Full Year 2019 Summary:
- Total revenue increased 32% year-over-year, to
$189.5 million , compared to$143.8 million in 2018; the adoption of new lease accounting standards contributed 3.7 percentage points of the year-over-year increase in total revenue. - Flexitouch revenue increased 30% year-over-year, to
$171.3 million , compared to$131.9 million in 2018. - Operating income increased 251% year-over-year, to
$10.5 million , compared to$3.0 million in 2018. - Net income increased 66% year-over-year, to
$11.0 million , compared to$6.6 million in 2018. - Adjusted EBITDA increased 46% year-over-year, to
$25.3 million , compared to$17.3 million in 2018.
Fourth Quarter 2019 Summary:
- Total revenue increased 23% year-over-year, to
$57.1 million , compared to$46.4 million in fourth quarter 2018. - Flexitouch revenue increased 21% year-over-year, to
$51.6 million , compared to$42.7 million in fourth quarter 2018. - Operating income increased 183% year-over-year, to
$6.0 million , compared to$2.1 million in fourth quarter 2018. - Net income increased 82% year-over-year, to
$4.3 million , compared to$2.4 million in fourth quarter 2018. - Adjusted EBITDA increased 26% year-over-year, to
$10.4 million , compared to$8.3 million in fourth quarter 2018.
Highlights Subsequent to Quarter End:
- 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.
“We are pleased to report another quarter of impressive performance, which resulted in revenue growth of 23% year-over-year,” said
Fourth Quarter 2019 Financial Results
Revenue in the fourth quarter of 2019 increased
As previously disclosed, effective
Gross profit in the fourth quarter of 2019 increased
Operating expenses in the fourth quarter of 2019 increased
Operating income in the fourth quarter of 2019 increased
Income tax expense in the fourth quarter of 2019 was
Net income in the fourth quarter of 2019 increased
Full Year 2019 Financial Results:
Total revenue for the full year 2019 increased $45.7 million, or 32%, to $189.5 million, compared to $143.8 million for the full year 2018. The year-over-year increase in revenue was driven by an increase of
In connection with the adoption of ASC 842, the Company recognized rental agreements commencing prior to
Net income for the full year ended December 31, 2019, increased $4.3 million, or 66%, to $11.0 million, or
Adjusted EBITDA for the full year ended
Cash Position
At
2020 Financial Outlook
The Company expects full year 2020 total revenue in the range of
Pursuant to the Company’s adoption of ASC 842, full year 2019 revenue included approximately
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 13698949. 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” 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 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, adjusted operating income 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 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, adjusted operating income 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, income from operations 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 and adjusted operating income are not intended to be measures 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 and adjusted operating income contain 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.
Consolidated Balance Sheets | |||||||
(Unaudited) | |||||||
(In thousands, except share and per share data) | 2019 | 2018 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 22,770 | $ | 20,099 | |||
Marketable securities | 22,464 | 25,786 | |||||
Accounts receivable | 33,444 | 24,332 | |||||
Net investment in leases | 8,147 | — | |||||
Inventories | 19,059 | 11,189 | |||||
Income taxes receivable | — | 1,793 | |||||
Prepaid expenses and other current assets | 2,451 | 1,762 | |||||
Total current assets | 108,335 | 84,961 | |||||
Non-current assets | |||||||
Property and equipment, net | 7,408 | 4,810 | |||||
Right of use operating lease assets | 15,885 | — | |||||
Intangible assets, net | 5,312 | 5,339 | |||||
