First Quarter 2020 Summary:
- Total revenue increased 16% year-over-year, to
$43.7 million , compared to$37.6 million in first quarter 2019.
-- Excluding the contribution to first quarter 2019 revenue related to the Company’s adoption of ASC 842, first quarter 2020 revenue reflects year-over-year growth of 26% on an operational basis.
-- As noted in the Company’s press release issued onApril 6, 2020 , revenue for the first quarter of 2020 was negatively impacted by the COVID-19 pandemic beginning in March. - Flexitouch revenue increased 13% year-over-year, to
$38.6 million , compared to$34.1 million in first quarter 2019. - Operating loss of
$4.5 million , compared to operating loss of$1.8 million in first quarter 2019. - Net loss of
$1.3 million , compared to net income of$1.5 million in first quarter 2019. - Adjusted EBITDA loss of
$0.5 million , compared to Adjusted EBITDA of$2.1 million in first quarter 2019.
First Quarter 2020 Highlights:
- On
January 13, 2020 , the Company announced thatGerald R. Mattys has communicated his intention to retire as Chief Executive Officer of the Company in 2020. The Board of Directors has initiated a process to identify a successor forMr. Mattys and has engaged an executive search firm to support the search.Mr. Mattys plans to continue as the Chief Executive Officer until his successor has started and will assist in ensuring a successful transition. - On
February 13, 2020 , the Company announced the publication of a new clinical study demonstrating the prevalence of chronic venous insufficiency-related lymphedema (“CVI-related lymphedema,” also known as “Phlebolymphedema”). Researchers concluded that chronic venous insufficiency, not cancer-related therapy, may be the most common cause of lower extremity lymphedema inthe United States . The new study suggests that the prevalence of lymphedema due to CVI is approximately 16 million individuals inthe United States . This, in addition to the estimated five million individuals living in theU.S. with cancer-related and primary lymphedema, increases the total prevalence estimates four-fold to over 20 million individuals.
Announcement Subsequent to Quarter End:
- On
April 6, 2020 , the Company withdrew its 2020 financial outlook and provided a business update on the Company’s response to the COVID-19 pandemic.
“We reported first quarter sales of
First Quarter 2020 Financial Results
Total revenue in the first quarter of 2020 increased
The increase in revenue was attributable to an increase of
Gross profit in the first quarter of 2020 increased
Operating expenses in the first quarter of 2020 increased
Operating loss in the first quarter of 2020 increased
Income tax benefit in the first quarter of 2020 decreased
Net loss in the first quarter of 2020 was
Cash Position
At
2020 Financial Outlook
On
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 877-660-6853 (201-612-7415 for international callers); access code 13701440. The webcast will be archived at investors.tactilemedical.com.
About
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” 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; the Company’s Chief Executive Officer transition, including disruptions and uncertainties related thereto, the Company’s ability to appoint a successor with the desired level of experience and expertise in a timely manner, the potential impact on the Company’s business and future strategic direction resulting from the transition to a new Chief Executive Officer and the Company’s ability to retain other key members of senior management; 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
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measures of Adjusted EBITDA and non-GAAP revenue growth which differ from financial measures calculated in accordance with
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 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 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.
Adjusted EBITDA and non-GAAP revenue growth are non-GAAP financial measures and should not be considered as an alternative to, or superior to, net income or loss or GAAP revenue growth, respectively, 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.
