Q2 Revenue Increased 30% Year-over-Year; Operating Income Up 80%
Second Quarter 2018 Summary:
- Total revenue increased 30% year-over-year, to
$34.1 million , compared to$26.3 million in second quarter 2017. - Flexitouch revenue increased 30% year-over-year, to
$31.4 million , compared to$24.2 million in second quarter 2017. - Operating income of
$1.3 million , compared to operating income of$0.7 million in second quarter 2017. - Net income of
$2.6 million , compared to net income of$3.8 million in second quarter 2017. - Adjusted EBITDA of
$4.3 million compared to Adjusted EBITDA of$2.3 million in second quarter 2017.
Second Quarter Highlights:
- On
April 9, 2018 , the Company announced that its latest-generation Flexitouch system, the Flexitouch Plus, is commercially available throughoutthe United States for the treatment of lymphedema. The Company previously announcedU.S. Food and Drug Administration (FDA ) 510(k) clearance for the Flexitouch Plus inJune 2017 . - On
June 4, 2018 , the Company announced it had signed a purchase agreement withWright Therapy Products, Inc. Under the terms of the agreement, Tactile Medical acquired the rights to a portfolio of 31 issued and pending patents, consisting of intellectual property related to Wright Therapy Products’ pneumatic compression therapy devices, which are used for the treatment of lymphedema, venous insufficiency, venous ulcers and other edematous conditions. - On
June 22, 2018 , the Company announced the publication of a new clinical study demonstrating the health and economic benefits of the Flexitouch system for chronic venous insufficiency-related lymphedema (“CVI-related lymphedema,” also known as “Phlebolymphedema”), compared to other treatment modalities. The study, titled Health and Economic Benefits of Advanced Pneumatic Compression Devices in Patients with Phlebolymphedema, was conducted by Lerman et al. and published in theJournal of Vascular Surgery .
Highlights Subsequent to Quarter End:
- On
August 3, 2018 , the Company entered into a Credit Agreement withWells Fargo Bank , National Association for a senior secured credit facility. The Credit Agreement provides for a$10 million revolving credit facility with a three-year maturity. Borrowings under the Credit Agreement would bear interest at a rate of Libor plus 140 basis points to 215 basis points, depending on the Company’s total leverage ratio at the time. The Credit Agreement also includes a$25 million accordion feature. Subject to satisfaction of certain conditions, the accordion feature could allow the Company to expand the total aggregate principal amount of loans available under the Credit Agreement to up to$35 million . As ofAugust 6, 2018 , the Company had not borrowed under the Credit Agreement. - On
August 6, 2018 , the Company announced the appointment ofBrent A. Moen to the position of Chief Financial Officer, effectiveSeptember 2, 2018 . Mr. Moen will succeedLynn L. Blake , who will resign from her current role as Chief Financial Officer effective as of the close of business onSeptember 1, 2018 . Ms. Blake’s resignation is for personal reasons and not due to any disagreement with the Company on any matter, including related to the Company’s operations, policies, practices, financial reporting or controls. Ms. Blake will continue to advise the Company in a consulting role untilMarch 2019 in order to facilitate a smooth transition.
“Our second quarter and first half results reflect strong operating and financial performance this year,” said
“As we announced in a separate press release this evening, the Company has appointed
Mr. Mattys continued, “Looking ahead, we are increasing our annual revenue guidance based on our first half results and we expect to leverage our strong revenue growth into improved profitability this year. In addition to remaining focused on these objectives, we will continue to enhance the quality of life for our patient customers by providing them with clinically proven, at-home treatments for their chronic conditions.”
Second Quarter 2018 Financial Results
Total revenue for the second quarter of 2018 increased
Gross profit for the second quarter of 2018 increased
Operating expenses for the second quarter of 2018 increased
Operating income for the second quarter of 2018 increased
Income tax benefit for the second quarter of 2018 was
Net income for the second quarter of 2018 decreased approximately
Adjusted EBITDA for the second quarter of 2018 increased approximately
First Half 2018 Financial Results:
Total revenue for the six months ended June 30, 2018 increased $14.9 million, or 32%, to $61.0 million, compared to $46.1 million for the six months ended June 30, 2017. The increase in revenue was primarily driven by an increase of approximately $14.2 million, or 34%, year-over-year in sales of the Flexitouch system.
