• Tactile Systems Technology, Inc. Reports Third Quarter 2023 Financial Results; Updates Full Year 2023 Outlook

    المصدر: Nasdaq GlobeNewswire / 06 نوفمبر 2023 15:05:01   America/Chicago

    MINNEAPOLIS, Nov. 06, 2023 (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, 2023.

    Third Quarter 2023 Summary:

    • Revenue increased 7% year-over-year to $69.6 million, compared to $65.3 million in third quarter 2022
      • Lymphedema revenue increased 15%
      • Airway clearance revenue decreased 36%
    • Operating income of $8.0 million, compared to operating loss of $1.6 million in third quarter 2022
    • Net income of $22.3 million, compared to a net loss of $2.3 million in third quarter 2022
    • Adjusted EBITDA of $7.7 million, up from $7.2 million in third quarter 2022
    • Cash balance of $66.0 million on September 30, 2023, compared to $63.2 million on June 30, 2023
    • Updating full year 2023 financial guidance

    Third Quarter 2023 Highlights:

    • Sherri Ferstler appointed to the position of Senior Vice President of Sales, effective July 31, 2023
    • The Company’s existing credit agreement was amended on August 1, 2023 to extend the maturity date and improve terms

    Highlights Subsequent to Quarter End:

    • Vindell Washington, M.D. appointed to the Company’s Board of Directors, effective October 2, 2023

    “Our team delivered another quarter of solid financial and operational performance,” said Dan Reuvers, President and Chief Executive Officer of Tactile Medical. “Revenue from our lymphedema products exceeded our expectations, increasing 15% year-over-year, our fourth consecutive quarter of double-digit lymphedema products growth, which more than offset the decrease in revenue from our airway clearance product line. Our total revenue performance and operating leverage – driven by continued improvements in our salesforce productivity and operational efficiency – enabled us to generate record quarterly operating income and increased cash flow from operations.”

    Mr. Reuvers continued: “We look forward to bringing 2023 to a strong conclusion as we execute our strategic initiatives and drive continued progress with respect to our multi-year financial goals.”

    Third Quarter 2023 Financial Results

    Total revenue in the third quarter of 2023 increased $4.3 million, or 6.6%, to $69.6 million, compared to $65.3 million in the third quarter of 2022. The increase in total revenue was attributable to an increase of $8.3 million, or 15.3%, in sales and rentals of the lymphedema product line, which more than offset a $4.0 million, or 35.9%, decrease in sales of the airway clearance product line in the quarter ended September 30, 2023.

    Gross profit in the third quarter of 2023 increased $2.6 million, or 5.5%, to $49.4 million, compared to $46.8 million in the third quarter of 2022. Gross margin was 70.9% of revenue, compared to 71.7% of revenue in the third quarter of 2022. Non-GAAP gross margin was 71.4% of revenue, compared to 72.2% of revenue in the third quarter of 2022.

    Operating expenses in the third quarter of 2023 decreased $7.0 million, or 14.5%, to $41.4 million, compared to $48.4 million in the third quarter of 2022.

    Operating income was $8.0 million in the third quarter of 2023, compared to an operating loss of $1.6 million in the third quarter of 2022. Non-GAAP operating income in the third quarter of 2023 was $5.2 million, compared to non-GAAP operating income of $3.9 million in the third quarter of 2022.

    Other expense was $0.4 million in the third quarter of 2023, compared to $0.7 million in the third quarter of 2022.

    Income tax benefit was $14.7 million in the third quarter of 2023, compared to $0.1 million in the third quarter of 2022.

    Net income in the third quarter of 2023 was $22.3 million, or $0.94 per diluted share, compared to a net loss of $2.3 million, or $0.11 per diluted share, in the third quarter of 2022. Non-GAAP net income in the third quarter of 2023 was $20.2 million, compared to non-GAAP net income of $1.9 million in the third quarter of 2022.

    Weighted average shares used to compute diluted net income and loss per share were 23.8 million and 20.1 million for the third quarters of 2023 and 2022, respectively.

    Adjusted EBITDA was $7.7 million in the third quarter of 2023, compared to $7.2 million in the third quarter of 2022.

    First Nine Months 2023 Financial Results

    Total revenue for the nine months ended September 30, 2023, increased $23.9 million, or 13.8%, to $196.8 million, compared to $172.9 million for the nine months ended September 30, 2022. The increase in revenue was attributable to an increase of $25.8 million, or 17.6%, in sales and rentals of the lymphedema product line, which more than offset a $1.9 million, or 7.1%, decrease in sales of the airway clearance product line for the nine months ended September 30, 2023.