Accounts receivable, non-current | 4,184 | 1,884 | |||||
Deferred income taxes | 8,970 | 8,820 | |||||
Other non-current assets | 1,658 | 1,257 | |||||
Total non-current assets | 43,417 | 22,110 | |||||
Total assets | $ | 151,752 | $ | 107,071 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 3,843 | $ | 5,110 | |||
Accrued payroll and related taxes | 10,098 | 7,421 | |||||
Accrued expenses | 4,498 | 2,785 | |||||
Income taxes payable | 632 | — | |||||
Operating lease liabilities | 1,454 | — | |||||
Other current liabilities | 903 | 760 | |||||
Total current liabilities | 21,428 | 16,076 | |||||
Non-current liabilities | |||||||
Accrued warranty reserve, non-current | 2,541 | 1,725 | |||||
Income taxes, non-current | 54 | — | |||||
Operating lease liabilities, non-current | 15,134 | — | |||||
Total non-current liabilities | 17,729 | 1,725 | |||||
Total liabilities | 39,157 | 17,801 | |||||
Stockholders’ equity: | |||||||
Preferred stock, |
— | — | |||||
Common stock, |
19 | 19 | |||||
Additional paid-in capital | 91,874 | 79,554 | |||||
Retained earnings | 20,676 | 9,705 | |||||
Accumulated other comprehensive income (loss) | 26 | (8 | ) | ||||
Total stockholders’ equity | 112,595 | 89,270 | |||||
Total liabilities and stockholders’ equity | $ | 151,752 | $ | 107,071 |
Consolidated Statements of Operations | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | ||||||||||||||
Year Ended |
||||||||||||||
(In thousands, except share and per share data) | 2019 | 2018 | 2019 | 2018 | ||||||||||
Revenue | ||||||||||||||
Sales revenue | $ | 50,401 | $ | 42,045 | $ | 162,904 | $ | 128,786 | ||||||
Rental revenue | 6,662 | 4,403 | 26,588 | 14,965 | ||||||||||
Total revenue | 57,063 | 46,448 | 189,492 | 143,751 | ||||||||||
Cost of revenue | ||||||||||||||
Cost of sales revenue | 13,803 | 12,976 | 47,034 | 36,969 | ||||||||||
Cost of rental revenue | 2,160 | 1,457 | 8,222 | 4,524 | ||||||||||
Total cost of revenue | 15,963 | 14,433 | 55,256 | 41,493 | ||||||||||
Gross profit | ||||||||||||||
Gross profit - sales revenue | 36,598 | 29,069 | 115,870 | 91,817 | ||||||||||
Gross profit - rental revenue | 4,502 | 2,946 | 18,366 | 10,441 | ||||||||||
Gross profit | 41,100 | 32,015 | 134,236 | 102,258 | ||||||||||
Operating expenses | ||||||||||||||
Sales and marketing | 22,374 | 17,730 | 78,920 | 60,371 | ||||||||||
Research and development | 1,192 | 1,340 | 5,174 | 5,289 | ||||||||||
Reimbursement, general and administrative | 11,485 | 10,809 | 39,644 | 33,608 | ||||||||||
Total operating expenses | 35,051 | 29,879 | 123,738 | 99,268 | ||||||||||
Income from operations | 6,049 | 2,136 | 10,498 | 2,990 | ||||||||||
Other income | 151 | 135 | 631 | 486 | ||||||||||
Income before income taxes | 6,200 | 2,271 | 11,129 | 3,476 | ||||||||||
Income tax expense (benefit) | 1,917 | (84 | ) | 158 | (3,147 | ) | ||||||||
Net income | $ | 4,283 | $ | 2,355 | $ | 10,971 | $ | 6,623 | ||||||
Net income per common share | ||||||||||||||
Basic | $ | 0.22 | $ | 0.13 | $ | 0.58 | $ | 0.36 | ||||||
Diluted | $ | 0.22 | $ | 0.12 | $ | 0.56 | $ | 0.34 | ||||||
Weighted-average common shares used to compute net income per common share | ||||||||||||||
Basic | 19,062,584 | 18,506,964 | 18,919,007 | 18,252,689 | ||||||||||
Diluted | 19,700,882 | 19,531,087 | 19,641,143 | 19,347,632 |
Consolidated Statements of Cash Flows | ||||||||||||
(Unaudited) | ||||||||||||
Year Ended |
||||||||||||
(In thousands) | 2019 | 2018 | 2017 | |||||||||
Cash flows from operating activities | ||||||||||||
Net income | $ | 10,971 | $ | 6,623 | $ | 5,855 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 3,538 | 3,737 | 1,800 | |||||||||
Net amortization of premiums and discounts on securities available-for-sale | (307 | ) | (102 | ) | 49 | |||||||
Deferred income taxes | (146 | ) | (6,182 | ) | 143 | |||||||
Stock-based compensation expense | 9,824 | 7,974 | 4,235 | |||||||||
Impairment losses | — | 2,534 | — | |||||||||
Loss on termination of lease | 1,148 | — | — | |||||||||
