First Quarter 2019 Summary:
- First quarter total revenue increased 40% year-over-year, to
$37.6 million , compared to$26.8 million in first quarter 2018; the adoption of new lease accounting rules accounted for 10 percentage points of the year-over-year increase in total revenue. - Flexitouch revenue increased 39% year-over-year, to
$34.1 million , compared to$24.5 million in first quarter 2018. - Operating loss of
$1.8 million , compared to operating loss of$1.8 million in first quarter 2018. - Net income of
$1.5 million , compared to net loss of$0.1 million in first quarter 2018. - Adjusted EBITDA of
$2.0 million , compared to$0.1 million in first quarter 2018. - On
March 19, 2019 , the Company announced the appointment ofPeter Schaubach to the position of Chief Information Officer (CIO), effectiveJanuary 21, 2019 .
“Our first quarter performance reflects an exciting start to 2019, driven by strong adoption of our Flexitouch Plus system,” said
Mr. Mattys continued, “We have increased our full year 2019 outlook to reflect the impacts of both our better than expected revenue performance in the first quarter and the adoption of the new lease accounting standard. We now expect total revenue to increase 25% to 27% year-over-year in 2019. We remain confident in our ability to deliver strong revenue growth and improved profitability, as we continue to expand our penetration of the $4+ billion U.S. lymphedema and chronic venous insufficiency markets.”
First Quarter 2019 Financial Results
Revenue for the first quarter of 2019 increased
During the first quarter of 2019, the Company adopted ASU No. 2016-02, “Leases” (Topic 842) (“ASC 842”) which supersedes the existing guidance for lease accounting, “Leases” (Topic 840) (“ASC 840”). Our rental revenue is derived from rent to purchase arrangements that typically range from three to ten months. Under ASC 840, our rental revenue was recognized as month-to-month cancelable leases, however, under ASC 842, these are recognized as sales-type leases. Each rental agreement contains two components, the controller and related garments, both of which are interdependent and recognized as one lease component.
In accordance with applicable guidance, we will continue to recognize rental agreements commencing prior to
Gross profit for the first quarter of 2019 increased
Operating expenses for the first quarter of 2019 increased
Operating loss for the first quarter of 2019 decreased
Income tax benefit for the first quarter of 2019 was
Net income for the first quarter of 2019 increased approximately
Cash Position
At
2019 Financial Outlook
The Company expects full year 2019 total revenue in the range of
2019 total revenue guidance now includes the impact of the Company’s adoption of ASC 842 which is estimated to increase revenue by approximately
- The updated guidance for total revenue growth of 25% to 27% year-over year is expected to be driven by:
- Sales revenue for 2019 is expected to be in the range of
$155.0 to $157.0 million , compared to sales revenue of$130.2 million in 2018. - Rental revenue for 2019 is expected to be in the range of
$25.0 to $25.5 million , compared to rental revenue of$13.6 million in 2018. The projected year-over-year increase in rental revenue for 2019 is expected to be driven by:- the impact of the adoption of ASC 842 – representing approximately half of the expected increase in rental revenue for 2019,
- the reclassification of garment revenue to rental revenue that was previously reported in sales revenue – representing approximately one quarter of the expected increase in rental revenue for 2019 and,
- operational growth of 20% to 22% over 2018 rental revenue – representing approximately one quarter of the expected increase in rental revenue for 2019.
- Sales revenue for 2019 is expected to be in the range of
Conference Call
Management will host a conference call at
For those unable to participate, a replay of the call will be available for two weeks at 800-585-8367 (416-621-4642 for international callers); access code 3790547. The webcast will be archived at investors.tactilemedical.com.
About
Tactile Medical is a leader in developing and marketing at-home therapy devices that treat chronic swelling conditions such as lymphedema and chronic venous insufficiency. Tactile Medical’s Mission is to help people suffering from chronic diseases live better and care for themselves at home. The Company’s unique offering includes advanced, clinically proven pneumatic compression devices, as well as continuity of care services provided by a national network of product specialists and trainers, reimbursement experts, patient advocates and clinicians. This combination of products and services ensures that tens of thousands of patients annually receive the at-home treatment necessary to better manage their chronic conditions. Tactile Medical takes pride in the fact that our solutions help increase clinical efficacy, reduce overall healthcare costs and improve the quality of life for patients with chronic conditions.