Net income for the six months ended June 30, 2018 increased $0.2 million, to $2.5 million, or
Adjusted EBITDA for the six months ended
Cash Position
At
On
As of
2018 Financial Outlook
For 2018, the Company now 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 4599514. 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; 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. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| (Unaudited) | ||||||||
| June 30, |
December 31, |
|||||||
| (In thousands, except share and per share data) | 2018 | 2017 | ||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 17,320 | $ | 23,968 | ||||
| Marketable securities | 23,802 | 19,944 | ||||||
| Accounts receivable, net | 17,529 | 17,623 | ||||||
| Inventories | 16,437 | 11,040 | ||||||
| Income taxes receivable | 5,205 | 2,119 | ||||||
| Prepaid expenses and other current assets | 947 | 2,178 | ||||||
| Total current assets | 81,240 | 76,872 | ||||||
| Property and equipment, net | 4,012 | 3,776 | ||||||
| Other assets | ||||||||
| Intangible assets, net | 2,984 | 2,218 | ||||||
| Medicare accounts receivable, long-term | 1,648 | 2,718 | ||||||
| Deferred income taxes | 2,648 | 2,662 | ||||||
| Other non-current assets | 201 | 201 | ||||||
| Total other assets | 7,481 | 7,799 | ||||||
| Total assets | $ | 92,733 | $ | 88,447 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 4,649 | $ | 4,253 | ||||
| Accrued payroll and related taxes | 5,520 | 6,706 | ||||||
| Accrued expenses | 2,033 | 2,598 | ||||||
| Future product royalties | 9 | 17 | ||||||
| Other current liabilities | 316 | 945 | ||||||
| Total current liabilities | 12,527 | 14,519 | ||||||
| Long-term liabilities | ||||||||
| Accrued warranty reserve, long-term | 1,437 | 1,141 | ||||||
| Total liabilities | 13,964 | 15,660 | ||||||
| Stockholders’ equity | ||||||||
| Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of June 30, 2018 and December 31, 2017 |
— | — | ||||||
| Common stock, $0.001 par value, 300,000,000 shares authorized; 18,313,061 shares issued and 18,286,975 shares outstanding as of June 30, 2018; 17,872,465 shares issued and 17,846,379 shares outstanding as of December 31, 2017 |
18 | 18 | ||||||
| Additional paid-in capital | 73,678 | 70,224 | ||||||
| Retained earnings | 5,604 | 3,082 | ||||||
| Accumulated other comprehensive loss | (38 | ) | (44 | ) | ||||
| Less: treasury stock, at cost — 26,086 shares as of June 30, 2018 and December 31, 2017 | (493 | ) | (493 | ) | ||||
| Total stockholders’ equity | 78,769 | 72,787 | ||||||
| Total liabilities and stockholders’ equity | $ | 92,733 | $ | 88,447 | ||||
| Tactile Systems Technology, Inc. | ||||||||||||||||
| Condensed Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (In thousands, except share and per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
| Revenues, net | $ | 34,133 | $ | 26,264 | $ | 60,981 | $ | 46,114 | ||||||||
| Cost of goods sold | 9,610 | 7,034 | 16,919 | 12,658 | ||||||||||||
| Gross profit | 24,523 | 19,230 | 44,062 | 33,456 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Sales and marketing | 14,452 | 10,645 | 27,009 | 20,811 | ||||||||||||
| Research and development | 1,289 | 1,465 | 2,726 | 2,583 | ||||||||||||
| Reimbursement, general and administrative | 7,471 | 6,390 | 14,843 | 12,264 | ||||||||||||
| Total operating expenses | 23,212 | 18,500 | 44,578 | 35,658 | ||||||||||||
| Income (loss) from operations | 1,311 | 730 | (516 | ) | (2,202 | ) | ||||||||||
| Other income | 132 | 64 | 223 | 119 | ||||||||||||
| Income (loss) before income taxes | 1,443 | 794 | (293 | ) | (2,083 | ) | ||||||||||
| Income tax benefit | (1,129 | ) | (2,993 | ) | (2,815 | ) | (4,366 | ) | ||||||||
| Net income | $ | 2,572 | $ | 3,787 | $ | 2,522 | $ | 2,283 | ||||||||
| Net income per common share | ||||||||||||||||
| Basic | $ | 0.14 | $ | 0.22 | $ | 0.14 | $ | 0.13 | ||||||||
| Diluted | $ | 0.13 | $ | 0.20 | $ | 0.13 | $ | 0.12 | ||||||||
| Weighted-average common shares used to compute net income per common share | ||||||||||||||||
| Basic | 18,155,543 | 17,176,386 | 18,076,546 | 17,028,237 | ||||||||||||
| Diluted | 19,313,156 | 18,814,565 | 19,204,100 | 18,713,421 | ||||||||||||
| Tactile Systems Technology, Inc. | ||||||||
| Condensed Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| (In thousands) | 2018 | 2017 | ||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 2,522 | $ | 2,283 | ||||
| Adjustments to reconcile net income to net cash used in operating activities | ||||||||
| Depreciation and amortization | 1,687 | 664 | ||||||
| Stock-based compensation expense | 3,258 | 2,137 | ||||||