Condensed Consolidated Balance Sheets | ||||||
(Unaudited) | ||||||
(In thousands, except share and per share data) | 2020 | 2019 | ||||
Assets | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 32,297 | $ | 22,770 | ||
Marketable securities | 12,537 | 22,464 | ||||
Accounts receivable | 30,781 | 33,444 | ||||
Net investment in leases | 8,882 | 8,147 | ||||
Inventories | 22,363 | 19,059 | ||||
Income taxes receivable | 3,495 | — | ||||
Prepaid expenses and other current assets | 1,966 | 2,451 | ||||
Total current assets | 112,321 | 108,335 | ||||
Non-current assets | ||||||
Property and equipment, net | 7,334 | 7,408 | ||||
Right of use operating lease assets | 15,289 | 15,885 | ||||
Intangible assets, net | 5,206 | 5,312 | ||||
Accounts receivable, non-current | 5,157 | 4,184 | ||||
Deferred income taxes | 7,973 | 8,970 | ||||
Other non-current assets | 2,239 | 1,658 | ||||
Total non-current assets | 43,198 | 43,417 | ||||
Total assets | $ | 155,519 | $ | 151,752 | ||
Liabilities and Stockholders' Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 8,739 | $ | 3,843 | ||
Accrued payroll and related taxes | 8,294 | 10,098 | ||||
Accrued expenses | 5,030 | 4,498 | ||||
Income taxes payable | — | 632 | ||||
Operating lease liabilities | 1,585 | 1,454 | ||||
Other current liabilities | 1,073 | 903 | ||||
Total current liabilities | 24,721 | 21,428 | ||||
Non-current liabilities | ||||||
Accrued warranty reserve, non-current | 2,884 | 2,541 | ||||
Income taxes, non-current | 28 | 54 | ||||
Operating lease liabilities, non-current | 14,846 | 15,134 | ||||
Total non-current liabilities | 17,758 | 17,729 | ||||
Total liabilities | 42,479 | 39,157 | ||||
Stockholders’ equity: | ||||||
Preferred stock, |
— | — | ||||
Common stock, |
19 | 19 | ||||
Additional paid-in capital | 93,614 | 91,874 | ||||
Retained earnings | 19,369 | 20,676 | ||||
Accumulated other comprehensive income | 38 | 26 | ||||
Total stockholders’ equity | 113,040 | 112,595 | ||||
Total liabilities and stockholders’ equity | $ | 155,519 | $ | 151,752 |
Condensed Consolidated Statements of Operations | ||||||||
(Unaudited) | ||||||||
Three Months Ended |
||||||||
(In thousands, except share and per share data) | 2020 | 2019 | ||||||
Revenue | ||||||||
Sales revenue | $ | 37,623 | $ | 30,831 | ||||
Rental revenue | 6,052 | 6,786 | ||||||
Total revenue | 43,675 | 37,617 | ||||||
Cost of revenue | ||||||||
Cost of sales revenue | 10,922 | 9,412 | ||||||
Cost of rental revenue | 1,680 | 1,947 | ||||||
Total cost of revenue | 12,602 | 11,359 | ||||||
Gross profit | ||||||||
Gross profit - sales revenue | 26,701 | 21,419 | ||||||
Gross profit - rental revenue | 4,372 | 4,839 | ||||||
Gross profit | 31,073 | 26,258 | ||||||
Operating expenses | ||||||||
Sales and marketing | 22,970 | 17,391 | ||||||
Research and development | 1,684 | 1,281 | ||||||
Reimbursement, general and administrative | 10,870 | 9,388 | ||||||
Total operating expenses | 35,524 | 28,060 | ||||||
Loss from operations | (4,451 | ) | (1,802 | ) | ||||
Other income | 266 | 161 | ||||||
Loss before income taxes | (4,185 | ) | (1,641 | ) | ||||
Income tax benefit | (2,878 | ) | (3,113 | ) | ||||
Net (loss) income | $ | (1,307 | ) | $ | 1,472 | |||
Net (loss) income per common share | ||||||||
Basic | $ | (0.07 | ) | $ | 0.08 | |||
Diluted | $ | (0.07 | ) | $ | 0.08 | |||
Weighted-average common shares used to compute net (loss) income per common share | ||||||||
Basic | 19,173,580 | 18,746,751 | ||||||
Diluted | 19,173,580 | 19,579,847 |
Condensed Consolidated Statements of Cash Flows | ||||||||
(Unaudited) | ||||||||
Three Months Ended |
||||||||
(In thousands) | 2020 | 2019 | ||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (1,307 | ) | $ | 1,472 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 730 | 1,064 | ||||||
Net amortization of premiums and discounts on securities available-for-sale | (43 | ) | (68 | ) | ||||
Deferred income taxes | 979 | (2,264 | ) | |||||
Stock-based compensation expense | 2,728 | 2,783 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 2,663 | 2,671 | ||||||
Net investment in leases | (735 | ) | (3,362 | ) | ||||
Inventories | (3,304 | ) | (132 | ) | ||||
Income taxes | (4,153 | ) | (1,030 | ) | ||||
Prepaid expenses and other assets | 192 | 21 | ||||||
