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News Release Details


Tactile Systems Technology, Inc. Reports Fourth Quarter And Full Year 2021 Financial Results; Introduces Full Year 2022 Outlook

February 22, 2022

Fourth Quarter Revenue Increased 4% Year-Over-Year; Full Year Revenue Increased 11% Year-over-Year

MINNEAPOLIS, Feb. 22, 2022 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. (“Tactile Medical”) (Nasdaq: TCMD), a medical technology company focused on developing medical devices for the treatment of patients with underserved chronic diseases at home, today reported financial results for the fourth quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Summary:

  • Total revenue increased 4% year-over-year to $61.7 million, compared to $59.2 million in fourth quarter 2020.
    • Total revenue in fourth quarter 2021 included $4.3 million of revenue from the AffloVest respiratory therapy business, acquired on September 8, 2021.
  • Operating income of $3.8 million, compared to operating income of $7.0 million in fourth quarter 2020.
    • Non-GAAP operating income of $6.4 million, compared to non-GAAP operating income of $7.8 million in fourth quarter of 2020.
  • Net loss of $7.5 million, compared to net income of $12.1 million in fourth quarter 2020.
    • Non-GAAP net loss of $5.5 million, compared to non-GAAP net income of $11.8 million in fourth quarter of 2020.
  • Adjusted EBITDA of $9.5 million, compared to Adjusted EBITDA of $10.8 million in fourth quarter 2020.

Full Year 2021 Summary:

  • Total revenue increased 11% year-over-year to $208.1 million, compared to $187.1 million in 2020.
    • Total revenue in 2021 included $5.1 million of revenue from the AffloVest respiratory therapy business, acquired on September 8, 2021.
  • Operating loss of $1.8 million, compared to operating loss of $3.6 million in 2020.
    • Non-GAAP operating income of $5.3 million, compared to non-GAAP operating income of $2.8 million in 2020.
  • Net loss of $11.8 million, compared to net loss of $0.6 million in 2020.
    • Non-GAAP net loss of $6.5 million, compared to non-GAAP net income of $3.3 million in 2020.
  • Adjusted EBITDA of $17.7 million, compared to Adjusted EBITDA of $16.0 million in 2020.

Highlights Subsequent to Quarter End:

  • On January 5, 2022, the Company announced the appointment of Valerie L. Asbury and D. Brent Shafer to the Company’s Board of Directors.

  • On February 18, 2022, the Company announced that the qui tam lawsuit filed by a competitor has been dropped and subsequently dismissed by a federal judge in Texas. Tactile Medical will not pay any damages, penalties or other compensation.

“Our fourth quarter sales performance exceeded our guidance, driven by stronger-than-anticipated sales of our Flexitouch Plus systems,” said Dan Reuvers, President and Chief Executive Officer of Tactile Medical. “We were pleased to achieve these results given the continuation of two primary headwinds that emerged during the third quarter: the impact of COVID-19 variants and challenges related to salesforce staffing. Our team performed admirably during the fourth quarter in spite of these headwinds, providing support for our existing customers, expanding our base of prescribing accounts and integrating the AffloVest business.”

Mr. Reuvers continued, “While we entered January amid an Omicron surge and the task of filling key sales roles, we expect these issues to be more impactful in the first half of the year, giving way to more normalized conditions in the back half of the year. We plan to focus on salesforce productivity, deeper penetration within our newly expanded prescriber base and the commercialization of new products later in the year. A bolstered field team, new garments that improve the patient experience and a mobile app that engages patients should help us more efficiently bring therapeutic relief to the millions of still under-diagnosed and under-treated lymphedema patients. We’re equally excited to support our AffloVest channel partners to bring airway clearance therapy to the 500,000 patients suffering from bronchiectasis.”

Fourth Quarter 2021 Financial Results

Total revenue in the fourth quarter of 2021 increased $2.5 million, or 4%, to $61.7 million, compared to $59.2 million in the fourth quarter of 2020. The increase in total revenue was attributable to $4.3 million in sales of the recently acquired AffloVest product line, which more than offset a $1.6 million, or 3%, decrease in sales and rentals of the Flexitouch system, and a $0.2 million, or 2%, decrease in sales and rentals of the Entre system in the quarter ended December 31, 2021. Fourth quarter 2021 revenue was negatively impacted by the prolonged recovery from COVID-19, including the resurgence due to COVID-19 variants during the period, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. In addition, the challenging labor market, coupled with our vaccine policy, impacted our ability to recruit and retain quality candidates for our direct sales force.