| Change in allowance for doubtful accounts | 250 | (296 | ) | |||||
| Loss on disposal of equipment | 3 | — | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (156 | ) | 2,389 | |||||
| Inventories | (5,397 | ) | (3,077 | ) | ||||
| Income taxes receivable | (3,086 | ) | (5,263 | ) | ||||
| Prepaid expenses and other assets | 231 | 354 | ||||||
| Medicare accounts receivable – long-term | 1,070 | (138 | ) | |||||
| Accounts payable | 309 | 851 | ||||||
| Accrued payroll and related taxes | (1,186 | ) | (3,574 | ) | ||||
| Accrued expenses and other liabilities | (896 | ) | 688 | |||||
| Future product royalties | (8 | ) | (33 | ) | ||||
| Net cash used in operating activities | (1,399 | ) | (3,015 | ) | ||||
| Cash flows from investing activities | ||||||||
| Proceeds from sales and maturities of marketable securities | 9,000 | 1,000 | ||||||
| Purchases of marketable securities | (11,844 | ) | (11,049 | ) | ||||
| Purchases of property and equipment | (1,700 | ) | (1,516 | ) | ||||
| Intangible asset costs | (901 | ) | (23 | ) | ||||
| Other investments | — | (145 | ) | |||||
| Net cash used in investing activities | (5,445 | ) | (11,733 | ) | ||||
| Cash flows from financing activities | ||||||||
| Taxes paid for net share settlement of restricted stock units | (1,791 | ) | (153 | ) | ||||
| Proceeds from exercise of common stock options and warrants | 571 | 579 | ||||||
| Proceeds from the issuance of common stock from the employee stock purchase plan | 1,416 | 2,210 | ||||||
| Shares repurchased to cover taxes from restricted stock award vesting | — | (493 | ) | |||||
| Net cash provided by financing activities | 196 | 2,143 | ||||||
| Net change in cash and cash equivalents | (6,648 | ) | (12,605 | ) | ||||
| Cash and cash equivalents – beginning of period | 23,968 | 30,701 | ||||||
| Cash and cash equivalents – end of period | $ | 17,320 | $ | 18,096 | ||||
| Supplemental cash flow disclosure | ||||||||
| Cash paid for taxes | $ | 436 | $ | 898 | ||||
| Capital expenditures incurred but not yet paid | $ | 87 | $ | 294 | ||||
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measure 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 less interest income, net, plus income tax benefit, depreciation and amortization and stock-based compensation expense. 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 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, the measure 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 Adjusted EBITDA on a supplemental basis. The Company’s definition of this measure is 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 | Six Months Ended | Increase | |||||||||||||||||||||||||||||
| June 30, | (Decrease) | June 30, | (Decrease) | |||||||||||||||||||||||||||||
| (In thousands) | 2018 | 2017 | $ | % | 2018 | 2017 | $ | % | ||||||||||||||||||||||||
| Net income | $ | 2,572 | $ | 3,787 | $ | (1,215 | ) | (32.1 | ) | % | $ | 2,522 | $ | 2,283 | $ | 239 | 10.5 | % | ||||||||||||||
| Interest income, net | (136 | ) | (64 | ) | (72 | ) | 112.5 | % | (244 | ) | (119 | ) | (125 | ) | 105.0 | % | ||||||||||||||||
| Income tax benefit | (1,129 | ) | (2,993 | ) | 1,864 | (62.3 | ) | % | (2,815 | ) | (4,366 | ) | 1,551 | (35.5 | ) | % | ||||||||||||||||
| Depreciation and amortization | 1,224 | 366 | 858 | 234.4 | % | 1,687 | 664 | 1,023 | 154.1 | % | ||||||||||||||||||||||
| Stock-based compensation | 1,777 | 1,180 | 597 | 50.6 | % | 3,258 | 2,137 | 1,121 | 52.5 | % | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 4,308 | $ | 2,276 | $ | 2,032 | 89.3 | % | $ | 4,408 | $ | 599 | $ | 3,809 | 635.9 | % | ||||||||||||||||
The following table summarizes revenues by product for the three and six months ended
| Tactile Systems Technology, Inc. | ||||||||||||||||||||||||
| Supplemental Financial Information | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| Three Months Ended | Increase | Six Months Ended | Increase | |||||||||||||||||||||
| June 30, | (Decrease) | June 30, | (Decrease) | |||||||||||||||||||||
| (Dollars in thousands) | 2018 | 2017 | $ | % | 2018 | 2017 | $ | % | ||||||||||||||||
| Flexitouch System | $ | 31,356 | $ | 24,208 | $ | 7,148 | 29.5 | % | $ | 55,886 | $ | 41,734 | $ | 14,152 | 33.9 | % | ||||||||
| Entre / Actitouch Systems | 2,777 | 2,056 | 721 | 35.1 | % | 5,095 | 4,380 | 715 | 16.3 | % | ||||||||||||||
| Total Revenue | $ | 34,133 | $ | 26,264 | $ | 7,869 | 30.0 | % | $ | 60,981 | $ | 46,114 | $ | 14,867 | 32.2 | % | ||||||||
Investor Inquiries:
Managing Director
Westwicke Partners
443-213-0500
[email protected]
Source: Tactile Systems Technology, Inc.