Other | 7 | 4 | — | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (9,112 | ) | (6,709 | ) | (2,882 | ) | ||||||
Net investment in leases | (8,147 | ) | — | — | ||||||||
Inventories | (7,870 | ) | (870 | ) | (4,486 | ) | ||||||
Income taxes | 2,428 | 165 | (2,730 | ) | ||||||||
Prepaid expenses and other assets | (1,166 | ) | (1,140 | ) | 146 | |||||||
Right of use operating lease assets | 625 | — | — | |||||||||
Medicare accounts receivable, non-current | (2,300 | ) | 834 | 105 | ||||||||
Accounts payable | (1,389 | ) | 690 | 462 | ||||||||
Accrued payroll and related taxes | 2,677 | 715 | 14 | |||||||||
Accrued expenses and other liabilities | 1,729 | 734 | 1,481 | |||||||||
Net cash provided by operating activities | 2,510 | 9,007 | 4,192 | |||||||||
Cash flows from investing activities | ||||||||||||
Proceeds from sales of securities available-for-sale | 1,493 | 2,000 | 1,000 | |||||||||
Proceeds from maturities of securities available-for-sale | 25,000 | 15,000 | 1,000 | |||||||||
Purchases of securities available-for-sale | (22,840 | ) | (21,680 | ) | (12,051 | ) | ||||||
Purchases of property and equipment | (5,446 | ) | (4,196 | ) | (3,746 | ) | ||||||
Intangible assets costs | (542 | ) | (5,350 | ) | (74 | ) | ||||||
Other investments | — | (500 | ) | (145 | ) | |||||||
Net cash used in investing activities | (2,335 | ) | (14,726 | ) | (14,016 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Taxes paid for net share settlement of restricted stock units | (3,391 | ) | (2,379 | ) | (387 | ) | ||||||
Proceeds from exercise of common stock options | 2,834 | 1,515 | 834 | |||||||||
Proceeds from the issuance of common stock from the employee stock purchase plan | 3,053 | 2,714 | 3,137 | |||||||||
Shares repurchased to cover taxes from restricted stock award vesting | — | — | (493 | ) | ||||||||
Net cash provided by financing activities | 2,496 | 1,850 | 3,091 | |||||||||
Net increase (decrease) in cash and cash equivalents | 2,671 | (3,869 | ) | (6,733 | ) | |||||||
Cash and cash equivalents – beginning of period | 20,099 | 23,968 | 30,701 | |||||||||
Cash and cash equivalents – end of period | $ | 22,770 | $ | 20,099 | $ | 23,968 | ||||||
Supplemental cash flow disclosure | ||||||||||||
Cash paid for interest | $ | — | $ | 9 | $ | — | ||||||
Cash paid for taxes | $ | 344 | $ | 2,883 | $ | 923 | ||||||
Capital expenditures incurred but not yet paid | $ | 122 | $ | 167 | $ | 15 | ||||||
The following table summarizes revenue by product for the three and twelve months ended
Supplemental Financial Information | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||||||
Increase | Increase | |||||||||||||||||||||||
(Dollars in thousands) | 2019 | 2018 | $ | % | 2019 | 2018 | $ | % | ||||||||||||||||
Flexitouch System | $ | 51,556 | $ | 42,719 | $ | 8,837 | 21 | % | $ | 171,323 | $ | 131,935 | $ | 39,388 | 30 | % | ||||||||
Entre / Actitouch Systems | 5,507 | 3,729 | 1,778 | 48 | % | 18,169 | 11,816 | 6,353 | 54 | % | ||||||||||||||
Total Revenue | $ | 57,063 | $ | 46,448 | $ | 10,615 | 23 | % | $ | 189,492 | $ | 143,751 | $ | 45,741 | 32 | % | ||||||||
The following table contains a reconciliation of net income to Adjusted EBITDA:
Reconciliation of Net Income to Non-GAAP Adjusted EBITDA | ||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Three Months Ended | Increase | Year Ended | Increase | |||||||||||||||||||||||||||||
(Decrease) | (Decrease) | |||||||||||||||||||||||||||||||
(Dollars in thousands) | 2019 | 2018 | $ | % | 2019 | 2018 | $ | % | ||||||||||||||||||||||||
Net income | $ | 4,283 | $ | 2,355 | $ | 1,928 | 82 | % | $ | 10,971 | $ | 6,623 | $ | 4,348 | 66 | % | ||||||||||||||||
Interest income, net | (81 | ) | (74 | ) | (7 | ) | 9 | % | (343 | ) | (413 | ) | 70 | (17 | ) | % | ||||||||||||||||
Income tax expense (benefit) | 1,917 | (84 | ) | 2,001 | N.M. | % | 158 | (3,147 | ) | 3,305 | (105 | ) | % | |||||||||||||||||||
Depreciation and amortization | 730 | 1,228 | (498 | ) | (41 | ) | % | 3,538 | 3,737 | (199 | ) | (5 | ) | % | ||||||||||||||||||
