0001558370-24-006795 | 10-Q | XBRL Viewer | Tactile Systems Technology INC

Net Loss Per Share (Tables)

3 Months Ended

Mar. 31, 2024

Schedule of computation of the basic and diluted net income (loss) per share


	Three Months Ended
	March 31,
(In thousands, except share and per share data)	2024		2023
Net loss	$	(2,209)	$	(1,886)
Weighted-average shares outstanding		23,665,829		21,283,752
Weighted-average shares used to compute diluted net loss per share		23,665,829		21,283,752
Net loss per share - Basic	$	(0.09)	$	(0.09)
Net loss per share - Diluted	$	(0.09)	$	(0.09)

Schedule of potentially dilutive securities outstanding


	Three Months Ended
	March 31,
	2024	2023
Restricted stock units	813,602	736,942
Common stock options	422,757	586,212
Performance stock units	320,049	233,798
Employee stock purchase plan	84,891	125,775
Total	1,641,299	1,682,727

Credit Agreement

3 Months Ended

Mar. 31, 2024

Credit Agreement

Credit Agreement

Note 8. Credit Agreement

On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent. The Restated Credit Agreement amended and restated in its entirety our prior credit agreement.

On September 8, 2021, we entered into a First Amendment Agreement (the “Amendment”), which amended the Restated Credit Agreement (as amended by the Amendment, the “Credit Agreement”) with the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment, among other things, added a $30.0 million incremental term loan to the $25.0 million revolving credit facility provided by the Restated Credit Agreement. The term loan is reflected on our condensed consolidated financial statements as a note payable. The Credit Agreement provides that, subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $80.0 million.

On September 8, 2021, in connection with the closing of the AffloVest Acquisition, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price.

On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amended the Credit Agreement. The Second Amendment modified the maximum leverage ratio, the minimum fixed charge coverage ratio and the minimum consolidated EBITDA covenants under the Credit Agreement, and added a minimum liquidity covenant, through the quarter ended June 30, 2023. The Second Amendment also increased the applicable margin for LIBOR rate loans under the Credit Agreement during the period commencing on the date of the Second Amendment and ending on the last day of the fiscal quarter ending June 30, 2023. Pursuant to the Second Amendment, we made a mandatory principal prepayment of the term loan of $3.0 million on February 22, 2022.

On June 21, 2023, we entered into a Third Amendment Agreement (the “Third Amendment”) that replaced the interest rate benchmark under the Credit Agreement from LIBOR to the term Secured Overnight Financing Rate (“SOFR”). All tenors of term SOFR are subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”).

Following the Third Amendment, the term loan and amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) Adjusted Term SOFR for a one-month tenor plus 1% (the “Base Rate”) plus an applicable margin or (b) Adjusted Term SOFR for an interest period of one, three or six months, at our option, plus the applicable margin. The applicable margin is 0.75% to 2.25% on loans bearing interest at the Base Rate and 1.75% to 3.25% on loans bearing interest at Adjusted Term SOFR, in each case depending on our consolidated total leverage ratio; except that, pursuant to the Second Amendment and the Third Amendment, during the period commencing on February 22, 2022 and ending on the last day of the fiscal quarter ending June 30, 2023, the applicable margin for LIBOR rate loans and Adjusted Term SOFR loans, as applicable, was 3.50%.

On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amended the Credit Agreement. The Fourth Amendment, among other things, decreased the commitment fees payable under the revolving credit facility under the Credit Agreement such that the undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.125% to 0.200%, depending on our consolidated leverage ratio, and eliminated the language providing that the applicable margin for Adjusted Term SOFR loans was 3.50%, such that the interest rates are in effect as set forth in the above paragraph. The Fourth Amendment also eliminated the liquidity financial covenant and modified the remaining financial covenants to reflect the termination of the temporary covenant relief period that was in place until June 30, 2023 pursuant to the Second Amendment, such that the financial covenants now include a maximum consolidated total leverage ratio covenant, a minimum consolidated EBITDA covenant and a minimum fixed charge coverage ratio covenant. In addition, the Fourth Amendment provided for an

additional term loan in the amount of $8.25 million, which we used for a paydown of the revolving credit facility. The Fourth Amendment also extended the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024, to August 1, 2026.

On December 21, 2023, we made a payment of $16.8 million to repay in full the outstanding balance on the revolving credit facility

As of March 31, 2024, we had outstanding borrowings of $28.5 million under the Credit Agreement, comprised entirely of the term loan. At March 31, 2024, all outstanding borrowings were subject to interest at a rate calculated at Adjusted Term SOFR plus an applicable margin, for an interest rate of 7.16%. The principal of the term loan is required to be repaid in quarterly installments of $750,000. Maturities of the term loan for the next three years as of March 31, 2024, were as follows:


(In thousands)	Amount
2024 (April 1 - December 31)	$	2,250
2025		3,000
2026		23,250
Total		28,500
Less: Deferred financing fees		(107)
Net Note Payable		28,393
Less: Current portion of note payable		(2,956)
Non-current portion of note payable	$	25,437

Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary. As of March 31, 2024, the Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum consolidated total leverage ratio, a minimum fixed charge coverage ratio and a minimum consolidated EBITDA covenant. As of March 31, 2024, we were in compliance with all financial covenants under the Credit Agreement.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
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-Name Accounting Standards Codification
-Section 50
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Paragraph 1
-Subparagraph (SX 210.4-08(c))
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-URI https://asc.fasb.org//470/tableOfContent

