Full Year 2018 Summary:
- Full year 2018 revenue increased 32% year-over-year, to
$143.8 million , compared to$109.3 million in 2017. - Flexitouch revenue increased 31% year-over-year, to
$131.9 million , compared to$100.3 million in 2017. - Operating income decreased 23% year-over-year to
$3.0 million , compared to operating income of$3.9 million in 2017. Excluding the non-cash impairment charge and inventory write-off related to our Actitouch assets, 2018 adjusted operating income was$5.5 million . - Net income increased 13% year-over-year to
$6.6 million , compared to$5.9 million in 2017. - Adjusted EBITDA increased 74% year-over-year to
$17.2 million , compared to$9.9 million in 2017.
Fourth Quarter 2018 Summary:
- Fourth quarter revenue increased 33% year-over-year, to
$46.4 million , compared to$34.9 million in fourth quarter 2017. - Flexitouch revenue increased 32% year-over-year, to
$42.7 million , compared to$32.4 million in fourth quarter 2017. - Operating income decreased 57% year-over-year to
$2.1 million , compared to operating income of$4.9 million in fourth quarter 2017. Excluding the non-cash impairment charge and inventory write-off related to our Actitouch assets, fourth quarter 2018 adjusted operating income was$4.6 million . - Net income increased 6% year-over-year to
$2.4 million , compared to$2.2 million in fourth quarter 2017. - Adjusted EBITDA increased 21% year-over-year to
$8.2 million , compared to$6.8 million in fourth quarter 2017. - On
October 17, 2018 , the Company announced an exclusive license agreement withSun Scientific, Inc. for the intellectual property of the Aero-WrapTM compression therapy products inthe United States andCanada . The wearable Aero-Wrap products provide static (continuous) compression for patients with swelling in their legs. Pursuant to the license agreement, the Company paid Sun Scientific an initiation fee of$4.0 million and will pay royalties based on future sales.
“We delivered strong operating and financial results in 2018 with full year revenue growth of 32%, well ahead of our expectations,” said
Mr. Mattys continued, “Looking ahead to 2019, we remain confident in our ability to deliver 20%+ revenue growth and improved profitability, as we continue to expand our share of the $4+ billion U.S. market in lymphedema and chronic venous insufficiency.”
Fourth Quarter 2018 Financial Results
Revenue for the fourth quarter of 2018 increased
Gross profit for the fourth quarter of 2018 increased
Operating expenses for the fourth quarter of 2018 increased
Operating income for the fourth quarter of 2018 decreased
Income tax benefit for the fourth quarter of 2018 was
Net income for the fourth quarter of 2018 increased approximately
Full Year 2018 Financial Results:
Revenue for the full year 2018 increased $34.5 million, or 32%, to $143.8 million, compared to $109.3 million for the year ended December 31, 2017. The increase in revenue was primarily driven by an increase of approximately $31.6 million, or 31%, year-over-year in sales of the Flexitouch system.
Net income for 2018 increased $0.8 million, or 13%, to $6.6 million, or
Cash Position
At
2019 Financial Outlook
For 2019, the Company expects revenue 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 9881939. 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” 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
| Tactile Systems Technology, Inc. | ||||||||
| Consolidated Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| At December 31, | ||||||||
| (In thousands, except share and per share data) | 2018 | 2017 | ||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 20,099 | $ | 23,968 | ||||
| Marketable securities | 25,786 | 19,944 | ||||||
| Accounts receivable, net | 24,332 | 17,623 | ||||||
| Inventories | 11,189 | 11,040 | ||||||
| Income taxes receivable | 1,793 | 2,119 | ||||||
| Prepaid expenses and other current assets | 1,762 | 2,178 | ||||||