Gross profit in the fourth quarter of 2021 increased $3.0 million, or 7%, to $44.8 million, compared to $41.9 million in the fourth quarter of 2020. Gross margin was 72.6% of revenue, compared to 70.6% of revenue in the fourth quarter of 2020. The increase in gross margin primarily resulted from the addition of the AffloVest product line and changes in the mix of sales and rentals by payer. Non-GAAP gross margin was 73.3% of revenue, compared to 70.7% of revenue in the fourth quarter of 2020.

Operating expenses in the fourth quarter of 2021 increased $6.2 million, or 18%, to $41.0 million, compared to $34.9 million in the fourth quarter of 2020. The increase in operating expenses was primarily driven by sales and marketing expense, which increased $5.0 million, or 26%, to $24.8 million, largely due to increases in personnel-related compensation expense and travel-related expenses. The increase in operating expenses was also driven by a $0.3 million increase in reimbursement, general and administrative expenses, a $0.4 million increase in intangible asset amortization and earn-out expense, and a $0.4 million increase in research and development expenses. The $0.4 million increase in non-cash intangible amortization and non-cash earn-out expense was primarily attributable to the increase in intangible assets associated with the AffloVest acquisition, partially offset by a $0.2 million decrease in the estimated fair value of our earn-out liability.

Operating income was $3.8 million in the fourth quarter of 2021, compared to $7.0 million in the fourth quarter of 2020. Non-GAAP operating income in the fourth quarter of 2021 was $6.4 million, compared to Non-GAAP operating income of $7.8 million in the fourth quarter of 2020.

Other expense was $0.4 million in the fourth quarter of 2021, compared to other income of $1.2 million in the fourth quarter of 2020. The change in other expense/income was due to $1.2 million recognized in the fourth quarter of 2020 under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Provider Relief Fund to provide relief for lost revenues from the COVID-19 public health emergency.

Income tax expense was $10.9 million in the fourth quarter of 2021, compared to an income tax benefit of $3.9 million in the fourth quarter of 2020. The current year tax expense was driven by the recording of a full valuation allowance against our deferred tax assets.

Net loss in the fourth quarter of 2021 was $7.5 million, or $0.38 per diluted share, compared to net income of $12.1 million, or $0.61 per diluted share, in the fourth quarter of 2020. Non-GAAP net loss in the fourth quarter of 2021 was $5.5 million, compared to Non-GAAP net income of $11.8 million in the fourth quarter of 2020.

Weighted average shares used to compute diluted net income/loss per share was 19.8 million in the fourth quarter of both 2021 and 2020.

Adjusted EBITDA was $9.5 million in the fourth quarter of 2021, compared to $10.8 million in the fourth quarter of 2020.

Full Year 2021 Financial Results:

Total revenue for the twelve months ended December 31, 2021, increased $20.9 million, or 11%, to $208.1 million, compared to $187.1 million for the twelve months ended December 31, 2020. The increase in revenue was driven by an increase of $12.3 million, or 8%, in sales and rentals of the Flexitouch system, $5.1 million in sales of the recently acquired AffloVest respiratory therapy business and an increase of $3.5 million, or 15% in sales and rentals of the Entre system for the twelve months ended December 31, 2021. Revenue for the twelve months ended December 31, 2021, benefited from the initial stages of recovery from the COVID-19 pandemic during the first half of 2021, as well as an expanded prescriber base. However, revenue in the second half of 2021 was negatively impacted by the prolonged recovery from COVID-19, including the resurgence due to variants, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. In addition, the challenging labor market coupled with our vaccine policy impacted our ability to recruit and retain quality candidates for our direct sales force.

Net loss for the twelve months ended December 31, 2021, was $11.8 million, or $0.60 per diluted share, compared to a net loss of $0.6 million, or $0.03 per diluted share, for the twelve months ended December 31, 2020. Non-GAAP net loss for the twelve months ended December 31, 2021, was $6.5 million, compared to Non-GAAP net income of $3.3 million for the twelve months ended December 31, 2020.

Weighted average shares used to compute diluted net loss per share were 19.8 million and 19.3 million for the twelve months ended December 31, 2021 and 2020, respectively.

Adjusted EBITDA was $17.7 million in the twelve months ended December 31, 2021, compared to $16.0 million in the twelve months ended December 31, 2020.

Balance Sheet Summary

As of December 31, 2021, the Company had $28.2 million in cash and cash equivalents and $55.0 million of outstanding borrowings under its credit agreement, compared to $47.9 million in cash and cash equivalents and no outstanding borrowings on its revolving credit facility as of December 31, 2020. The change in cash and debt was primarily due to the funding of the AffloVest acquisition which closed on September 8, 2021.