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+ Details

Credit Agreement (Details) - USD ($)						3 Months Ended
Credit Agreement (Details) - USD ($)	Dec. 31, 2023	Aug. 01, 2023	Jun. 21, 2023	Feb. 22, 2022	Sep. 08, 2021	Mar. 31, 2024
Credit Agreement
Basis spread (as a percent)			0.10%
Credit facility outstanding amount					$ 25,000,000.0
Line of credit, threshold contingent increase in borrowing capacity					25,000,000.0
Credit agreement, total aggregate principal amount					80,000,000.0
Long-term debt						$ 28,500,000
SOFR
Credit Agreement
Basis spread (as a percent)			3.50%
Revolving credit facility
Credit Agreement
Line of credit					25,000,000.0
Debt instrument periodic payment	$ 16,800,000
Revolving credit facility \| Federal Funds
Credit Agreement
Basis spread (as a percent)			0.50%
Revolving credit facility \| Base Rate
Credit Agreement
Basis spread (as a percent)			1.00%
Revolving credit facility \| SOFR
Credit Agreement
Basis spread (as a percent)		3.50%				7.16%
Revolving credit facility \| Maximum
Credit Agreement
Unused line fee (as a percent)		0.20%
Revolving credit facility \| Maximum \| Base Rate
Credit Agreement
Basis spread (as a percent)			2.25%
Revolving credit facility \| Maximum \| SOFR
Credit Agreement
Basis spread (as a percent)			3.25%
Revolving credit facility \| Minimum
Credit Agreement
Unused line fee (as a percent)		0.125%
Revolving credit facility \| Minimum \| Base Rate
Credit Agreement
Basis spread (as a percent)			0.75%
Revolving credit facility \| Minimum \| SOFR
Credit Agreement
Basis spread (as a percent)			1.75%
Term Loan
Credit Agreement
Increase in term debt		$ 8,250,000
Debt instrument face amount					30,000,000.0
Long-term debt					$ 30,000,000.0	$ 28,393,000
Debt instrument periodic payment						$ 750,000
Debt instrument frequency of periodic payment						quarterly
Principal prepayment of term loan				$ 3,000,000.0

Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Fair Value Measurements

Fair Value Measurements

Note 14. Fair Value Measurements

We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3).

As of March 31, 2024, our obligations under the AffloVest Acquisition earn-out arrangements had been paid in full. Prior to the determination of the actual amount of the earn-out, the earn-out liability was valued by employing a Monte Carlo Simulation model in a risk-neutral framework, which is a Level 3 input. The underlying simulated variable included recognized revenue. The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies. The model included other assumptions including the market price of risk, which was calculated as the weighted average cost of capital less the long-term risk-free rate. The earn-out liability was adjusted to fair value at each reporting date until the end of the earn-out period, which was September 30, 2023. Changes in fair value were included in intangible asset amortization and earn-out expenses in our Condensed Consolidated Statements of Operations.

Changes in the earn-out liability measured at fair value using Level 3 inputs were as follows:


(In thousands)
Earn-out liability at December 31, 2022	$	13,050
Payment on earn-out		—
Fair value adjustments		660
Earn-out liability at March 31, 2023	$	13,710

On May 25, 2023, the Company paid $5.0 million, plus an imputed interest payment of $250,000, relating to the initial earn-out. Subsequent to September 30, 2023, it was determined that the calculated amount of the second earn-out payment was $5.6 million, which was paid by the Company on November 28, 2023.

The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these items. Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Revenue (Tables)

3 Months Ended

Mar. 31, 2024

Revenue

Summary of revenue disaggregated by product


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Revenue
Lymphedema products	$	52,313	$	49,752
Airway clearance products		8,775		9,094
Total	$	61,088	$	58,846

Percentage of total revenue
Lymphedema products		86%		85%
Airway clearance products		14%		15%
Total		100%		100%

Summary of revenue by channel


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Private insurers and other payers	$	31,277	$	25,425
Veterans Administration		6,826		5,823
Medicare		14,210		18,504
Durable medical equipment distributors		8,775		9,094
Total	$	61,088	$	58,846

Sales-type lease revenue and the associated cost of goods sold


	Three Months Ended March 31,
(In thousands)	2024		2023
Sales-type lease revenue	$	7,781	$	6,055
Cost of sales-type lease revenue		2,715		2,736
Gross profit	$	5,066	$	3,319

Commitments and Contingencies - Undiscounted cash flows (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Undiscounted cash flows
2024 (April 1 - December 31)	$ 2,667
2025	3,644
2026	3,715
2027	3,210
2028	3,185
Thereafter	6,943
Total minimum lease payments	23,364
Less: Amount of lease payments representing interest	(2,767)
Present value of future minimum lease payments	20,597	$ 21,243
Less: Current obligations under operating lease liabilities	(2,740)	(2,807)
Non-current obligations under operating lease liabilities	$ 17,857	$ 18,436

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2024	Dec. 31, 2023
Condensed Consolidated Balance Sheets
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares, issued	23,761,897	23,600,584
Common stock, shares, outstanding	23,761,897	23,600,584

Warranty Reserves (Tables)

3 Months Ended

Mar. 31, 2024

Warranty Reserves

Schedule of warranty reserves


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Beginning balance	$	4,038	$	4,212
Warranty provision		840		874
Processed warranty claims		(1,042)		(1,086)
Ending balance	$	3,836	$	4,000

Accrued warranty reserve, current	$	2,191	$	1,916
Accrued warranty reserve, non-current		1,645		2,084
Total accrued warranty reserve	$	3,836	$	4,000

Accrued Expenses

3 Months Ended

Mar. 31, 2024

Accrued Expenses

Accrued Expenses

Note 6. Accrued Expenses

Accrued expenses consisted of the following:


(In thousands)	At March 31, 2024		At December 31, 2023
Warranty	$	2,191	$	2,357
In-transit inventory		1,454		401
Travel		1,119		1,038
Legal and consulting		742		611
Clinical studies		356		363
Sales and use tax		184		183
Other		820		951
Total	$	6,866	$	5,904

Inventories (Tables)

3 Months Ended

Mar. 31, 2024

Inventories

Schedule of inventories


(In thousands)	At March 31, 2024		At December 31, 2023
Finished goods	$	7,519	$	7,979
Component parts and work-in-process		13,325		14,548
Total inventories	$	20,844	$	22,527

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2024

Fair Value Measurements

Schedule of changes in the earn-out liability


(In thousands)
Earn-out liability at December 31, 2022	$	13,050
Payment on earn-out		—
Fair value adjustments		660
Earn-out liability at March 31, 2023	$	13,710

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (2,209)	$ (1,886)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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-Topic 235
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+ Details

Inventories

3 Months Ended

Mar. 31, 2024

Inventories

Inventories

Note 4. Inventories

Inventories consisted of the following:


(In thousands)	At March 31, 2024		At December 31, 2023
Finished goods	$	7,519	$	7,979
Component parts and work-in-process		13,325		14,548
Total inventories	$	20,844	$	22,527

Nature of Business and Operations

3 Months Ended

Mar. 31, 2024

Nature of Business and Operations

Nature of Business and Operations

Note 1. Nature of Business and Operations

Tactile Systems Technology, Inc. (“we,” “us,” “our,” and the “Company”) manufactures and distributes medical devices for the treatment of patients with underserved chronic diseases at home. We provide our Flexitouch® Plus and Entre™ Plus systems, which help control symptoms of lymphedema, a chronic progressive medical condition, through our direct sales force for use in the home following receipt of prescriptions from vascular, wound and lymphedema clinics throughout the United States.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance business (“AffloVest Acquisition”). AffloVest is a portable, wearable vest that treats patients with chronic respiratory conditions. We sell this device through home medical equipment and durable medical equipment (“DME”) providers throughout the United States.

We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in our reincorporation as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical”.

On August 2, 2016, we closed the initial public offering of our common stock, which resulted in the sale of 4,120,000 shares of our common stock at a public offering price of $10.00 per share. We received net proceeds from the initial public offering of approximately $35.4 million, after deducting underwriting discounts and approximately $2.9 million of transaction expenses.

On February 27, 2023, we closed on a public offering of 2,875,000 shares of our common stock at a public offering price of $13.00 per share. We received net proceeds from this offering of $34.6 million after deducting underwriting discounts, commissions, and offering expenses.

Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products.

Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Inventories
Finished goods	$ 7,519	$ 7,979
Component parts and work-in-process	13,325	14,548
Total inventories	$ 20,844	$ 22,527

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023
Current assets
Cash and cash equivalents	$ 60,706	$ 61,033
Accounts receivable	40,491	43,173
Net investment in leases	14,324	14,195
Inventories	20,844	22,527
Prepaid expenses and other current assets	4,908	4,366
Total current assets	141,273	145,294
Non-current assets
Property and equipment, net	6,217	6,195
Right of use operating lease assets	18,480	19,128
Intangible assets, net	45,795	46,724
Goodwill	31,063	31,063
Accounts receivable, non-current	6,953	10,936
Deferred income taxes	19,294	19,378
Other non-current assets	2,965	2,720
Total non-current assets	130,767	136,144
Total assets	272,040	281,438
Current liabilities
Accounts payable	5,488	6,659
Note payable	2,956	2,956
Accrued payroll and related taxes	11,023	16,789
Accrued expenses	6,866	5,904
Income taxes payable	725	1,467
Operating lease liabilities	2,740	2,807
Other current liabilities	3,335	4,475
Total current liabilities	33,133	41,057
Non-current liabilities
Note payable, non-current	25,437	26,176
Accrued warranty reserve, non-current	1,645	1,681
Income taxes payable, non-current	495	446
Operating lease liabilities, non-current	17,857	18,436
Total non-current liabilities	45,434	46,739
Total liabilities	78,567	87,796
Commitments and Contingencies (see Note 9)
Stockholders' equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of March 31, 2024 and December 31, 2023
Common stock, $0.001 par value, 300,000,000 shares authorized; 23,761,897 shares issued and outstanding as of March 31, 2024; 23,600,584 shares issued and outstanding as of December 31, 2023	24	24
Additional paid-in capital	176,764	174,724
Retained earnings	16,685	18,894
Total stockholders' equity	193,473	193,642
Total liabilities and stockholders' equity	$ 272,040	$ 281,438

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Total revenue	$ 61,088	$ 58,846
Total cost of revenue	17,659	17,378
Gross profit	43,429	41,468
Operating expenses
Sales and marketing	27,357	26,302
Research and development	2,143	2,233
Reimbursement, general and administrative	16,261	15,434
Intangible asset amortization and earn-out	632	1,305
Total operating expenses	46,393	45,274
Loss from operations	(2,964)	(3,806)
Other expense	155	(993)
Loss before income taxes	(2,809)	(4,799)
Income tax benefit	(600)	(2,913)
Net loss	$ (2,209)	$ (1,886)
Net loss per common share
Basic	$ (0.09)	$ (0.09)
Diluted	$ (0.09)	$ (0.09)
Weighted-average common shares used to compute net loss per common share
Basic	23,665,829	21,283,752
Diluted	23,665,829	21,283,752
Sales revenue
Total revenue	$ 53,307	$ 52,791
Total cost of revenue	14,944	14,642
Gross profit	38,363	38,149
Rental revenue
Total revenue	7,781	6,055
Total cost of revenue	2,715	2,736
Gross profit	$ 5,066	$ 3,319