| Total current assets | 84,961 | 76,872 | ||||||
| Property and equipment, net | 4,810 | 3,776 | ||||||
| Other assets | ||||||||
| Intangible assets, net | 5,339 | 2,218 | ||||||
| Medicare accounts receivable, long-term | 1,884 | 2,718 | ||||||
| Deferred income taxes | 8,820 | 2,662 | ||||||
| Other non-current assets | 1,257 | 201 | ||||||
| Total other assets | 17,300 | 7,799 | ||||||
| Total assets | $ | 107,071 | $ | 88,447 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 5,110 | $ | 4,253 | ||||
| Accrued payroll and related taxes | 7,421 | 6,706 | ||||||
| Accrued expenses | 2,780 | 2,598 | ||||||
| Future product royalties | 5 | 17 | ||||||
| Income taxes | 51 | 212 | ||||||
| Other current liabilities | 709 | 733 | ||||||
| Total current liabilities | 16,076 | 14,519 | ||||||
| Long-term liabilities | ||||||||
| Accrued warranty reserve, long-term | 1,725 | 1,141 | ||||||
| Total liabilities | 17,801 | 15,660 | ||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of December 31, 2018 and 2017 | — | — | ||||||
| Common stock, $0.001 par value, 300,000,000 shares authorized; 18,631,127 shares issued and outstanding as of December 31, 2018; 17,872,465 shares issued and 17,846,379 shares outstanding as of December 31, 2017 | 19 | 18 | ||||||
| Additional paid-in capital | 79,554 | 70,224 | ||||||
| Retained earnings | 9,705 | 3,082 | ||||||
| Accumulated other comprehensive loss | (8 | ) | (44 | ) | ||||
| Less: treasury stock, at cost — none as of December 31, 2018 and 26,086 shares as of December 31, 2017 | — | (493 | ) | |||||
| Total stockholders’ equity | 89,270 | 72,787 | ||||||
| Total liabilities and stockholders’ equity | $ | 107,071 | $ | 88,447 | ||||
| Tactile Systems Technology, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| (In thousands, except share and per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Revenues, net | $ | 46,448 | $ | 34,886 | $ | 143,751 | $ | 109,283 | ||||||||
| Cost of goods sold | 14,433 | 8,829 | 41,493 | 29,015 | ||||||||||||
| Gross profit | 32,015 | 26,057 | 102,258 | 80,268 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Sales and marketing | 17,730 | 12,670 | 60,371 | 44,396 | ||||||||||||
| Research and development | 1,340 | 1,361 | 5,289 | 5,060 | ||||||||||||
| Reimbursement, general and administrative | 10,809 | 7,099 | 33,608 | 26,914 | ||||||||||||
| Total operating expenses | 29,879 | 21,130 | 99,268 | 76,370 | ||||||||||||
| Income from operations | 2,136 | 4,927 | 2,990 | 3,898 | ||||||||||||
| Other income | 135 | 88 | 486 | 292 | ||||||||||||
| Income before income taxes | 2,271 | 5,015 | 3,476 | 4,190 | ||||||||||||
| Income tax (benefit) expense | (84 | ) | 2,785 | (3,147 | ) | (1,665 | ) | |||||||||
| Net income | $ | 2,355 | $ | 2,230 | $ | 6,623 | $ | 5,855 | ||||||||
| Net income per common share | ||||||||||||||||
| Basic | $ | 0.13 | $ | 0.13 | $ | 0.36 | $ | 0.34 | ||||||||
| Diluted | $ | 0.12 | $ | 0.12 | $ | 0.34 | $ | 0.31 | ||||||||
| Weighted-average common shares used to compute net income per common share | ||||||||||||||||
| Basic | 18,506,964 | 17,750,144 | 18,252,689 | 17,355,175 | ||||||||||||
| Diluted | 19,531,087 | 19,073,080 | 19,347,632 | 18,877,863 | ||||||||||||
| Tactile Systems Technology, Inc. | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| Year Ended December 31, | ||||||||
| (In thousands) | 2018 | 2017 | ||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 6,623 | $ | 5,855 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
| Depreciation and amortization | 3,635 | 1,849 | ||||||
| Deferred income taxes | (6,182 | ) | 143 | |||||
| Stock-based compensation expense | 7,974 | 4,235 | ||||||
| Loss on disposal of equipment | 3 | — | ||||||
| Loss on sales of marketable securities | 1 | — | ||||||
| Impairment losses | 2,534 | — | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (6,709 | ) | (3,391 | ) | ||||
| Inventories | (870 | ) | (4,486 | ) | ||||