2022 Financial Outlook

The Company expects full year 2022 total revenue in the range of $235.0 million to $240.0 million, representing growth of approximately 13% to 15% year-over-year, compared to total revenue of $208.1 million in 2021.

Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on February 22, 2022, 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 13726731. 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 13726731. 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. The company 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 impacts of the COVID-19 pandemic on the Company’s business, financial condition and results of operations; the course of the COVID-19 pandemic and its impact on general economic, business and market conditions; the Company’s inability to execute on its plans to respond to the COVID-19 pandemic; 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; loss or retirement of key executives, including prior to identifying a successor; adverse economic conditions or intense competition; the Company’s ability to effectively integrate the acquisition of the AffloVest product line; 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 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 margin, non-GAAP operating income, 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 impairment charges and inventory write-offs, plus litigation defense costs, plus acquisition costs, less CARES Act funding, plus or minus the change in fair value of earn-out, and plus executive transition costs. Non-GAAP gross margin in this release represents gross margin plus non-cash intangible amortization expense, inventory write-offs and inventory purchase price adjustments. Non-GAAP operating income in this release represents operating income (loss) adjusted for non-cash intangible amortization expense, inventory write-offs, inventory purchase price adjustments, impairment of intangibles, acquisition costs and expenses, 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, inventory write-offs, inventory purchase price adjustments, impairment of intangibles, acquisition costs and expenses, CARES Act funding, 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.
Consolidated Balance Sheets
(Unaudited)
       December 31,      December 31,
(In thousands, except share and per share data)      2021      2020
Assets          
Current assets            
Cash and cash equivalents   $ 28,229   $ 47,855
Accounts receivable     49,478     43,849
Net investment in leases     12,482     10,708
Inventories     19,217     18,563
Prepaid expenses and other current assets     4,141     2,638
Total current assets     113,547     123,613
Non-current assets            
Property and equipment, net     6,750     6,957
Right of use operating lease assets     23,984     20,132
Intangible assets, net     54,081     1,680
Goodwill     31,063    
Accounts receivable, non-current     12,847     9,433
Deferred income taxes         10,198
Other non-current assets     1,998     2,074
Total non-current assets     130,723     50,474
Total assets   $ 244,270   $ 174,087
Liabilities and Stockholders' Equity            
Current liabilities            
Accounts payable   $ 5,023   $ 4,197
Note payable     2,960    
Earn-out, current     3,250    
Accrued payroll and related taxes     12,139     11,588
Accrued expenses     5,262     4,423
Income taxes payable     16     2,658
Operating lease liabilities     2,506     2,006
Other current liabilities     3,305     1,842
Total current liabilities     34,461     26,714
Non-current liabilities            
Revolving line of credit, non-current     24,857    
Note payable, non-current     26,933    
Earn-out, non-current     2,950    
Accrued warranty reserve, non-current     3,108     3,235
Income taxes payable, non-current     348    
Operating lease liabilities, non-current     23,354     19,388
Deferred income taxes     32    
Total non-current liabilities     81,582     22,623
Total liabilities     116,043     49,337
             
Stockholders’ equity:            
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of December 31, 2021 and December 31,
2020
       
Common stock, $0.001 par value, 300,000,000 shares authorized; 19,877,786 shares issued and outstanding as of December 31, 2021; 19,492,718 shares issued and outstanding as of December 31, 2020     20     19
Additional paid-in capital     119,962     104,675
Retained earnings     8,245     20,056
Total stockholders’ equity     128,227     124,750
Total liabilities and stockholders’ equity   $ 244,270   $ 174,087
             


                         
Tactile Systems Technology, Inc.
Consolidated Statements of Operations
(Unaudited)
                         
                         
    Three Months Ended   Year Ended
    December 31,   December 31,
(In thousands, except share and per share data)      2021        2020        2021        2020  
Revenue                        
Sales revenue   $ 53,699     $ 51,783     $ 177,914     $ 161,497  
Rental revenue     8,029       7,460       30,143       25,633  
Total revenue     61,728       59,243       208,057       187,130  
Cost of revenue                        
Cost of sales revenue     13,797       14,441       50,222       45,309  
Cost of rental revenue     3,121       2,949       9,622       9,011  
Total cost of revenue     16,918       17,390       59,844       54,320  
Gross profit                        
Gross profit - sales revenue     39,902       37,342       127,692       116,188  
Gross profit - rental revenue     4,908       4,511       20,521       16,622  
Gross profit     44,810       41,853       148,213       132,810  
Operating expenses                        
Sales and marketing     24,826       19,778       86,775       79,634  
Research and development     1,774       1,373       5,659       5,264  
Reimbursement, general and administrative     14,000       13,661       56,802       51,343  
Intangible asset amortization and earn-out     445       49       739       197  
Total operating expenses     41,045       34,861       149,975       136,438  
(Loss) income from operations     3,765       6,992       (1,762 )     (3,628 )
Other (expense) income     (377 )     1,186       (531 )     1,367  
(Loss) income before income taxes     3,388       8,178       (2,293 )     (2,261 )
Income tax expense (benefit)     10,883       (3,935 )     9,518       (1,641 )
Net (loss) income   $ (7,495 )   $ 12,113     $ (11,811 )   $ (620 )
Net (loss) income per common share                        
Basic   $ (0.38 )   $ 0.62     $ (0.60 )   $ (0.03 )
Diluted   $ (0.38 )   $ 0.61     $ (0.60 )   $ (0.03 )
Weighted-average common shares used to compute net (loss) income per common share                        
Basic     19,790,838       19,415,640       19,719,485       19,346,929  
Diluted     19,790,838       19,747,365       19,719,485       19,346,929  