Net Loss Per Share - Basic and Diluted Net income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Net Loss Per Share
Net Income (Loss)	$ (2,209)	$ (1,886)
Weighted-average shares outstanding	23,665,829	21,283,752
Weighted-average shares used to compute diluted net loss per share	23,665,829	21,283,752
Net loss per share - Basic	$ (0.09)	$ (0.09)
Net loss per share - Diluted	$ (0.09)	$ (0.09)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Net Loss Per Share

3 Months Ended

Mar. 31, 2024

Net Loss Per Share

Net Loss Per Share

Note 13. Net Loss Per Share

The following table sets forth the computation of our basic and diluted net loss per share:


	Three Months Ended
	March 31,
(In thousands, except share and per share data)	2024		2023
Net loss	$	(2,209)	$	(1,886)
Weighted-average shares outstanding		23,665,829		21,283,752
Weighted-average shares used to compute diluted net loss per share		23,665,829		21,283,752
Net loss per share - Basic	$	(0.09)	$	(0.09)
Net loss per share - Diluted	$	(0.09)	$	(0.09)

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:


	Three Months Ended
	March 31,
	2024	2023
Restricted stock units	813,602	736,942
Common stock options	422,757	586,212
Performance stock units	320,049	233,798
Employee stock purchase plan	84,891	125,775
Total	1,641,299	1,682,727

Net Loss Per Share - Antidilutive Securities Excluded From Computation of Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	1,641,299	1,682,727
Restricted stock units
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	813,602	736,942
Common stock options
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	422,757	586,212
Performance stock units
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	320,049	233,798
Employee stock purchase plan
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	84,891	125,775

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2024

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes in our significant accounting policies during the three months ended March 31, 2024. See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023, for information regarding our significant accounting policies.

Accounting Pronouncement Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which requires entities to enhance disclosures around segment reporting. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” which requires entities to enhance disclosures around income taxes. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2024

Schedule of allocation of total stock-based compensation expense


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Cost of revenue	$	83	$	103
Sales and marketing expenses		738		752
Research and development expenses		33		49
Reimbursement, general and administrative expenses		1,185		1,119
Total stock-based compensation expense	$	2,039	$	2,023

Schedule of stock option activity


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except options and per share data)	Outstanding	Per Share ⁽¹⁾		Contractual Life	Value ⁽²⁾
Balance at December 31, 2023	429,960	$	40.74	3.8 years	$	223
Exercised	(354)	$	1.35		$	5
Forfeited	—	$	—
Cancelled/Expired	(6,849)	$	44.62
Balance at March 31, 2024	422,757	$	40.71	3.6 years	$	289

Options exercisable at March 31, 2024	395,952	$	41.94	3.5 years	$	160

(1)	The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant.

(2)

The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise. The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period.

Time-Based Restricted Stock Units

Schedule of stock-settled restricted stock unit activity


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2023	589,142	$	16.35	$	8,425
Granted	367,036	$	13.88
Vested	(133,324)	$	17.60
Cancelled	(9,252)	$	18.20
Balance at March 31, 2024	813,602	$	15.01	$	13,221

(1)	The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

Performance-based stock-settled restricted stock units

Schedule of stock-settled restricted stock unit activity


		Weighted-
		Average Grant		Aggregate
	PSUs	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2023	198,232	$	18.93	$	2,785
Granted	160,659	$	13.88
Vested	(38,842)	$	29.02
Cancelled	—	$	—
Balance at March 31, 2024	320,049	$	15.17	$	5,201

(1)	The aggregate intrinsic value of PSUs outstanding was based on our closing stock price on the last trading day of the period.

Income Taxes

3 Months Ended

Mar. 31, 2024

Income Taxes

Income Taxes

Note 12. Income Taxes

We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income (loss) and adjusting for discrete tax items recorded in the period. Deferred income taxes result from temporary differences between the reporting of amounts for financial statement purposes and income tax purposes. These differences relate primarily to different methods used for income tax reporting purposes, including for depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves. Our provision for income taxes includes current federal and state income tax expense, as well as deferred federal and state income tax expense.

The effective tax rate for the three months ended March 31, 2024, was a benefit of 21.4%, compared to a benefit of 60.7% for the three months ended March 31, 2023. The primary driver of the change in our effective tax rate was attributable to the fact that we did not have a full valuation allowance on our deferred tax assets for the current year period, while the prior year period reported a full valuation allowance. We recorded an income tax benefit of $0.6 million and an income tax benefit of $2.9 million for the three months ended March 31, 2024 and 2023, respectively.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority is more-likely-than-not to sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company currently is not under examination in any jurisdictions.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Credit Agreement - Maturities of Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Sep. 08, 2021
Maturities of notes payable
Net Notes Payable	$ 28,500
Term Loan
Maturities of notes payable
2024	2,250
2025	3,000
2026	23,250
Total	28,500
Less: Deferred financing fees	(107)
Net Notes Payable	28,393	$ 30,000
Less: Current portion of notes payable	(2,956)
Non-current portion of notes payable	$ 25,437