    Net income for the nine months ended September 30, 2023, was $20.3 million, or $0.88 per diluted share, compared to a net loss of $22.5 million, or $1.12 per diluted share, for the nine months ended September 30, 2022. Non-GAAP net income for the nine months ended September 30, 2023, was $20.6 million, compared to a non-GAAP net loss of $9.5 million for the nine months ended September 30, 2022.

    Weighted average shares used to compute diluted net income or loss per share were 23.0 million and 20.0 million for the nine months ended September 30, 2023 and 2022, respectively.

    Adjusted EBITDA was $14.3 million in the nine months ended September 30, 2023, compared to $6.2 million in the nine months ended September 30, 2022.

    Balance Sheet Summary

    As of September 30, 2023, the Company had $66.0 million in cash and cash equivalents and $46.8 million of outstanding borrowings under its credit agreement, compared to $21.9 million in cash and cash equivalents and $49.0 million of outstanding borrowings under its credit agreement as of December 31, 2022.

    2023 Financial Outlook

    The Company now expects full year 2023 total revenue in the range of $273.0 million to $277.0 million, representing growth of approximately 11% to 12% year-over-year. The Company’s prior 2023 revenue guidance expectation was total revenue in the range of $274.0 million to $278.0 million, representing growth of approximately 11% to 13% year-over-year.

    Conference Call

    Management will host a conference call at 5:00 p.m. Eastern Time on November 6th, 2023, to discuss the results of the quarter with a question-and-answer session. Those who would like to participate may dial 877-407-3088 (201-389-0927 for international callers) and provide access code 13741621. 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 13741621. 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 impact of inflation, rising interest rates or a recession; the adequacy of the Company’s liquidity to pursue its business objectives; the Company’s ability to obtain reimbursement from third-party payers for its products; 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 prior to identifying a successor; 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 impacts of the COVID-19 pandemic on the Company’s business, financial condition and results of operations, and the Company’s inability to mitigate such impacts; 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 (loss), and non-GAAP net income (loss), 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, plus litigation defense costs and plus executive transition costs. Non-GAAP gross profit in this release represents gross profit plus non-cash intangible amortization expense. Non-GAAP gross margin in this release represents non-GAAP gross profit divided by revenue. Non-GAAP operating income (loss) in this release represents operating income (loss) adjusted for non-cash intangible amortization expense, change in fair value of earn-out, litigation defense costs and executive transition expenses. Non-GAAP net income (loss) represents net income (loss) adjusted for non-cash intangible amortization expense, change in fair value of earn-out, litigation defense costs 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) 2023 2022
    Assets     
    Current assets       
    Cash and cash equivalents $66,036  $21,929 
    Accounts receivable  43,879   54,826 
    Net investment in leases  13,603   16,130 
    Inventories  23,498   23,124 
    Prepaid expenses and other current assets  4,674   3,754 
    Total current assets  151,690   119,763 
    Non-current assets       
    Property and equipment, net  5,486   6,077 
    Right of use operating lease assets  19,303   21,322 
    Intangible assets, net  47,628   50,375 
    Goodwill  31,063   31,063 
    Accounts receivable, non-current  14,636   23,061 
    Deferred income taxes  20,717    
    Other non-current assets  2,784   3,335 
    Total non-current assets  141,617   135,233 
    Total assets $293,307  $254,996 
    Liabilities and Stockholders' Equity       
    Current liabilities       
    Accounts payable $6,402  $9,984 
    Note payable  2,956   2,968 
    Earn-out, current  5,575   13,050 
    Accrued payroll and related taxes  14,784   17,100 
    Accrued expenses  5,327   9,240 
    Income taxes payable  2,092   2,336 
    Operating lease liabilities  2,596   2,500 
    Other current liabilities  5,886   7,152 
    Total current liabilities  45,618   64,330 
    Non-current liabilities       
    Revolving line of credit, non-current  16,677   24,916 
    Note payable, non-current  26,915   20,979 
    Accrued warranty reserve, non-current  1,781   2,207 
    Income taxes payable, non-current  443   298 
    Operating lease liabilities, non-current  19,043   20,866 
    Total non-current liabilities  64,859   69,266 
    Total liabilities  110,477   133,596 
            
