Tactile Systems Technology, Inc. Reports Third Quarter 2018 Financial Results; Increases 2018 Outlook
Q3 Revenue Increase of 28% Year-over-Year
Third Quarter 2018 Summary:
- Total revenue increased 28% year-over-year, to
$36.3 million, compared to $28.3 millionin third quarter 2017.
- Flexitouch revenue increased 27% year-over-year, to
$33.3 million, compared to $26.2 millionin third quarter 2017.
- Operating income increased 17% year-over-year to
$1.4 million, compared to operating income of $1.2 millionin third quarter 2017.
- Net income increased 30% year-over-year to
$1.7 million, compared to net income of $1.3 millionin third quarter 2017.
- Adjusted EBITDA increased 83% year-over-year to
$4.6 millioncompared to Adjusted EBITDA of $2.5 millionin third quarter 2017.
Third Quarter Highlights:
August 3, 2018, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association for a senior secured credit facility. The Credit Agreement provides for a $10 millionrevolving credit facility with a three-year maturity and also includes a $25 millionaccordion feature, which could allow the Company to expand the total aggregate principal amount up to $35 million.
August 6, 2018, the Company announced the appointment of Brent A. Moento the position of Chief Financial Officer, effective September 2, 2018. Tactile Medical former Chief Financial Officer, Lynn L. Blake, resigned from that role effective as of the close of business September 1, 2018.
August 13, 2018, the Company announced that Juleen Kringsjoined the Company as Chief Human Resources Officer (CHRO).
September 5, 2018, the Company announced that it had been awarded a new Federal Supply Schedule (FSS) contract for its Flexitouch systems by the National Acquisition Center, U.S. Department of Veterans Affairs(VA).
Highlights Subsequent to Quarter End:
October 17, 2018, the Company announced an exclusive license agreement with Sun Scientific, Inc.for the intellectual property of the Aero-WrapTM compression therapy products in the United Statesand Canada. 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 millionand will also pay a royalty based on future sales. The transaction is expected to be immaterial to Tactile Medical’s 2018 and 2019 GAAP net income.
“Our third quarter revenue growth of 28% represents a continuation of the strong performance we have achieved throughout 2018,” said
Mr. Mattys continued: “We remain confident in our ability to continue driving strong growth as we maximize the powerful combination of an expanding sales force, a focused selling strategy targeting high-volume accounts and the
Third Quarter 2018 Financial Results
Total revenue for the third quarter of 2018 increased
Gross profit for the third quarter of 2018 increased
Operating expenses for the third quarter of 2018 increased
Operating income for the third quarter of 2018 increased
Income tax benefit for the third quarter of 2018 was
Net income for the third quarter of 2018 increased approximately
Adjusted EBITDA for the third quarter of 2018 increased approximately
First Nine Months 2018 Financial Results:
Total revenue for the nine months ended September 30, 2018 increased $22.9 million, or 31%, to $97.3 million, compared to $74.4 million for the nine months ended September 30, 2017. The increase in revenue was primarily driven by an increase of approximately $21.3 million, or 31%, year-over-year in sales of the Flexitouch system.
Net income for the nine months ended September 30, 2018 increased $0.6 million, to $4.3 million, or
Adjusted EBITDA for the nine months ended
2018 Financial Outlook
For 2018, the Company now expects revenue in the range of
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 6875376. The webcast will be archived at investors.tactilemedical.com.