Stockholders' Equity - Stock Options and Restricted Stock (Details) $ / shares in Units, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2024 USD ($) item $ / shares shares	Mar. 31, 2023 USD ($) $ / shares shares	Dec. 31, 2023 USD ($) $ / shares shares
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	$ 2,039	$ 2,023
Employee Stock Option
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	100	$ 300
Total unrecognized pre-tax compensation expense related to nonvested stock option awards \| $	$ 100
Weighted-average period over which unrecognized compensation cost is expected to be recognized	1 year
Options Outstanding
Outstanding at beginning of period \| shares	429,960
Exercised \| shares	(354)
Cancelled/Expired \| shares	(6,849)
Outstanding at end of period \| shares	422,757		429,960
Weighted Average Exercise Price Per Share
Outstanding at beginning of period \| $ / shares	$ 40.74
Exercised \| $ / shares	1.35
Cancelled/Expired \| $ / shares	44.62
Outstanding at end of period \| $ / shares	$ 40.71		$ 40.74
Other information
Options exercisable number of shares exercisable \| shares	395,952	479,622
Options exercisable, weighted-average exercise price \| $ / shares	$ 41.94	$ 44.60
Weighted average remaining contractual life (in years)	3 years 7 months 6 days		3 years 9 months 18 days
Options exercisable, weighted-average remaining contractual life	3 years 6 months
Aggregate Intrinsic Value, Options outstanding \| $	$ 289		$ 223
Aggregate Intrinsic Value, Exercised \| $	5
Aggregate Intrinsic Value, Options exercisable \| $	$ 160
Employee Stock Option \| Minimum
Stock-based compensation, general disclosures.
Vesting period (in years)	3 years
Term (in years)	7 years
Employee Stock Option \| Maximum
Stock-based compensation, general disclosures.
Vesting period (in years)	4 years
Term (in years)	10 years
2016 Plan \| Time-Based Restricted Stock Units
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	$ 1,400	$ 1,300
Total unrecognized pre-tax compensation expense related to awards \| $	$ 9,900
Weighted-average period over which unrecognized compensation cost is expected to be recognized	2 years 2 months 12 days
Units Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares) \| shares	589,142
Granted (in shares) \| shares	367,036
Vested (in shares) \| shares	(133,324)
Cancelled (in shares) \| shares	(9,252)
Restricted stock unit awards outstanding at the end of the period (in shares) \| shares	813,602		589,142
Weighted Average Grant Date Fair Value Per Unit
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share) \| $ / shares	$ 16.35
Granted (in dollars per share) \| $ / shares	13.88
Vested (in dollars per share) \| $ / shares	17.60
Cancelled (in dollars per share) \| $ / shares	18.20
Restricted stock unit awards outstanding at the end of the period (in dollars per share) \| $ / shares	$ 15.01		$ 16.35
Aggregate Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value \| $	$ 13,221		$ 8,425
2016 Plan \| Time-Based Restricted Stock Units \| Minimum
Stock-based compensation, general disclosures.
Vesting period (in years)	1 year
2016 Plan \| Time-Based Restricted Stock Units \| Maximum
Stock-based compensation, general disclosures.
Vesting period (in years)	3 years
2016 Plan \| Performance-based stock-settled restricted stock units
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	$ 400	$ 200
Total unrecognized pre-tax compensation expense related to awards \| $	$ 3,100
Weighted-average period over which unrecognized compensation cost is expected to be recognized	2 years 6 months
Number of performance awards under share-based payment arrangement \| item	3
Units Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares) \| shares	198,232
Granted (in shares) \| shares	160,659
Vested (in shares) \| shares	(38,842)
Restricted stock unit awards outstanding at the end of the period (in shares) \| shares	320,049		198,232
Weighted Average Grant Date Fair Value Per Unit
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share) \| $ / shares	$ 18.93
Granted (in dollars per share) \| $ / shares	13.88
Vested (in dollars per share) \| $ / shares	29.02
Restricted stock unit awards outstanding at the end of the period (in dollars per share) \| $ / shares	$ 15.17		$ 18.93
Aggregate Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value \| $	$ 5,201		$ 2,785
2016 Plan \| Performance-based stock-settled restricted stock units \| Minimum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	25.00%
2016 Plan \| Performance-based stock-settled restricted stock units \| Maximum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	175.00%
2016 Plan \| 2025 PSUs \| Minimum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	25.00%
2016 Plan \| 2025 PSUs \| Maximum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	175.00%
2016 Plan \| 2024 PSUs \| Minimum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	25.00%
2016 Plan \| 2024 PSUs \| Maximum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	175.00%
2016 Plan \| 2023 PSUs
Stock-based compensation, general disclosures.
Number of performance awards under share-based payment arrangement \| item	3
2016 Plan \| Tranche one \| 2024 PSUs
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%
2016 Plan \| Tranche one \| 2023 PSUs
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%
2016 Plan \| Tranche two \| 2025 PSUs
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%
2016 Plan \| Tranche three \| 2026 PSUs
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%

Commitments and Contingencies - Lease Obligations (Details) - ft²	3 Months Ended
	Mar. 31, 2024	Dec. 31, 2019	Dec. 31, 2018	Oct. 31, 2018
Minimum
Commitments and Contingencies
Lease terms	12 months
Building \| Minimum
Commitments and Contingencies
Lease terms	1 year
Building \| Maximum
Commitments and Contingencies
Lease terms	7 years
Equipment
Commitments and Contingencies
Option to renew	true
Equipment \| Minimum
Commitments and Contingencies
Lease terms	1 year
Equipment \| Maximum
Commitments and Contingencies
Lease terms	4 years
Initial lease
Commitments and Contingencies
Area of office space				80,000
Second lease
Commitments and Contingencies
Area of office space			29,000
Additional office space added to the lease		4,000
Third lease
Commitments and Contingencies
Additional office space added to the lease		37,000