    Stockholders’ equity:       
    Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022      
    Common stock, $0.001 par value, 300,000,000 shares authorized; 23,497,557 shares issued and outstanding as of September 30, 2023; 20,252,677 shares issued and outstanding as of December 31, 2022  23   20 
    Additional paid-in capital  172,115   131,001 
    Retained earnings (accumulated deficit)  10,692   (9,621)
    Total stockholders’ equity  182,830   121,400 
    Total liabilities and stockholders’ equity $293,307  $254,996 
             


                 
    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) 2023
     2022
     2023
     2022
    Revenue            
    Sales revenue $58,866  $55,545  $171,459  $147,980 
    Rental revenue  10,720   9,717   25,312   24,905 
    Total revenue  69,586   65,262   196,771   172,885 
    Cost of revenue            
    Cost of sales revenue  17,016   15,476   48,523   41,366 
    Cost of rental revenue  3,211   2,992   9,122   7,640 
    Total cost of revenue  20,227   18,468   57,645   49,006 
    Gross profit            
    Gross profit - sales revenue  41,850   40,069   122,936   106,614 
    Gross profit - rental revenue  7,509   6,725   16,190   17,265 
    Gross profit  49,359   46,794   139,126   123,879 
    Operating expenses            
    Sales and marketing  26,030   26,583   80,538   79,335 
    Research and development  1,964   1,581   6,030   4,949 
    Reimbursement, general and administrative  16,449   16,257   46,874   47,369 
    Intangible asset amortization and earn-out  (3,073)  3,993   (557)  12,834 
    Total operating expenses  41,370   48,414   132,885   144,487 
    Income (loss) from operations  7,989   (1,620)  6,241   (20,608)
    Other expense  (404)  (736)  (2,235)  (1,765)
    Income (loss) before income taxes  7,585   (2,356)  4,006   (22,373)
    Income tax (benefit) expense  (14,714)  (77)  (16,307)  114 
    Net income (loss) $22,299  $(2,279) $20,313  $(22,487)
    Net income (loss) per common share            
    Basic $0.95  $(0.11) $0.89  $(1.12)
    Diluted $0.94  $(0.11) $0.88  $(1.12)
    Weighted-average common shares used to compute net income (loss) per common share            
    Basic  23,483,269   20,139,944   22,714,574   20,021,966 
    Diluted  23,848,729   20,139,944   22,987,667   20,021,966 
                     


           
    Tactile Systems Technology, Inc.
    Condensed Consolidated Statements of Cash Flows
    (Unaudited)
       
      Nine Months Ended September 30,
    (In thousands) 2023
     2022
    Cash flows from operating activities      
    Net income (loss) $20,313  $(22,487)
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
    Depreciation and amortization  4,916   4,670 
    Deferred income taxes  (20,717)  17 
    Stock-based compensation expense  5,597   7,681 
    Loss on disposal of property and equipment and intangibles  3   20 
    Change in fair value of earn-out liability  (2,475)  10,898 
    Changes in assets and liabilities, net of acquisition:      
    Accounts receivable  10,947   (2,336)
    Net investment in leases  2,527   (2,570)
    Inventories  (374)  (3,803)
    Income taxes  (99)  (55)
    Prepaid expenses and other assets  (369)  (349)
    Right of use operating lease assets  292   141 
    Accounts receivable, non-current  8,425   (4,856)
    Accounts payable  (3,622)  6,148 
    Accrued payroll and related taxes  (2,316)  1,436 
    Accrued expenses and other liabilities  (5,545)  6,799 
    Net cash provided by operating activities  17,503   1,354 
    Cash flows from investing activities      
    Purchases of property and equipment  (1,424)  (1,731)
    Intangible assets expenditures  (117)  (113)
    Net cash used in investing activities  (1,541)  (1,844)
    Cash flows from financing activities      
    Proceeds from issuance of note payable  8,250    
    Payment on earn-out  (5,000)   
    Payments on note payable  (2,250)  (5,250)
    Payment on revolving line of credit  (8,250)   
    Payments of deferred debt issuance costs  (125)  (39)
    Proceeds from exercise of common stock options  13   152 
    Proceeds from the issuance of common stock from the employee stock purchase plan  882   824 
    Proceeds from issuance of common stock at market  34,625    
    Net cash provided by (used in) financing activities  28,145   (4,313)
    Net increase (decrease) in cash and cash equivalents  44,107   (4,803)
    Cash and cash equivalents – beginning of period  21,929   28,229 
    Cash and cash equivalents – end of period $66,036  $23,426 
           