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,” “confident,” “outlook,” “guidance” or “project” 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 adequacy of the Company’s liquidity to pursue its complete business objectives; the Company’s ability to obtain reimbursement from third party payers for its products; loss or retirement of key executives; adverse economic conditions or intense competition; loss of a key supplier; entry of new competitors and products; adverse federal, state and local government regulation; 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; price increases for supplies and components; 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
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measures of Adjusted EBITDA, which differs from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA in this release represents net income (loss) less interest income, net, less income tax benefit or plus income tax expense, plus depreciation and amortization, plus stock-based compensation expense and plus impairment charges and inventory write-offs. A reconciliation of Adjusted EBITDA to net income (loss) is included in this press release.
Adjusted EBITDA is presented because the Company believes it is a useful indicator of its operating performance. Management uses the measure principally as a measure of the Company’s operating performance and for planning purposes, including the preparation of the Company’s annual operating budget and financial projections. The Company believes this measure is useful to investors as supplemental information and because it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company believes Adjusted EBITDA is 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.
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to, or superior to, net income or loss, as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP, and it 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 Adjusted EBITDA, 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 Adjusted EBITDA 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 Adjusted EBITDA 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) | |||||||
March 31, | December 31, | ||||||
(In thousands, except share and per share data) | 2019 | 2018 |
|||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 23,548 | $ | 20,099 | |||
Marketable securities | 21,384 | 25,786 | |||||
Accounts receivable, net | 21,661 | 24,332 | |||||
Net investment in leases | 3,362 | — | |||||
Inventories | 11,321 | 11,189 | |||||
Income taxes receivable | 2,814 | 1,793 | |||||
Prepaid expenses and other current assets | 1,680 | 1,762 | |||||
Total current assets | 85,770 | 84,961 | |||||
Non-current assets: | |||||||
Property and equipment, net | 4,616 | 4,810 | |||||
Right of use operating lease assets | 3,396 | — | |||||
Intangible assets, net | 5,244 | 5,339 | |||||
Medicare accounts receivable, long-term | 2,172 | 1,884 | |||||
Deferred income taxes | 11,077 | 8,820 | |||||
Other non-current assets | 1,242 | 1,257 | |||||
Total non-current assets | 27,747 | 22,110 | |||||
Total assets | $ | 113,517 | $ | 107,071 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 5,832 | $ | 5,110 | |||
Accrued payroll and related taxes | 6,837 | 7,421 | |||||
Accrued expenses | 2,685 | 2,780 | |||||
Future product royalties | 3 | 5 | |||||
Income taxes | — | 51 | |||||
Right of use operating lease liabilities | 1,147 | — | |||||
Other current liabilities | 800 | 709 | |||||
Total current liabilities | 17,304 | 16,076 | |||||
Non-current liabilities: | |||||||
Accrued warranty reserve, non-current | 1,854 | 1,725 | |||||
Income taxes, non-current | 42 | — | |||||
Right of use operating lease liabilities, non-current | 2,318 | — | |||||
Total non-current liabilities | 4,214 | 1,725 | |||||
Total liabilities | 21,518 | 17,801 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of March 31, 2019 and December 31, 2018 | — | — | |||||
Common stock, $0.001 par value, 300,000,000 shares authorized; 18,818,692 shares issued and outstanding as of March 31, 2019; 18,631,125 shares issued and outstanding as of December 31, 2018 | 19 | 19 | |||||
Additional paid-in capital | 80,788 | 79,554 | |||||
Retained earnings | 11,177 | 9,705 | |||||
Accumulated other comprehensive income (loss) | 15 | (8 | ) | ||||
Total stockholders’ equity | 91,999 | 89,270 | |||||
Total liabilities and stockholders’ equity | $ | 113,517 | $ | 107,071 | |||
Tactile Systems Technology, Inc. | ||||||||
Condensed Consolidated Statements of Operations | ||||||||
(Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
(In thousands, except share and per share data) | 2019 | 2018 | ||||||
Revenue | ||||||||
Sales revenue | $ | 30,831 | $ | 23,647 | ||||
