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Tactile Systems Technology, Inc. Reports Second Quarter 2016 Financial Results and Introduces Fiscal Year 2016 Outlook; Q2 Revenue Increased 34% Year-over-Year

MINNEAPOLIS, Sept. 07, 2016 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. (“Tactile Medical”) (Nasdaq:TCMD), a medical technology company that develops and provides innovative medical devices for the treatment of chronic diseases at home, today reported financial results for the second quarter ended June 30, 2016.  

Second Quarter 2016 Highlights:

  • Total revenue of $19.7 million, up 34% year-over-year, compared to revenue of $14.8 million in the second quarter of 2015.
    • Flexitouch® revenue increased 34% year-over-year to $16.9 million, from $12.6 million.
    • Revenue for other products, consisting of revenue from sales of the Company’s ACTitouch® and Entré™ Systems, increased 31% year-over-year, to $2.8 million, from $2.2 million.
  • Operating income of $1.8 million, or 9.1% of total revenue, compared to $0.2 million, or 1.5% of total revenue, in the second quarter of 2015.
  • Net income of $1.0 million, compared to net income of $0.1 million in the prior year quarter.

Highlights Subsequent to Quarter-End:

  • On August 2, 2016, the Company closed an initial public offering (IPO) of its common stock that resulted in the sale of 4,120,000 shares at a price of $10.00 per share. The Company received net proceeds from the IPO of approximately $35.8 million, after deducting underwriting discounts and offering expenses.

“We are pleased with our performance in the second quarter,” said Gerald R. Mattys, Chief Executive Officer. “Our operating and financial results over the first half of 2016 reflect a combination of increasing market penetration and the growing awareness of Tactile Medical’s innovative solutions for the treatment of vascular disease among patients, providers and payers. Importantly, we are still in the early stages of executing our growth strategy and look forward to pursuing future opportunities as we leverage the investments in our distribution and reimbursement infrastructure.”

“We are delighted to have completed our IPO in July and are excited about the many opportunities ahead of us,” said Lynn Blake, Chief Financial Officer. “The IPO enabled us to strengthen Tactile Medical’s balance sheet while providing substantial capacity to further grow the business.”

Second Quarter 2016 Financial Results:

    Three Months Ended June 30,   Increase / Decrease  
(In thousands)   2016   2015   $ Change   % Change  
Flexitouch System   $ 16,892   $ 12,604   $ 4,288   34.0 %
ACTitouch & Entré Systems     2,837     2,167     670   30.9 %
Total Revenue:   $  19,729   $  14,771   $  4,958    33.6 %
                         

Total revenue increased $4.9 million, or 34% year-over-year, to $19.7 million, compared to $14.8 million last year. The increase in revenue was driven by an increase of approximately $4.3 million, or 34% year-over-year, in sales of the Flexitouch System and an increase of approximately $0.7 million, or 31% year-over-year, in sales of the ACTitouch and Entré Systems.

Gross profit increased $4.0 million, or 39% year-over-year, to $14.4 million, compared to $10.4 million last year. Gross margin increased to 73% of sales in the second quarter of 2016, compared to 70% of sales last year, driven primarily by increased sales of the Flexitouch System.

Operating expenses increased $2.5 million, or 24% year-over-year, to $12.6 million, compared to $10.1 million last year. The increase in total operating expenses in the second quarter was driven by higher sales and marketing and reimbursement, general and administrative expenses, which increased 28% and 24%, respectively, year-over-year. These increases were driven primarily by the expansion in the field sales team as well as additional personnel in the reimbursement operations and corporate staff functions.

Operating income increased $1.6 million to $1.8 million, compared to $0.2 million last year. Operating margin increased to 9.1% of sales in the second quarter of 2016, compared to 1.5% of sales last year.

Net income increased $0.9 million year-over-year, to $1.0 million, compared to $0.1 million last year. Net income attributable to common stockholders increased to $0.2 million, or $0.04 per diluted share, compared to a net loss attributable to common stockholders of $0.3 million, or $0.12 per diluted share, last year. Net loss attributable to common stockholders in both the current and prior periods includes the accrual of convertible preferred dividends of $0.5 million.

Six-Months 2016 Financial Results:

Total revenue for the six months ended June 30, 2016 increased $8.5 million, or 34% year-over-year, to $33.4 million, compared to $24.9 million last year. The increase in revenue was driven by an increase of approximately $7.1 million, or 34% year-over-year, in sales of the Flexitouch System and an increase of approximately $1.4 million, or 42% year-over-year, in sales of the ACTitouch and Entré Systems, compared to the prior year.

