UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): February 26, 2018

TACTILE SYSTEMS TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

 

1331 Tyler Street NE, Suite 200, Minneapolis, MN 55413

(Address of principal executive offices) (Zip Code)

 

(612) 355-5100

(Registrant’s telephone number, including area code)

 

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Item 2.02.  Results of Operations and Financial Condition.

 

On February 26, 2018, we issued a press release disclosing our results of operations and financial condition for our most recently completed fiscal quarter and fiscal year. In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in that filing.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

EXHIBIT INDEX

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

TACTILE SYSTEMS TECHNOLOGY, INC. REPORTS FOURTH QUARTER AND FULL YEAR 2017 FINANCIAL RESULTS; INTRODUCES 2018 OUTLOOK

Q4 Revenues  Increased 23% Year-over-Year; 2017 Revenues Up 29%

MINNEAPOLIS, MN, February 26, 2018 – Tactile Systems Technology, Inc. (“Tactile Medical”) (Nasdaq: TCMD), a medical technology company focused on developing medical devices for the treatment of chronic diseases at home, today reported financial results for the fourth quarter and full year ended December 31, 2017.  

Full Year 2017 Summary:

 

Fourth Quarter 2017 Summary:

 

“2017 was a year of exceptional performance, driven by record sales of our Flexitouch system,” said Gerald R. Mattys, Chief Executive Officer of Tactile Medical. “Our Flexitouch sales throughout 2017 – and in the fourth quarter – reflected the Company’s strong execution on our primary growth drivers: field sales team expansion, focused account targeting and increased in-network coverage with payers. Our growth was also fueled by increased market awareness of chronic swelling conditions and how Tactile Medical’s innovative continuity of care, service and support can improve outcomes, reduce costs and significantly improve quality of life for patients.”

Mr. Mattys continued, “We expect continued progress in expanding our sales team and increasing awareness to result in strong growth and improving profitability in 2018. Specifically, our 2018 outlook calls for total revenue growth this year in a range of 20% - 22%. Additionally, we remain committed to leveraging the strong top-line growth into improved profitability again this year. The long-term growth opportunities for

Tactile Medical remain very compelling, and our entire organization is focused on our mission to help people suffering from chronic diseases live better and care for themselves at home.”

Fourth Quarter 2017 Financial Results

Revenues for the fourth quarter of 2017 increased $6.4 million, or 23%, to $34.9 million, compared to $28.5 million for the quarter ended December 31, 2016. The increase in revenues was attributable to an increase of $7.0 million, or 28%, in sales of the Flexitouch system, which was partially offset by a decrease of approximately $0.6 million, or 19%, in sales of the Entre and Actitouch systems. The increase in Flexitouch system sales was largely driven by expansion of the Company’s sales force, increased physician and patient awareness of the treatment options for lymphedema, and increased contractual coverage with national and regional insurance payers.

Gross profit for the fourth quarter of 2017 increased $5.1 million, or 24%, to $26.1 million, compared to $21.0 million in the fourth quarter of 2016. Gross margin was 74.7% of sales in the fourth quarter of 2017, compared to 73.6% of sales in the fourth quarter of 2016.

Operating expenses for the fourth quarter of 2017 increased $3.5 million, or 20%, to $21.1 million, compared to $17.7 million in the fourth quarter of 2016. The increase in operating expenses in the fourth quarter was primarily driven by an increase of $2.7 million, or 28% year-over-year, in sales and marketing expenses due to continued investment in field sales team expansion. The year-over-year increase in operating expenses was also impacted by a $0.5 million, or 8% year-over-year, increase in reimbursement, general and administrative expenses and a $0.2 million, or 17% year-over-year, increase in research and development expenses.

Operating income for the fourth quarter of 2017 increased $1.6 million, or 50%, to $4.9 million, compared to $3.3 million in the fourth quarter of 2016.  