Nature of Business and Operations (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Feb. 27, 2023	Aug. 02, 2016	Mar. 31, 2023
Nature of Business and Operations
Proceeds from Issuance of Common Stock			$ 34,625
IPO
Nature of Business and Operations
Number of shares of common stock sold		4,120,000
IPO price per share (in dollars per share)		$ 10.00
Net proceeds from the initial public offering		$ 35,400
Expense Relating To Initial Public Offering		$ 2,900
Follow-On Public Offering
Nature of Business and Operations
Number of shares of common stock sold	2,875,000
Stock price	$ 13.00
Proceeds from Issuance of Common Stock	$ 34,600

Credit Agreement (Tables)

3 Months Ended

Mar. 31, 2024

Credit Agreement

Schedule of maturities of the term note payable


(In thousands)	Amount
2024 (April 1 - December 31)	$	2,250
2025		3,000
2026		23,250
Total		28,500
Less: Deferred financing fees		(107)
Net Note Payable		28,393
Less: Current portion of note payable		(2,956)
Non-current portion of note payable	$	25,437

Stockholders' Equity - Stock-Based Compensation (Details) - USD ($) $ in Thousands		3 Months Ended
	Jan. 01, 2024	Mar. 31, 2024	Mar. 31, 2023
Stock-based compensation
Compensation expense		$ 2,039	$ 2,023
Cost of revenue.
Stock-based compensation
Compensation expense		83	103
Sales and marketing expenses
Stock-based compensation
Compensation expense		738	752
Research and development expenses
Stock-based compensation
Compensation expense		33	49
Reimbursement, general and administrative expenses
Stock-based compensation
Compensation expense		$ 1,185	$ 1,119
2016 Plan
Stock-based compensation
Number of shares authorized		4,800,000
Automatic annual increase to the number of shares reserved and available for issuance as a percentage of outstanding common stock (as a percent)		5.00%
Automatic annual increase to the number of shares reserved and available for issuance		2,500,000
Increase in number of shares reserved and available for issuance	1,180,019
Shares available for future issuance		6,451,155

Commitments and Contingencies - Lease related assets and liabilities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Lease-related assets and liabilities
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Right of use operating lease assets		Right of use operating lease assets
Right of use operating lease assets	$ 18,480		$ 19,128
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Operating lease liabilities, Current		Operating lease liabilities, Current
Operating lease liabilities, Current	$ 2,740		$ 2,807
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Operating lease liabilities, non-current		Operating lease liabilities, non-current
Operating lease liabilities, non-current	$ 17,857		$ 18,436
Present value of future minimum lease payments	$ 20,597		$ 21,243
Weighted average remaining lease term	6 years 6 months		6 years 8 months 12 days
Weighted average discount rate	4.30%		4.30%
Cash paid for operating lease liabilities	$ 867	$ 860

Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies

Commitments and Contingencies

Note 9. Commitments and Contingencies

Lease Obligations

We lease property and equipment under operating leases, typically with terms greater than 12 months, and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (“ROU”) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options are at our discretion and are included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and non-lease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Condensed Consolidated Balance Sheets.

None of our lease agreements contain material restrictive covenants or residual value guarantees.

Buildings

We lease certain office and warehouse space at various locations in the United States where we provide services. These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheets, with rent expense recognized on a straight-line basis over the term of the lease. The remaining lease terms vary from approximately one to seven years as of March 31, 2024.

We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota. In December 2018, we amended the initial lease to add approximately 29,000 square feet of additional office space, which is accounted for as a separate lease (“second lease”) in accordance with ASU No. 2016-02, “Leases” (Topic 842) (“ASC 842”). In December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842. The portion of the space covered under the initial lease was placed in service in September 2019. The portion of the space covered under the second lease commenced in September 2020. Finally, the portion of the space covered under the third lease commenced in September 2021. The three portions were recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets.

Computer and Office Equipment

We also have operating lease agreements for certain computer and office equipment. The remaining lease terms as of March 31, 2024, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. The leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned.

Lease Position, Undiscounted Cash Flow and Supplemental Information

The table below presents information related to our ROU operating lease assets and operating lease liabilities that we have recorded:


(In thousands)	At March 31, 2024		At December 31, 2023
Right of use operating lease assets	$	18,480	$	19,128

Operating lease liabilities:
Current	$	2,740	$	2,807
Non-current		17,857		18,436
Total	$	20,597	$	21,243

Operating leases:
Weighted average remaining lease term		6.5 years		6.7 years
Weighted average discount rate		4.3%		4.3%

	Three Months Ended March 31,
	2024		2023
Supplemental cash flow information for our operating leases:
Cash paid for operating lease liabilities	$	867	$	860

The table below reconciles the undiscounted cash flows for the periods presented to the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented:


(In thousands)
2024 (April 1 - December 31)	$	2,667
2025		3,644
2026		3,715
2027		3,210
2028		3,185
Thereafter		6,943
Total minimum lease payments		23,364
Less: Amount of lease payments representing interest		(2,767)
Present value of future minimum lease payments		20,597
Less: Current obligations under operating lease liabilities		(2,740)
Non-current obligations under operating lease liabilities	$	17,857

Operating lease costs were $0.9 million for each of the three months ended March 31, 2024 and 2023.

Major Vendors

We had purchases from one vendor that accounted for 23% of our total purchases for the three months ended March 31, 2024 and purchases from one vendor that accounted for 29% of our total purchases for the three months ended March 31, 2023.

Purchase Commitments

We issued purchase orders prior to March 31, 2024, totaling $25.7 million for goods that we expect to receive within the next year.

Retirement Plan

We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation. We recorded an expense related to our discretionary contributions to the 401(k) plan of $0.7 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.