Stock-based compensation | 2,437 | 2,336 | 101 | 4 | % | 9,824 | 7,974 | 1,850 | 23 | % | ||||||||||||||||||||||
Impairment charges and inventory write-offs | — | 2,534 | (2,534 | ) | (100 | ) | % | — | 2,534 | (2,534 | ) | (100 | ) | % | ||||||||||||||||||
Loss on termination of lease | 1,148 | — | 1,148 | — | % | 1,148 | — | 1,148 | — | % | ||||||||||||||||||||||
Adjusted EBITDA | $ | 10,434 | $ | 8,295 | $ | 2,139 | 26 | % | $ | 25,296 | $ | 17,308 | $ | 7,988 | 46 | % | ||||||||||||||||
The following table contains a reconciliation of net margin to Adjusted EBITDA margin:
Three Months Ended | Year Ended | |||||||||||||||||||||||
Increase | Increase | |||||||||||||||||||||||
(As a percentage of revenue) | 2019 | 2018 | (Decrease) | 2019 | 2018 | (Decrease) | ||||||||||||||||||
Net margin | 7.5 | % | 5.1 | % | 240 | bps | 5.8 | % | 4.6 | % | 120 | bps | ||||||||||||
Interest income, net | (0.1 | ) | % | (0.2 | ) | % | 10 | bps | (0.2 | ) | % | (0.3 | ) | % | 10 | bps | ||||||||
Income tax benefit | 3.4 | % | (0.2 | ) | % | 360 | bps | 0.1 | % | (2.2 | ) | % | 230 | bps | ||||||||||
Depreciation and amortization | 1.3 | % | 2.6 | % | (130 | ) | bps | 1.9 | % | 2.5 | % | (60 | ) | bps | ||||||||||
Stock-based compensation | 4.3 | % | 5.0 | % | (70 | ) | bps | 5.2 | % | 5.6 | % | (40 | ) | bps | ||||||||||
Impairment charges and inventory write-offs | — | % | 5.6 | % | (560 | ) | bps | — | % | 1.8 | % | (180 | ) | bps | ||||||||||
Loss on termination of lease | 1.9 | % | — | % | 190 | bps | 0.5 | % | — | % | 50 | bps | ||||||||||||
Adjusted EBITDA margin | 18.3 | % | 17.9 | % | 40 | bps | 13.3 | % | 12.0 | % | 130 | bps | ||||||||||||
The following table contains a reconciliation of income from operations to non-GAAP adjusted operating income:
Reconciliation of Income from Operations to Non-GAAP Adjusted Operating Income | ||||||||||||
(Unaudited) | ||||||||||||
Three Months Ended | Year Ended | |||||||||||
(Dollars in thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||
Income from operations | $ | 6,049 | $ | 2,136 | $ | 10,498 | $ | 2,990 | ||||
Impairment charges and inventory write-offs | — | 2,534 | — | 2,534 | ||||||||
Loss on termination of lease | 1,148 | — | 1,148 | — | ||||||||
Non-GAAP adjusted operating income | $ | 7,197 | $ | 4,670 | $ | 11,646 | $ | 5,524 | ||||
The following table contains a reconciliation of income from operations margin to non-GAAP adjusted operating income margin:
Three Months Ended | Year Ended | |||||||||||
(As a percentage of revenue) | 2019 | 2018 | 2019 | 2018 | ||||||||
Income from operations margin | 10.6 | % | 4.6 | % | 5.5 | % | 2.1 | % | ||||
Impairment charges and inventory write-offs | — | % | 5.5 | % | — | % | 1.8 | % | ||||
Loss on termination of lease | 2.0 | % | — | % | 0.5 | % | — | % | ||||
Non-GAAP adjusted operating income margin | 12.6 | % | 10.1 | % | 6.0 | % | 3.9 | % | ||||
The following table contains a reconciliation of the projected revenue growth rate to the projected non-GAAP revenue growth rate:
Reconciliation of Projected 2020 Revenue Growth Rate to Projected 2020 Non-GAAP Revenue Growth Rate | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Year Ended | Projected Year Ended | |||||||||||||||||
(Dollars in thousands) | Increase | |||||||||||||||||
Low | High | Low | High | |||||||||||||||
Revenue | ||||||||||||||||||
Sales revenue | $ | 162,904 | ||||||||||||||||
Rental revenue | ||||||||||||||||||
Sales-type lease revenue | 19,065 | |||||||||||||||||
Garment lease revenue | 2,505 | |||||||||||||||||
Operating lease revenue(1) | 5,018 | |||||||||||||||||
Total rental revenue | 26,588 | |||||||||||||||||
Total revenue | 189,492 | $ | 227,500 | $ | 230,500 | 20 | % | 22 | % | |||||||||
Less: Operating lease revenue(1) | (5,018 | ) | N/A | N/A | 3 | % | 3 | % | ||||||||||
Total non-GAAP revenue | $ | 184,474 | $ | 227,500 | $ | 230,500 | 23 | % | 25 | % |
(1) The operating lease revenue excluded from 2019 revenue in the adjustment was related to rental agreements commencing prior to
Source: Tactile Systems Technology, Inc.