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
Condensed Consolidated Balance Sheets
|September 30,||December 31,|
|(In thousands, except share and per share data)||2018||2017|
|Cash and cash equivalents||$||23,136||$||23,968|
|Accounts receivable, net||20,179||17,623|
|Income taxes receivable||5,798||2,119|
|Prepaid expenses and other current assets||2,370||2,178|
|Total current assets||89,202||76,872|
|Property and equipment, net||4,063||3,776|
|Intangible assets, net||3,035||2,218|
|Medicare accounts receivable, long-term||1,011||2,718|
|Deferred income taxes||4,057||2,662|
|Other non-current assets||367||201|
|Total other assets||8,470||7,799|
|Liabilities and Stockholders’ Equity|
|Accrued payroll and related taxes||8,292||6,706|
|Future product royalties||6||17|
|Other current liabilities||439||733|
|Total current liabilities||16,757||14,519|
|Accrued warranty reserve, long-term||1,560||1,141|
|Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2018 and December 31, 2017||—||—|
|Common stock, $0.001 par value, 300,000,000 shares authorized; 18,415,699 shares issued and outstanding as of September 30, 2018; 17,872,465 shares issued and 17,846,379 shares outstanding as of December 31, 2017||18||18|
|Additional paid-in capital||76,081||70,224|
|Accumulated other comprehensive loss||(31||)||(44||)|
|Less: treasury stock, at cost — none as of September 30, 2018 and 26,086 shares as of December 31, 2017||—||(493||)|
|Total stockholders’ equity||83,418||72,787|
|Total liabilities and stockholders’ equity||$||101,735||$||88,447|
Condensed Consolidated Statements of Operations
|Three Months Ended||Nine Months Ended|
|September 30,||September 30,|
|(In thousands, except share and per share data)||2018||2017||2018||2017|
|Cost of goods sold||10,141||7,528||27,060||20,186|
|Sales and marketing||15,632||10,915||42,641||31,726|
|Research and development||1,223||1,116||3,949||3,699|
|Reimbursement, general and administrative||7,956||7,551||22,799||19,815|
|Total operating expenses||24,811||19,582||69,389||55,240|
|Income (loss) from operations||1,370||1,173||854||(1,029||)|
|Income (loss) before income taxes||1,498||1,258||1,205||(825||)|
|Income tax benefit||(248||)||(84||)||(3,063||)||(4,450||)|
|Net income per common share|
|Weighted-average common shares used to compute net income per common share|
Condensed Consolidated Statements of Cash Flows
|Nine Months Ended|
|Cash flows from operating activities|
|Adjustments to reconcile net income to net cash provided by operating activities|
|Depreciation and amortization||2,474||1,073|
|Deferred income taxes||(1,411||)||—|
|Stock-based compensation expense||5,638||3,104|
|Change in allowance for doubtful accounts||414||(36||)|
|Loss on disposal of equipment||3||—|
|Changes in assets and liabilities:|
|Prepaid expenses and other assets||(1,358||)||130|
|Medicare accounts receivable – long-term||1,707||52|
|Accrued payroll and related taxes||1,586||(812||)|
|Accrued expenses and other liabilities||(179||)||1,585|
|Future product royalties||(11||)||(41||)|
|Net cash provided by operating activities||3,684||33|
|Cash flows from investing activities|
|Proceeds from sales and maturities of marketable securities||13,000||1,000|
|Purchases of marketable securities||(14,792||)||(12,051||)|
|Purchases of property and equipment||(2,384||)||(1,953||)|
|Intangible asset costs||(1,052||)||(44||)|
|Net cash used in investing activities||(5,228||)||(13,193||)|
|Cash flows from financing activities|
|Taxes paid for net share settlement of restricted stock units||(1,922||)||(278||)|
|Proceeds from exercise of common stock options and warrants||1,218||673|
|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||712||2,112|
|Net change in cash and cash equivalents||(832||)||(11,048||)|
|Cash and cash equivalents – beginning of period||23,968||30,701|
|Cash and cash equivalents – end of period||$||23,136||$||19,653|
|Supplemental cash flow disclosure|
|Cash paid for interest||$||3||$||1|
|Cash paid for taxes||$||448||$||923|
|Capital expenditures incurred but not yet paid||$||184||$||97|
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, less income tax benefit, plus depreciation and amortization and plus 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.
Reconciliation of Net Income to Non-GAAP Adjusted EBITDA
|Three Months Ended||Increase||Nine Months Ended||Increase|
|September 30,||(Decrease)||September 30,||(Decrease)|
|Interest income, net||(95)||(136)||41||(30.2)%||(339)||(255)||(84)||32.9%|
|Income tax benefit||(248)||(84)||(164)||195.2%||(3,063)||(4,450)||1,387||(31.2)%|
|Depreciation and amortization||787||409||378||92.4%||2,474||1,073||1,401||130.6%|
The following table summarizes revenues by product for the three and nine months ended
Supplemental Financial Information
|Three Months Ended||Increase||Nine Months Ended||Increase|
|September 30,||(Decrease)||September 30,||(Decrease)|
|(Dollars in thousands)||2018||2017||$||%||2018||2017||$||%|
|Entre / Actitouch Systems||2,992||2,081||911||43.8||%||8,087||6,461||1,626||25.2||%|
Mike Piccinino, CFA Managing Director Westwicke Partners443-213-0500 email@example.com
Source: Tactile Systems Technology, Inc.