacting gross profit $317  $316  $950  $945 
    Non-cash intangible asset amortization expense impacting operating expenses  633   633   1,898   1,919 
    Change in fair value of earn-out     (3,705)     (2,475)
    Executive transition expenses  136      111    
    Non-GAAP operating income: $7,867  $5,233  $12,625  $6,630 
                     

    The following table contains a reconciliation of GAAP net income to non-GAAP net income:

    Tactile Systems Technology, Inc.
    Reconciliation of GAAP Net Income to Non-GAAP Net Income
    (Unaudited)
                 
      Three Months Ended Nine Months Ended
      September 30,September 30,
    (Dollars in thousands) 2024 2023 2024 2023
    GAAP net income $5,155  $22,299  $7,244  $20,313 
    Reconciling items:            
    Non-cash intangible asset amortization expense impacting gross profit $317  $316  $950  $945 
    Non-cash intangible asset amortization expense impacting operating expenses  633   633   1,898   1,919 
    Change in fair value of earn-out     (3,705)     (2,475)
    Executive transition expenses  136      111    
    Income tax expense on reconciling items*  (272)  689   (740)  (97)
    Non-GAAP net income $5,969  $20,232  $9,463  $20,605 
    * The effect of income tax on the reconciling items is estimated using the Company's effective statutory tax rate.
     

    The following table contains a reconciliation of net income to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023, as well as the dollar and percentage change between the comparable periods:

    Tactile Systems Technology, Inc.
    Reconciliation of Net Income to Non-GAAP Adjusted EBITDA
    (Unaudited)
                             
      Three Months Ended Increase Nine Months Ended Increase
      September 30, (Decrease) September 30, (Decrease)
    (Dollars in thousands) 2024 2023 $ % 2024 2023 $ %
    Net income $5,155  $22,299  $(17,144) (77)% $7,244  $20,313  $(13,069) 64 %
    Interest (income) expense, net  (452)  404   (856) N.M.%  (823)  2,235   (3,058) (137)%
    Income tax expense (benefit)  2,078   (14,714)  16,792  (114)%  3,254   (16,307)  19,561  (120) 
    Depreciation and amortization  1,734   1,646   88  5 %  5,079   4,915   164  3 %
    Stock-based compensation  2,070   1,766   304  17 %  5,969   5,597   372  7 %
    Change in fair value of earn-out     (3,705)  3,705  (100)%     (2,475)  2,475  (100)%
    Executive transition costs  136      136   %  111      111   %
    Adjusted EBITDA $10,721  $7,696  $3,025  39 % $20,834  $14,278  $6,556  46 %
                                     

    Investor Inquiries:
    Sam Bentzinger
    Gilmartin Group
    investorrelations@tactilemedical.com


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