Rental revenue | 6,786 | 3,201 | ||||||
Total revenue | 37,617 | 26,848 | ||||||
Cost of revenue | ||||||||
Cost of sales revenue | 9,412 | 6,409 | ||||||
Cost of rental revenue | 1,947 | 900 | ||||||
Total cost of revenue | 11,359 | 7,309 | ||||||
Gross profit | ||||||||
Gross profit - sales revenue | 21,419 | 17,238 | ||||||
Gross profit - rental revenue | 4,839 | 2,301 | ||||||
Gross profit | 26,258 | 19,539 | ||||||
Operating expenses | ||||||||
Sales and marketing | 17,391 | 12,557 | ||||||
Research and development | 1,281 | 1,437 | ||||||
Reimbursement, general and administrative | 9,388 | 7,372 | ||||||
Total operating expenses | 28,060 | 21,366 | ||||||
Loss from operations | (1,802 | ) | (1,827 | ) | ||||
Other income | 161 | 91 | ||||||
Loss before income taxes | (1,641 | ) | (1,736 | ) | ||||
Income tax benefit | (3,113 | ) | (1,686 | ) | ||||
Net income (loss) | $ | 1,472 | $ | (50 | ) | |||
Net income per common share | ||||||||
Basic | $ | 0.08 | $ | 0.00 | ||||
Diluted | $ | 0.08 | $ | 0.00 | ||||
Weighted-average common shares used to compute net income per common share | ||||||||
Basic | 18,746,751 | 17,996,672 | ||||||
Diluted | 19,579,847 | 17,996,672 | ||||||
Tactile Systems Technology, Inc. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(Unaudited) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
(In thousands) | 2019 | 2018 | ||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 1,472 | $ | (50 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 996 | 463 | ||||||
Deferred income taxes | (2,264 | ) | — | |||||
Stock-based compensation expense | 2,783 | 1,481 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 2,671 | 3,414 | ||||||
Net investment in leases | (3,362 | ) | — | |||||
Inventories | (132 | ) | (3,616 | ) | ||||
Income taxes | (1,030 | ) | (1,952 | ) | ||||
Prepaid expenses and other assets | 97 | 63 | ||||||
Right of use operating lease assets | (3,396 | ) | — | |||||
Medicare accounts receivable – long-term | (288 | ) | (253 | ) | ||||
Accounts payable | 722 | 885 | ||||||
Accrued payroll and related taxes | (584 | ) | (1,850 | ) | ||||
Accrued expenses and other liabilities | 125 | (756 | ) | |||||
Right of use operating lease liabilities | 3,465 | — | ||||||
Future product royalties | (2 | ) | (2 | ) | ||||
Net cash provided by (used in) operating activities | 1,273 | (2,173 | ) | |||||
Cash flows from investing activities | ||||||||
Proceeds from sales of securities available-for-sale | — | 1,000 | ||||||
Proceeds from maturities of securities available-for-sale | 4,500 | 4,000 | ||||||
Purchases of property and equipment | (731 | ) | (432 | ) | ||||
Intangible assets costs | (44 | ) | — | |||||
Net cash provided by investing activities | 3,725 | 4,568 | ||||||
Cash flows from financing activities | ||||||||
Taxes paid for net share settlement of restricted stock units | (2,410 | ) | (1,188 | ) | ||||
Proceeds from exercise of common stock options | 861 | 138 | ||||||
Net cash used in financing activities | (1,549 | ) | (1,050 | ) | ||||
Net increase in cash and cash equivalents | 3,449 | 1,345 | ||||||
Cash and cash equivalents – beginning of period | 20,099 | 23,968 | ||||||
Cash and cash equivalents – end of period | $ | 23,548 | $ | 25,313 | ||||
Supplemental cash flow disclosure | ||||||||
Cash paid for interest | $ | — | $ | — | ||||
Cash paid for taxes | $ | 181 | $ | 284 | ||||
Capital expenditures incurred but not yet paid | $ | 176 | $ | 96 | ||||
Tactile Systems Technology, Inc. | |||||||||||||||
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Increase | ||||||||||||||
March 31, | (Decrease) | ||||||||||||||
(Dollars in thousands) | 2019 |
2018 |
$ | % | |||||||||||
Net income | $ | 1,472 | $ | (50 | ) | $ | 1,522 | N.M. | % | ||||||
Interest income, net | (98 | ) | (108 | ) | 10 | (9 | )% | ||||||||
Income tax (benefit) expense | (3,113 | ) | (1,686 | ) | (1,427 | ) | 85 | % | |||||||
Depreciation and amortization | 996 | 463 | 533 | 115 | % | ||||||||||
Stock-based compensation | 2,783 | 1,481 | 1,302 | 88 | % | ||||||||||
Adjusted EBITDA | $ | 2,040 | $ | 100 | $ | 1,940 | N.M. | % |
“N.M.” Not Meaningful
Tactile Systems Technology, Inc. | ||||||||||||
Supplemental Financial Information | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | Increase | |||||||||||
March 31, | (Decrease) | |||||||||||
(Dollars in thousands) | 2019 | 2018 | $ | % | ||||||||
Flexitouch System | $ | 34,109 | $ | 24,530 | $ | 9,579 | 39 | % | ||||
Entre / Actitouch Systems | 3,508 | 2,318 | 1,190 | 51 | % | |||||||
Total Revenue | $ | 37,617 | $ | 26,848 | $ | 10,769 | 40 | % |
Investor Inquiries:Mike Piccinino , CFA Managing DirectorWestwicke Partners 443-213-0500 [email protected]
Source: Tactile Systems Technology, Inc.