Net income increased $0.7 million, to $8,000, compared to a net loss of $0.7 million in the prior year. Net loss attributable to common stockholders for the six months ended June 30, 2016 and June 30, 2015, was $1.0 million, or $0.30 per diluted share, and $1.7 million, or $0.61 per diluted share, respectively. Net loss attributable to common stockholders includes the accrual of convertible preferred dividends of $1.0 million, compared to $0.9 million last year.

As of June 30, 2016, cash and cash equivalents were $6.7 million, and the Company had no debt outstanding, compared to $7.1 million of cash and cash equivalents and no debt outstanding as of December 31, 2015. On August 2, 2016, the Company completed its IPO, raising net proceeds of approximately $35.8 million, after deducting underwriting discounts and offering expenses of approximately $5.4 million. The Company paid $8.2 million in cumulative accrued dividends to its Series A preferred stockholders from the net offering proceeds. Information on the intended use of proceeds from the Company’s IPO was contained in the prospectus filed with the SEC on July 27, 2016.

Fiscal Year 2016 Outlook:

For the full year 2016, the Company expects total revenue in the range of $77.0 million to $79.0 million, representing growth of 22% to 26% year-over-year, compared to total revenue of $62.9 million in fiscal year 2015.

About Tactile Systems Technology, Inc.:

Tactile Systems Technology, Inc. (“Tactile Medical”) is a medical technology company that develops and provides innovative medical devices for the treatment of chronic diseases at home. The Company is the sole manufacturer and distributor of the Flexitouch and Entré Systems, medical devices to help control symptoms of lymphedema, a chronic and progressive medical condition that is often an unintended consequence of cancer treatment, and the ACTitouch System, a medical device to treat venous leg ulcers and chronic venous insufficiency. The Company provides products for use both in the home and in health care institutions, including hospitals and vascular, wound and lymphedema clinics throughout the United States.  For additional information, please visit http://www.tactilemedical.com. To receive future press releases via email, please visit http://investors.tactilemedical.com/phoenix.zhtml?c=254364&p=irol-alerts&t=&id=&.

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," 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; and 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, including the final prospectus for the Company’s initial public offering. Investors and security holders are urged to read these documents free of charge on the SEC's web site 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.  
Condensed Consolidated Balance Sheets  
   
                     
    June 30,    Pro Forma as of   December 31,   
    2016   June 30, 2016   2015  
(In thousands, except share and per share data)   (unaudited)   (unaudited)        
Assets                    
Current assets                    
Cash and cash equivalents   $   6,719     $   6,719     $   7,060    
Accounts receivable, net       12,606         12,606         14,151    
Inventories       5,945         5,945         5,781    
Deferred income taxes       1,781         1,781         1,766    
Prepaid expenses       434         434         602    
Total current assets       27,485         27,485         29,360    
Property and equipment, net       1,441         1,441         1,346    
Other assets                    
Patent costs, net       2,356         2,356         2,489    
Medicare accounts receivable – long term       1,787         1,787         2,039    
Deferred income taxes       387         387         402    
Other non-current assets       2,296         2,296         1,337    
Total other assets       6,826         6,826         6,267    
Total assets   $   35,752     $   35,752     $   36,973    
                     
Liabilities and Stockholders’ Equity (Deficit)                    
Current liabilities                    
Accounts payable   $   4,353     $   4,353     $   3,336    
Accrued payroll and related taxes       1,987         1,987         3,355    
Accrued expenses       1,092         9,192         916    
Future product royalties       495         495         991    
Income taxes payable                       904    
Total current liabilities       7,927         16,027         9,502    
Long-term liabilities                    
Deferred compensation       193         193         193    
Total liabilities       8,120         16,220         9,695    
Convertible preferred stock                    
Series B convertible preferred stock; $0.001 par value, 5,319,066 shares authorized and 2,733,468 shares issued and outstanding as of June 30, 2016 (unaudited) and December 31, 2015 and no shares authorized, issued or outstanding as of June 30, 2016 (pro forma)       12,970                 12,599    
Series A convertible preferred stock; $0.001 par value, 3,112,153 shares authorized, 3,108,589 shares issued and 3,061,488 shares outstanding as of June 30, 2016 (unaudited) and December 31, 2015 and no shares authorized, issued or outstanding as of June 30, 2016 (pro forma)       20,980                 20,328    
Stockholders’ equity (deficit)                    
Preferred stock; $0.001 par value, 50,000,000 shares authorized and no shares issued and outstanding as of June 30, 2016 (pro forma)                          
Common stock; $0.001 par value, 14,184,175 shares authorized and 3,414,137 shares issued and outstanding as of June 30, 2016 (unaudited) and 300,000,000 shares authorized and 12,625,376 shares issued and outstanding as of June 30, 2016 (pro forma) and 14,184,175 shares authorized and 3,222,902 shares issued and outstanding as of December 31, 2015       3         13         3    
Additional paid-in capital               25,840            
Accumulated deficit       (6,321 )       (6,321 )       (5,652 )  
Total stockholders’ (deficit) equity       (6,318 )       19,532         (5,649 )  
Total liabilities and stockholders’ equity (deficit)   $   35,752     $   35,752     $   36,973    
                                 