             
Tactile Systems Technology, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
     
    Year Ended December 31
(In thousands)      2021        2020  
Cash flows from operating activities            
Net (loss) income   $ (11,811 )   $ (620 )
Adjustments to reconcile net (loss) income to net cash provided by operating activities:            
Depreciation and amortization     3,681       2,794  
Net amortization of premiums and discounts on securities available-for-sale           (91 )
Deferred income taxes     10,230       (1,233 )
Stock-based compensation expense     10,173       10,689  
Gain on other investments and maturities of marketable securities           (11 )
Impairment losses           4,025  
Loss on disposal of property and equipment     20        
Change in fair value of earn-out liability     (200 )      
Changes in assets and liabilities, net of acquisition:            
Accounts receivable     (5,629 )     (10,405 )
Net investment in leases     (1,774 )     (2,561 )
Inventories     972       318  
Income taxes     (2,294 )     1,972  
Prepaid expenses and other assets     (1,489 )     (528 )
Right of use operating lease assets     614       559  
Medicare accounts receivable, non-current     (3,414 )     (5,249 )
Accounts payable     826       337  
Accrued payroll and related taxes     551       1,490  
Accrued expenses and other liabilities     2,175       1,308  
Net cash provided by operating activities     2,631       2,794  
Cash flows from investing activities            
Proceeds from maturities of securities available-for-sale           22,500  
Payments related to acquisition     (79,829 )      
Purchases of property and equipment     (2,103 )     (2,059 )
Intangible assets costs     (252 )     (232 )
Other investments           (30 )
Net (used in) provided by investing activities     (82,184 )     20,179  
Cash flows from financing activities            
Proceeds from issuance of note payable     30,000        
Proceeds from revolving line of credit     25,000        
Payment of deferred debt issuance costs     (188 )      
Taxes paid for net share settlement of performance and restricted stock units     (1,173 )     (1,854 )
Proceeds from exercise of common stock options     3,976       1,068  
Proceeds from the issuance of common stock from the employee stock purchase plan     2,312       2,898  
Net cash provided by financing activities     59,927       2,112  
Net (decrease) increase in cash and cash equivalents     (19,626 )     25,085  
Cash and cash equivalents – beginning of period     47,855       22,770  
Cash and cash equivalents – end of period   $ 28,229     $ 47,855  
             
Supplemental cash flow disclosure            
Cash paid for taxes   $ 1,593     $ 543  
Capital expenditures incurred but not yet paid   $ 23     $ 17  

The following table summarizes revenue by product for the three and twelve months ended December 31, 2021 and 2020:

                         
    Three Months Ended   Year Ended
    December 31,   December 31,
(In thousands)      2021     2020     2021     2020  
Revenue                        
Flexitouch system   $ 49,684     $ 51,293     $ 176,228     $ 163,914  
Entre system     7,761       7,949       26,685       23,216  
AffloVest     4,283             5,144        
Total   $ 61,728     $ 59,242     $ 208,057     $ 187,130  
                         
Percentage of total revenue                        
Flexitouch system     80 %     87 %     85 %     88 %
Entre system     13 %     13 %     13 %     12 %
AffloVest     7 %     %     2 %     %
Total     100 %     100 %     100 %     100 %

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

                                 
Tactile Systems Technology, Inc.
Reconciliation of Gross Margin to Non-GAAP Gross Margin
(Unaudited)
                                 
    Three Months Ended   Year Ended
    December 31, December 31,
(Dollars in thousands)      2021      2020      2021      2020
Revenue   $ 61,728     $ 59,243     $ 208,057     $ 187,130  
                                 