    Supplemental cash flow disclosure      
    Cash paid for interest $2,810  $1,433 
    Cash paid for taxes $3,006  $29 
    Capital expenditures incurred but not yet paid $40  $16 
             

    The following table summarizes revenue by product line for the three and nine months ended September 30, 2023 and 2022:

                 
      Three Months Ended Nine Months Ended
      September 30, September 30,
    (In thousands) 2023
     2022
     2023
     2022
    Revenue            
    Lymphedema products $62,506  $54,214  $172,257  $146,502 
    Airway clearance products  7,080   11,048   24,514   26,383 
    Total $69,586  $65,262  $196,771  $172,885 
                 
    Percentage of total revenue            
    Lymphedema products  90%  83%  88%  85%
    Airway clearance products  10%  17%  12%  15%
    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) 2023 2022 2023 2022
    Gross profit, as reported $49,359  $46,794  $139,126  $123,879 
    Gross margin, as reported  70.9%  71.7%  70.7%  71.7%
    Reconciling items:                
    Non-cash intangible amortization expense $316  $312  $945  $933 
    Non-GAAP gross profit $49,675  $47,106  $140,071  $124,812 
    Non-GAAP gross margin  71.4%  72.2%  71.2%  72.2%
                     

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

                     
    Tactile Systems Technology, Inc.
    Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income (Loss)
    (Unaudited)
                     
      Three Months Ended Nine Months Ended
      September 30,September 30,
    (Dollars in thousands) 2023 2022 2023 2022
    GAAP operating income (loss) $7,989   $(1,620)  $6,241   $(20,608) 
    Reconciling items:                
    Non-cash intangible amortization expense impacting gross profit $316   $312   $945   $933  
    Non-cash intangible amortization expense impacting operating expenses  633    645    1,919    1,936  
    Change in fair value of earn-out  (3,705)   3,348    (2,475)   10,898  
    Litigation defense costs      928        3,277  
    Executive transition expenses      290        290  
    Non-GAAP operating income (loss): $5,233   $3,903   $6,630   $(3,274) 
    Non-GAAP operating margin  7.5 %  6.0 %  3.4 %  (1.9)%
                         

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

                     
    Tactile Systems Technology, Inc.
    Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)
    (Unaudited)
                     
      Three Months Ended Nine Months Ended
      September 30,September 30,
    (Dollars in thousands) 2023 2022 2023 2022
    GAAP net income (loss) $22,299   $(2,279)  $20,313   $(22,487) 
    Reconciling items:                
    Non-cash intangible amortization expense impacting gross profit $316   $312   $945   $933  
    Non-cash intangible amortization expense impacting operating expenses  633    645    1,919    1,936  
    Change in fair value of earn-out  (3,705)   3,348    (2,475)   10,898  
    Litigation defense costs      928        3,277  
    Executive transition expenses      290        290  
    Income tax expense on reconciling items*  689    (1,381)   (97)   (4,334) 
    Non-GAAP net income (loss) $20,232   $1,863   $20,605   $(9,487) 
    * 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 (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2023 and 2022, as well as the dollar and percentage change between the comparable periods:

                             
    Tactile Systems Technology, Inc.
    Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA
    (Unaudited)
                             
      Three Months Ended Increase Nine Months Ended Increase
      September 30, (Decrease) September 30, (Decrease)
    (Dollars in thousands) 2023
     2022
     $ % 2023
     2022
     $ %
    Net income (loss) $22,299  $(2,279) $24,578  N.M.% $20,313  $(22,487) $42,800  (190)%
    Interest expense, net  404   738   (334) (45)%  2,235   1,778   457  26  
    Income tax (benefit) expense  (14,714)  (77)  (14,637) N.M.%  (16,307)  114   (16,421) N.M.%
    Depreciation and amortization  1,646   1,655   (9) (1)%  4,915   4,670   245  5 %
    Stock-based compensation  1,766   2,560   (794) (31)%  5,597   7,681   (2,084) (27)%
    Change in fair value of earn-out  (3,705)  3,348   (7,053) N.M.   (2,475)  10,898   (13,373) (123) 
    Litigation defense costs     928   (928) (100)%     3,277   (3,277) (100)%
    Executive transition costs     290   (290) (100)%     290   (290) (100)%
    Adjusted EBITDA $7,696  $7,163  $533  7 % $14,278  $6,221  $8,057  130 %
                                     


    Investor Inquiries:
    Mike Piccinino, CFA
    ICR Westwicke
    443-213-0500
    investorrelations@tactilemedical.com

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