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)   2016   2015   2016   2015  
Revenues, net   $ 19,729   $   14,771     $   33,429     $   24,892    
Cost of goods sold     5,324       4,401         9,135         7,373    
Gross profit     14,405       10,370         24,294         17,519    
Operating expenses                          
Sales and marketing     7,598       5,929         14,879         11,098    
Research and development     1,049       1,011         2,029         1,828    
Reimbursement, general and administrative     3,966       3,202         7,380         5,849    
Total operating expenses     12,613       10,142         24,288         18,775    
Income (loss) from operations     1,792       228         6         (1,256 )  
Other income (expense)     5       3         10         15    
Income (loss) before income taxes     1,797       231         16         (1,241 )  
Income tax expense (benefit)     809       93         8         (499 )  
Net income (loss)     988       138         8         (742 )  
Convertible preferred stock dividends     509       466         1,023         926    
Allocation of undistributed earnings to preferred stockholders     302                          
Net income (loss) attributable to common stockholders   $ 177   $   (328 )   $   (1,015 )   $   (1,668 )  
Net income (loss) per common share attributable to common stockholders                          
Basic   $ 0.05   $   (0.12 )   $   (0.30 )   $   (0.61 )  
Diluted   $ 0.04   $   (0.12 )   $   (0.30 )   $   (0.61 )  
Weighted-average common shares used to compute net income (loss) per common share attributable to common stockholders                          
Basic     3,406,420       2,808,004         3,349,873         2,724,320    
Diluted     4,846,327       2,808,004         3,349,873         2,724,320    
Pro forma net income per common share attributable to common stockholders                          
Basic               $            
Diluted               $            
Weighted-average shares used to compute pro forma net income per common share attributable to common stockholders                          
Basic                   13,406,568          
Diluted                   14,846,475          
                               


Tactile Systems Technology, Inc.  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
               
    Six months ended  
    June 30,   
(In thousands)   2016   2015  
Cash flows from operating activities              
Net income (loss)   $    8     $    (742 )  
Adjustments to reconcile net income (loss) to net cash flows used in operating activities:              
Depreciation and amortization        437          411    
Deferred income taxes                (496 )  
Stock-based compensation expense        150          145    
Change in allowance for doubtful accounts        300            
Changes in assets and liabilities              
Accounts receivable        1,245          1,637    
Inventories        (164 )        (866 )  
Prepaid expenses and other non-current assets        (791 )        37    
Medicare accounts receivable – long-term        252          (278 )  
Accounts payable        1,017          517    
Accrued payroll and related taxes        (1,368 )        (430 )  
Accrued expenses and income taxes payable        (728 )        (209 )  
Future product royalties        (496 )        (297 )  
Net cash used in operating activities        (138 )        (571 )  
Cash flows from investing activities              
Purchases of property and equipment        (393 )        (261 )  
Patent costs        (6 )          
Net cash used in investing activities        (399 )        (261 )  
Cash flows from financing activities              
Payments on notes payable                (5 )  
Proceeds from exercise of common stock options and warrants        196          551    
Net cash provided by financing activities        196          546    
Net change in cash and cash equivalents        (341 )        (286 )  
Cash and cash equivalents – beginning of period        7,060          5,416    
Cash and cash equivalents – end of period   $    6,719     $    5,130    
Supplemental cash flow disclosure              
Cash paid for interest   $       $      
Cash paid for taxes   $    964     $    212    
                       

 

Investor Inquiries:

Mike Piccinino
Managing Director
Westwicke Partners
(443) 213-0500
investorrelations@tactilemedical.com

Media Inquiries:

Kristen Weaver
Director of Marketing Communications
Tactile Medical
(612) 355-5116

Tactile Systems Technology
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