Legal Proceedings

From time to time, we are subject to various claims and legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

On May 24, 2022, a stockholder derivative lawsuit was filed in the United States District Court for the District of Minnesota, purportedly on behalf of the Company against certain of our present and former officers and directors and the Company (as a nominal defendant), captioned Jack Weaver v. Moen, et al., File No. 0:22-cv-01403-NEB-BRT (the “Weaver Lawsuit”). The Weaver Lawsuit generally arises out of the same subject matter as a previously settled securities class action captioned Brian Mart v. Tactile Sys. Tech., Inc., et al., File No. 0:20-cv-02074-NEB-BRT (D. Minn.) (the “Mart Lawsuit”), which alleged, inter alia, that we and eight of our former officers and directors made materially false or misleading statements about our business, operational and compliance policies. The Weaver Lawsuit alleges the following claims under the Exchange Act and common law: (1) that the director defendants made materially false or misleading public statements in proxy statements in violation of Section 14(a) of the Exchange Act; (2) that the director defendants’ stock and option awards should be rescinded under Section 29(b) of the Exchange Act; (3) that the officer defendants’ employment contract compensation should be rescinded under Section 29(b) of the Exchange Act; (4) that certain officer defendants are liable for contribution arising out of any liability incurred in the Mart Lawsuit, under Sections 10(b) and 21D of the Exchange Act; (5) that the individual defendants breached their fiduciary duties; and (6) that the individual defendants were unjustly enriched. The lawsuit seeks unspecified damages. In August 2022, the matter was transferred to the United States District Court for the District of Delaware by order granting the Parties Stipulation to Transfer. On February 10, 2023, we filed a motion to dismiss the action. The plaintiff filed an Amended Complaint on March 3, 2023. On March 31, 2023, we filed a motion to dismiss the Amended Complaint, which is pending. On July 31, 2023, the plaintiff filed a Joint Notice of Preliminary Settlement indicating that the parties have reached a non-binding settlement-in-principal on most of the material terms that would resolve all claims between the parties and requested that the Court temporarily stay all deadlines, hearings, and conferences while the parties continue to finalize settlement.

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Dec. 31, 2023	Mar. 31, 2023
Accrued Expenses
Warranty	$ 2,191	$ 2,357	$ 1,916
In-transit inventory	1,454	401
Travel	1,119	1,038
Legal and consulting	742	611
Clinical studies	356	363
Sales and use tax	184	183
Other	820	951
Total	$ 6,866	$ 5,904

Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets

Schedule of finite lived intangible assets


	Weighted-	At March 31, 2024
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	1,039	$	269	$	770
Defensive intangible assets	1 year		1,125		956		169
Customer accounts	—		125		125		—
Customer relationships	10 years		31,000		6,107		24,893
Developed technology	8 years		13,000		3,027		9,973
Subtotal			46,289		10,484		35,805
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			490		—		490
Total intangible assets		$	56,279	$	10,484	$	45,795


	Weighted-	At December 31, 2023
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	1,018	$	248	$	770
Defensive intangible assets	1 year		1,125		920		205
Customer accounts	—		125		125		—
Customer relationships	11 years		31,000		5,511		25,489
Developed technology	9 years		13,000		2,731		10,269
Subtotal			46,268		9,535		36,733
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			491		—		491
Total intangible assets		$	56,259	$	9,535	$	46,724

Schedule of future amortization expense


(In thousands)
2024 (April 1 - December 31)	$	2,847
2025		3,707
2026		3,642
2027		3,634
2028		3,631
Thereafter		18,344
Total	$	35,805

Commitments and Contingencies - Lease commitments and operating lease cost (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Commitments and Contingencies
Operating lease cost	$ 0.9	$ 0.9

Warranty Reserves (Details) - USD ($) $ in Thousands	3 Months Ended
Warranty Reserves (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023	Dec. 31, 2023
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 4,038	$ 4,212
Warranty provision	840	874
Processed warranty claims	(1,042)	(1,086)
Ending balance	3,836	4,000
Accrued warranty reserve, current	2,191	1,916	$ 2,357
Accrued warranty reserve, non-current	1,645	2,084	$ 1,681
Total accrued warranty reserve	$ 3,836	$ 4,000

Basis of Presentation

3 Months Ended

Mar. 31, 2024

Basis of Presentation

Basis of Presentation

Note 2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.

The results for the three months ended March 31, 2024, are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other interim period or for any future year. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
Revenue (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023
Revenue
Revenue	$ 61,088	$ 58,846
Percentage of total revenue (in percent)	100.00%	100.00%
Revenue from sale type lease
Sales-type lease revenue	$ 7,781	$ 6,055
Cost of sales-type lease revenue	2,715	2,736
Gross profit	$ 5,066	3,319
Minimum
Revenue from sale type lease
Rental period of rent-to-purchase arrangements	3 months
Maximum
Revenue from sale type lease
Rental period of rent-to-purchase arrangements	10 months
Private insurers and other payers
Revenue
Revenue	$ 31,277	25,425
Veterans Administration
Revenue
Revenue	6,826	5,823
Medicare
Revenue
Revenue	14,210	18,504
Durable medical equipment distributors
Revenue
Revenue	8,775	9,094
Lymphedema products
Revenue
Revenue	$ 52,313	$ 49,752
Percentage of total revenue (in percent)	86.00%	85.00%
Airway clearance products
Revenue
Revenue	$ 8,775	$ 9,094
Percentage of total revenue (in percent)	14.00%	15.00%