Right of use operating lease assets | 151 | (9 | ) | |||||
Medicare accounts receivable, non-current | (973 | ) | (288 | ) | ||||
Accounts payable | 4,741 | 722 | ||||||
Accrued payroll and related taxes | (1,804 | ) | (584 | ) | ||||
Accrued expenses and other liabilities | 1,044 | 277 | ||||||
Net cash provided by operating activities | 909 | 1,273 | ||||||
Cash flows from investing activities | ||||||||
Proceeds from maturities of securities available-for-sale | 10,000 | 4,500 | ||||||
Purchases of property and equipment | (358 | ) | (731 | ) | ||||
Intangible assets costs | (36 | ) | (44 | ) | ||||
Net cash provided by investing activities | 9,606 | 3,725 | ||||||
Cash flows from financing activities | ||||||||
Taxes paid for net share settlement of restricted stock units | (1,160 | ) | (2,410 | ) | ||||
Proceeds from exercise of common stock options | 172 | 861 | ||||||
Net cash used in financing activities | (988 | ) | (1,549 | ) | ||||
Net increase in cash and cash equivalents | 9,527 | 3,449 | ||||||
Cash and cash equivalents – beginning of period | 22,770 | 20,099 | ||||||
Cash and cash equivalents – end of period | $ | 32,297 | $ | 23,548 | ||||
Supplemental cash flow disclosure | ||||||||
Cash paid for taxes | $ | 311 | $ | 181 | ||||
Capital expenditures incurred but not yet paid | $ | 155 | $ | 176 | ||||
The following table summarizes revenue by product for the three months ended
Supplemental Financial Information | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | ||||||||||||
Increase | ||||||||||||
(Dollars in thousands) | 2020 | 2019 | $ | % | ||||||||
Flexitouch System | $ | 38,586 | $ | 34,109 | $ | 4,477 | 13 | % | ||||
Other products(1) | 5,089 | 3,508 | 1,581 | 45 | % | |||||||
Total Revenue | $ | 43,675 | $ | 37,617 | $ | 6,058 | 16 | % |
(1) The “other products” line primarily includes revenue from our Entre system. The Actitouch system and Airwear wrap contributed immaterial amounts of revenue for both of the three months ended
The following table contains a reconciliation of the revenue growth rate to the non-GAAP revenue growth rate for the three months ended
Reconciliation of First Quarter 2020 Revenue Growth Rates | |||||||||||
(Unaudited) | |||||||||||
Three Months Ended | Three Months Ended | ||||||||||
(Dollars in thousands) | % Increase | ||||||||||
Total revenue | $ | 43,675 | $ | 37,617 | 16 | % | |||||
Less: Operating lease revenue(1) | N/A | (2,821 | ) | 9 | % | ||||||
Total non-GAAP revenue | $ | 43,675 | $ | 34,796 | 26 | % |
(1) The operating lease revenue excluded from first quarter 2019 revenue in the adjustment was related to rental agreements commencing prior to
The following table contains a reconciliation of net (loss) income to Adjusted EBITDA:
Reconciliation of Net (Loss) Income to Non-GAAP Adjusted EBITDA | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Increase | |||||||||||||||
(Decrease) | ||||||||||||||||
(Dollars in thousands) | 2020 | 2019 | $ | % | ||||||||||||
Net (loss) income | $ | (1,307 | ) | $ | 1,472 | $ | (2,779 | ) | (189 | )% | ||||||
Interest income, net | (55 | ) | (98 | ) | 43 | (44 | )% | |||||||||
Income tax benefit | (2,878 | ) | (3,113 | ) | 235 | (8 | )% | |||||||||
Depreciation and amortization | 730 | 1,064 | (334 | ) | (31 | )% | ||||||||||
Stock-based compensation | 2,728 | 2,783 | (55 | ) | (2 | )% | ||||||||||
CEO transition costs | 312 | — | 312 | — | % | |||||||||||
Adjusted EBITDA | $ | (470 | ) | $ | 2,108 | $ | (2,578 | ) | (122 | )% |
The following table contains a reconciliation of net margin to Adjusted EBITDA margin:
Three Months Ended | |||||||||
Increase | |||||||||
(As a percentage of revenue) | 2020 | 2019 | (Decrease) | ||||||
Net margin | (3.0 | )% | 3.9 | % | (690) | bps | |||
Interest income, net | (0.1 | )% | (0.3 | )% | 20 | bps | |||
Income tax benefit | (6.6 | )% | (8.3 | )% | 170 | bps | |||
Depreciation and amortization | 1.7 | % | 2.9 | % | (120) | bps | |||
Stock-based compensation | 6.2 | % | 7.4 | % | (120) | bps | |||
CEO transition costs | 0.7 | % | — | % | 70 | bps | |||
Adjusted EBITDA margin | (1.1 | )% | 5.6 | % | (670) | bps |
Investor Inquiries:Mike Piccinino , CFA Managing DirectorWestwicke Partners 443-213-0500 [email protected]
Source: Tactile Systems Technology, Inc.