| Income taxes | 165 | (2,942 | ) | |||||
| Prepaid expenses and other assets | (1,140 | ) | 146 | |||||
| Medicare accounts receivable – long-term | 834 | 105 | ||||||
| Accounts payable | 690 | 462 | ||||||
| Accrued payroll and related taxes | 715 | 14 | ||||||
| Accrued expenses and other liabilities | 746 | 2,252 | ||||||
| Future product royalties | (12 | ) | (50 | ) | ||||
| Net cash provided by operating activities | 9,007 | 4,192 | ||||||
| Cash flows from investing activities | ||||||||
| Proceeds from sales of securities available-for-sale | 2,000 | 1,000 | ||||||
| Proceeds from maturities of securities available-for-sale | 15,000 | 1,000 | ||||||
| Purchases of securities available-for-sale | (21,680 | ) | (12,051 | ) | ||||
| Purchases of property and equipment | (4,196 | ) | (3,746 | ) | ||||
| Acquisition of intangible assets | (5,350 | ) | (74 | ) | ||||
| Other investments | (500 | ) | (145 | ) | ||||
| Net cash used in investing activities | (14,726 | ) | (14,016 | ) | ||||
| Cash flows from financing activities | ||||||||
| Taxes paid for net share settlement of restricted stock units | (2,379 | ) | (387 | ) | ||||
| Proceeds from exercise of common stock options and warrants | 1,515 | 834 | ||||||
| Proceeds from the issuance of common stock from the employee stock purchase plan | 2,714 | 3,137 | ||||||
| Shares repurchased to cover taxes from restricted stock award vesting | — | (493 | ) | |||||
| Net cash provided by financing activities | 1,850 | 3,091 | ||||||
| Net change in cash and cash equivalents | (3,869 | ) | (6,733 | ) | ||||
| Cash and cash equivalents – beginning of period | 23,968 | 30,701 | ||||||
| Cash and cash equivalents – end of period | $ | 20,099 | $ | 23,968 | ||||
| Supplemental cash flow disclosure | ||||||||
| Cash paid for interest | $ | 9 | $ | — | ||||
| Cash paid for taxes | $ | 2,883 | $ | 923 | ||||
| Capital expenditures incurred but not yet paid | $ | 167 | $ | 15 | ||||
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measures of Adjusted EBITDA, Adjusted EBITDA margin, adjusted gross margin and adjusted operating 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 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. Adjusted EBITDA margin represents net income as a percentage of revenue (net margin), with the same adjustments as Adjusted EBITDA. Adjusted gross margin represents gross margin plus inventory write-offs. Adjusted operating income represents operating income plus impairment charges and inventory write-offs.
These non-GAAP financial measures are presented because the Company believes they are useful indicators of its operating performance. Management uses the measures principally as measures 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 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 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.
These non-GAAP financial measures should not be considered as an alternative to, or superior to, net income, net margin, gross margin or operating income 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. These non-GAAP financial measures contain 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 these 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 these 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 are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
The following table contains a reconciliation of net income to Adjusted EBITDA:
| Tactile Systems Technology, Inc. | |||||||||||||||||||||||||||||||
| Reconciliation of Net Income to Non-GAAP Adjusted EBITDA | |||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||
| Three Months Ended | Increase | Year Ended | Increase | ||||||||||||||||||||||||||||
| December 31, | (Decrease) | December 31, | (Decrease) | ||||||||||||||||||||||||||||
| (Dollars in thousands) | 2018 | 2017 | $ | % | 2018 | 2017 | $ | % | |||||||||||||||||||||||
| Net income | $ | 2,355 | $ | 2,230 | $ | 125 | 6 | % | $ | 6,623 | $ | 5,855 | $ | 768 | 13 | % | |||||||||||||||