Gross profit, as reported   $ 44,810     $ 41,853     $ 148,213     $ 132,810  
Gross margin, as reported     72.6 %     70.6 %     71.2 %     71.0 %
Reconciling items affecting gross margin:                                
Non-cash intangible amortization expense   $ 308     $ 10     $ 412     $ 175  
Inventory write-offs                 588       428  
Inventory purchase price adjustments     150             200        
Non-GAAP gross profit   $ 45,268     $ 41,863     $ 149,413     $ 133,413  
Non-GAAP gross margin     73.3 %     70.7 %     71.8 %     71.3 %

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

                           
Tactile Systems Technology, Inc.
Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income
(Unaudited)
                           
    Three Months Ended   Year Ended
    December 31, December 31,
(Dollars in thousands)      2021      2020      2021      2020
GAAP operating income (loss)   $ 3,765     $ 6,992     $ (1,762 )   $ (3,628 )
Reconciling items affecting operating income (loss):                          
Non-cash intangible amortization expense impacting gross profit   $ 308     $ 10     $ 412     $ 175  
Inventory write-offs                 588       428  
Inventory purchase price adjustments     150             200        
Non-cash intangible amortization expense impacting operating expenses     645       49       939       197  
Impairment of intangibles                       3,597  
Acquisition costs & expenses     112             886        
Change in fair value of earn-out     (200 )           (200 )      
Litigation defense costs     1,318       599       3,669       1,030  
Executive transition expenses     340       105       526       981  
Non-GAAP operating income:   $ 6,438     $ 7,755     $ 5,258     $ 2,780  

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   Year Ended
    December 31, December 31,
(Dollars in thousands)      2021      2020      2021      2020
GAAP net (loss) income   $ (7,495 )   $ 12,113     $ (11,811 )   $ (620 )
Reconciling items affecting net (loss) income:                        
Non-cash intangible amortization expense impacting gross profit   $ 308     $ 10     $ 412     $ 175  
Inventory write-offs                 588       428  
Inventory purchase price adjustments     150             200        
Non-cash intangible amortization expense impacting operating expenses     645       49       939       197  
Impairment of intangibles                       3,597  
Acquisition costs & expenses     112             886        
CARES Act funding           (1,176 )           (1,176 )
Change in fair value of earn-out     (200 )           (200 )      
Litigation defense costs     1,318       599       3,669       1,030  
Executive transition expenses     340       105       526       981  
Income tax (expense) benefit on reconciling items*     (668 )     103       (1,755 )     (1,308 )
Non-GAAP net (loss) income   $ (5,490 )   $ 11,803     $ (6,546 )   $ 3,304  
* 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 (loss) income to Adjusted EBITDA for the three and twelve months ended December 31, 2021 and 2020, as well as the dollar and percentage change between the comparable periods:

                                                 
Tactile Systems Technology, Inc.
Reconciliation of Net (Loss) Income to Non-GAAP Adjusted EBITDA
(Unaudited)
                                                 
    Three Months Ended   Increase   Year Ended   Increase
    December 31,   (Decrease)   December 31,   (Decrease)
(Dollars in thousands)      2021        2020     $      %      2021        2020     $      %
Net (loss) income   $ (7,495 )   $ 12,113     $ (19,608 )   (162 ) %   $ (11,811 )   $ (620 )   $ (11,191 )   N.M. %
Interest expense (income), net     378       (14 )     392     N.M. %     499       (75 )     574     N.M. %
Income tax expense (benefit)     10,883       (3,935 )     14,818     N.M. %     9,518       (1,641 )     11,159     N.M. %
Depreciation and amortization     1,531       692       839     121   %     3,681       2,794       887     32   %
Stock-based compensation     2,470       2,401       69     3   %     10,173       10,689       (516 )   (5 ) %
Impairment charges and inventory write-offs                       %     588       4,025       (3,437 )   (85 ) %
Acquisition costs     262             262       %     1,086             1,086       %
CARES Act funding           (1,176 )     1,176     (100 ) %           (1,176 )     1,176     (100 ) %
Change in fair value of earn-out     (200 )           (200 )           (200 )           (200 )      
Litigation defense costs     1,318       599       719     120   %     3,669       1,030       2,639     N.M. %
Executive transition costs     340       105       235     N.M. %     526       981       (455 )   (46 ) %
Adjusted EBITDA   $ 9,487     $ 10,785     $ (1,298 )   (12 ) %   $ 17,729     $ 16,007     $ 1,722     11   %
                                                                 

Investor Inquiries:
Mike Piccinino, CFA
Managing Director
Westwicke Partners
443-213-0500
[email protected]

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Source: Tactile Systems Technology, Inc.