Pre-tax income for the fourth quarter of 2017 increased $1.7 million, or 52%, to $5.0 million, compared to $3.3 million in the fourth quarter of 2016. Income tax expense for the fourth quarter of 2017 was $2.8 million, compared to income tax expense of $0.9 million in the fourth quarter of 2016. Fourth quarter 2017 income tax expense included approximately $1.2 million of incremental expense associated with revaluation of deferred tax assets and liabilities resulting from the enactment of the Tax Cuts and Jobs Act in December 2017.

Net income for the fourth quarter of 2017 decreased $0.1 million, or 6%, to $2.2 million, or $0.12 per diluted share, compared to $2.4 million, or $0.13 per diluted share, in the fourth quarter of 2016. Weighted average shares used to compute diluted net income per share were 19.1 million and 18.7 million for the fourth quarters of 2017 and 2016, respectively. 

Adjusted EBITDA for the fourth quarter of 2017 increased approximately $2.4 million, or 53%, to $6.8 million, compared to $4.4 million in the fourth quarter of 2016.

Full Year 2017 Financial Results

Revenues for the full year 2017 increased $24.7 million, or 29%, to $109.3 million, compared to $84.5 million for the twelve months ended December 31, 2016. The increase in revenues was driven by an increase of approximately $26.9 million, or 37%, year-over-year in sales of the Flexitouch system, which was partially offset by a decrease of approximately $2.2 million, or 20%, year-over-year in sales of the Entre and Actitouch systems, compared to 2016.

Net income for 2017 increased $3.0 million, to $5.9 million, compared to net income of approximately $2.9 million for 2016. Net income attributable to common stockholders for 2017 was $5.9 million, or $0.31 per diluted share, compared to a net income attributable to common stockholders of $1.6 million, or $0.15 per diluted share, for 2016. Net income attributable to common stockholders for 2016 included the accrual of convertible preferred stock dividends of $1.2 million, which did not occur in 2017. Weighted average shares used to compute diluted net income per share were 18.9 million and 10.8 million for 2017 and 2016, respectively.

Adjusted EBITDA for 2017 increased approximately $2.9 million, or 42%, to $9.9 million, compared to $7.0 million for 2016.

Cash Position

At December 31, 2017, cash, cash equivalents and marketable securities were $43.9 million, compared to $41.7 million at December 31, 2016. The Company had no debt outstanding at December 31, 2017.

2018 Financial Outlook

For 2018, the Company expects revenues in the range of $131 million to $133 million, representing growth of 20% to 22% year-over-year, compared to revenues of $109.3 million in 2017.

Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on February 26 to discuss the results of the quarter and the year with a question and answer session. Those who would like to participate may dial 833-286-5804 (647-689-4449 for international callers) and provide access code 1687067. 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 800-585-8367 (416-621-4642 for international callers); access code 1687067. 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 therapy devices that treat chronic swelling conditions such as lymphedema and chronic venous insufficiency. Our mission is to help people suffering from chronic diseases live better and care for themselves at home. Our 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 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.

Tactile Systems Technology, Inc.

Consolidated Balance Sheets

(unaudited)

 

Tactile Systems Technology, Inc.

Consolidated Statements of Operations

(unaudited)

 

 

Tactile Systems Technology, Inc.

Consolidated Statements of Cash Flows

(unaudited)

 

 

 

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, and income tax expense, 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.

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 Adjusted EBITDA to Net Income.

Tactile Systems Technology, Inc.

Reconciliation of Net Income to Non-GAAP Adjusted EBITDA

(Unaudited)

 

 

 

 

 

Tactile Systems Technology, Inc.

Supplemental Financial Information

(Unaudited)

 

The following table summarizes revenues by product for the three and twelve months ended December 31, 2017 and 2016:

 

 

 

 

Investor Inquiries:

Mike Piccinino, CFA

Managing Director

Westwicke Partners

443-213-0500

[email protected]