| Interest income, net | (74 | ) | (112 | ) | 38 | (34 | ) | % | (413 | ) | (367 | ) | (46 | ) | 13 | % | |||||||||||||||
| Income tax (benefit) expense | (84 | ) | 2,785 | (2,869 | ) | (103 | ) | % | (3,147 | ) | (1,665 | ) | (1,482 | ) | 89 | % | |||||||||||||||
| Depreciation and amortization | 1,161 | 776 | 385 | 50 | % | 3,635 | 1,849 | 1,786 | 97 | % | |||||||||||||||||||||
| Stock-based compensation | 2,336 | 1,131 | 1,205 | 107 | % | 7,974 | 4,235 | 3,739 | 88 | % | |||||||||||||||||||||
| Impairment charges and inventory write-offs | 2,534 | — | 2,534 | — | % | 2,534 | — | 2,534 | — | % | |||||||||||||||||||||
| Adjusted EBITDA | $ | 8,228 | $ | 6,810 | $ | 1,418 | 21 | % | $ | 17,206 | $ | 9,907 | $ | 7,299 | 74 | % | |||||||||||||||
The following table contains a reconciliation of net margin to Adjusted EBITDA margin:
| Tactile Systems Technology, Inc. | ||||||||||||
| Reconciliation of Net Margin to Non-GAAP Adjusted EBITDA Margin | ||||||||||||
| (Unaudited) | ||||||||||||
| Year Ended | ||||||||||||
| December 31, | Increase | |||||||||||
| (As a percentage of revenue) | 2018 | 2017 | (Decrease) | |||||||||
| Net margin | 4.6 | % | 5.4 | % | (80 | ) | bps | |||||
| Interest income, net | (0.3 | ) | % | (0.3 | ) | % | — | bps | ||||
| Income tax benefit | (2.2 | ) | % | (1.5 | ) | % | (70 | ) | bps | |||
| Depreciation and amortization | 2.5 | % | 1.7 | % | 80 | bps | ||||||
| Stock-based compensation | 5.6 | % | 3.8 | % | 180 | bps | ||||||
| Impairment charges and inventory write-offs | 1.8 | % | — | % | 180 | bps | ||||||
| Adjusted EBITDA margin | 12.0 | % | 9.1 | % | 290 | bps | ||||||
The following table contains a reconciliation of gross margin to adjusted gross margin:
| Tactile Systems Technology, Inc. | ||||
| Reconciliation of Gross Margin to Non-GAAP Adjusted Gross Margin | ||||
| (Unaudited) | ||||
| Three Months Ended | ||||
| (Dollars in thousands) | December 31, 2018 | |||
| Gross profit, as reported | $ | 32,015 | ||
| Gross margin, as reported | 68.9 | % | ||
| Reconciling item affecting gross margin: | ||||
| Inventory write-offs | 721 | |||
| Non-GAAP adjusted gross profit | $ | 32,736 | ||
| Non-GAAP adjusted gross margin | 70.5 | % | ||
The following table contains a reconciliation of operating income to adjusted operating income:
| Tactile Systems Technology, Inc. | ||||||||
| Reconciliation of Operating Income to Non-GAAP Adjusted Operating Income | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | Year Ended | |||||||
| (Dollars in thousands) | December 31, 2018 | December 31, 2018 | ||||||
| Operating income, as reported | $ | 2,136 | $ | 2,990 | ||||
| Reconciling item affecting operating income: | ||||||||
| Impairment charges and inventory write-offs | 2,534 | 2,534 | ||||||
| Non-GAAP adjusted operating income | $ | 4,670 | $ | 5,524 | ||||
The following table summarizes revenues by product for the three and twelve months ended
| Tactile Systems Technology, Inc. | ||||||||||||||||||||||||||||||
| Supplemental Financial Information | ||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||
| Three Months Ended | Increase | Year Ended | Increase | |||||||||||||||||||||||||||
| December 31, | (Decrease) | December 31, | (Decrease) | |||||||||||||||||||||||||||
| (Dollars in thousands) | 2018 | 2017 | $ | % | 2018 |
2017 |
$ | % | ||||||||||||||||||||||
| Flexitouch System | $ | 42,719 | $ | 32,408 | $ | 10,311 | 31.8 | % | $ | 131,935 | $ | 100,344 | $ | 31,591 | 31.5 | % | ||||||||||||||
| Entre / Actitouch Systems | 3,729 | 2,478 | 1,251 | 50.5 | % | 11,816 | 8,939 | 2,877 | 32.2 | % | ||||||||||||||||||||
| Total Revenue | $ | 46,448 | $ | 34,886 | $ | 11,562 | 33.1 | % | $ | 143,751 | $ | 109,283 | $ | 34,468 | 31.5 | % | ||||||||||||||
Investor Inquiries:Mike Piccinino , CFA Managing DirectorWestwicke Partners 443-213-0500 [email protected]
Source: Tactile Systems Technology, Inc.