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Mar. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Cash flows from operating activities
Net loss	$ (2,209)	$ (1,886)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,634	1,629
Deferred income taxes	84
Stock-based compensation expense	2,039	2,023
Loss on disposal of property and equipment and intangibles		3
Change in fair value of earn-out liability		660
Changes in assets and liabilities, net of acquisition:
Accounts receivable	2,682	3,806
Net investment in leases	(129)	2,349
Inventories	1,683	3,110
Income taxes	(693)	(2,919)
Prepaid expenses and other assets	(787)	(1,056)
Right of use operating lease assets	2	71
Accounts receivable, non-current	3,983	3,078
Accounts payable	(1,396)	(403)
Accrued payroll and related taxes	(5,766)	(5,636)
Accrued expenses and other liabilities	(203)	(5,331)
Net cash provided by (used in) operating activities	924	(502)
Cash flows from investing activities
Purchases of property and equipment	(482)	(241)
Intangible assets expenditures	(20)	(50)
Net cash used in investing activities	(502)	(291)
Cash flows from financing activities
Payments on note payable	(750)	(750)
Proceeds from exercise of common stock options	1
Proceeds from issuance of common stock at market		34,625
Net cash (used in) provided by financing activities	(749)	33,875
Net (decrease) increase in cash and cash equivalents	(327)	33,082
Cash and cash equivalents - beginning of period	61,033	21,929
Cash and cash equivalents - end of period	60,706	55,011
Supplemental cash flow disclosure
Cash paid for interest	583	927
Cash paid for taxes	54	6
Capital expenditures incurred but not yet paid	$ 225	$ 10

Stockholders' Equity - Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023	Jan. 01, 2024	Apr. 27, 2016
Stockholders' Equity
Stock-based compensation expense	$ 2,039	$ 2,023
2016 Plan
Stockholders' Equity
Shares reserved	6,451,155
Employee Stock Purchase Plan
Stockholders' Equity
Purchase price of common stock under plan (as a percent)	85.00%
Offering period (in months)	6 months
Shares reserved	1,605,871		236,003	1,600,000
Incremental share increase (as a percent)	1.00%
Incremental share increase (in shares)	500,000
Stock-based compensation expense	$ 100	$ 200

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

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+ Details

Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2024

Accrued Expenses

Schedule of Accrued Expenses


(In thousands)	At March 31, 2024		At December 31, 2023
Warranty	$	2,191	$	2,357
In-transit inventory		1,454		401
Travel		1,119		1,038
Legal and consulting		742		611
Clinical studies		356		363
Sales and use tax		184		183
Other		820		951
Total	$	6,866	$	5,904

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit).	Total
Balances at the beginning at Dec. 31, 2022	$ 20	$ 131,001	$ (9,621)	$ 121,400
Balances at the beginning (in shares) at Dec. 31, 2022	20,252,677
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		2,023		2,023
Exercise of common stock options and vesting of performance and restricted stock units (in shares)	107,388
Sale of common stock from follow-on public offering, net of offering expenses	$ 3	34,622		34,625
Sale of common stock from follow-on public offering, net of offering expenses (in shares)	2,875,000
Net loss for the period			(1,886)	(1,886)
Balances at the end at Mar. 31, 2023	$ 23	167,646	(11,507)	156,162
Balances at the end (in shares) at Mar. 31, 2023	23,235,065
Balances at the beginning at Dec. 31, 2023	$ 24	174,724	18,894	193,642
Balances at the beginning (in shares) at Dec. 31, 2023	23,600,584
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		2,039		2,039
Exercise of common stock options and vesting of performance and restricted stock units		1		1
Exercise of common stock options and vesting of performance and restricted stock units (in shares)	161,313
Net loss for the period			(2,209)	(2,209)
Balances at the end at Mar. 31, 2024	$ 24	$ 176,764	$ 16,685	$ 193,473
Balances at the end (in shares) at Mar. 31, 2024	23,761,897

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

- Definition

Equity impact of the value of new stock issued during the period. Includes shares issued in an initial public offering or a secondary public offering.

+ References + Details

- Definition

Amount of equity (deficit) attributable to parent. Excludes temporary equity and equity attributable to noncontrolling interest.

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+ Details

Commitments and Contingencies - Major Vendors (Details) - Vendor One - item	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
Commitments and Contingencies
Number of vendors	1	1
Purchases \| Vendor
Commitments and Contingencies
Total purchases (in percentage)	23.00%	29.00%

Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2024

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 5. Goodwill and Intangible Assets

Goodwill

In the third quarter of fiscal 2021, we completed the AffloVest Acquisition. The purchase price of the AffloVest product line exceeded the net acquisition-date estimated fair value amounts of the identifiable assets acquired and the liabilities assumed by $31.1 million, which was assigned to goodwill.

Intangible Assets

Our patents and other intangible assets are summarized as follows:


	Weighted-	At March 31, 2024
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	1,039	$	269	$	770
Defensive intangible assets	1 year		1,125		956		169
Customer accounts	—		125		125		—
Customer relationships	10 years		31,000		6,107		24,893
Developed technology	8 years		13,000		3,027		9,973
Subtotal			46,289		10,484		35,805
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			490		—		490
Total intangible assets		$	56,279	$	10,484	$	45,795


	Weighted-	At December 31, 2023
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	1,018	$	248	$	770
Defensive intangible assets	1 year		1,125		920		205
Customer accounts	—		125		125		—
Customer relationships	11 years		31,000		5,511		25,489
Developed technology	9 years		13,000		2,731		10,269
Subtotal			46,268		9,535		36,733
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			491		—		491
Total intangible assets		$	56,259	$	9,535	$	46,724

Amortization expense was $0.9 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively. Future amortization expenses are expected as follows:


(In thousands)
2024 (April 1 - December 31)	$	2,847
2025		3,707
2026		3,642
2027		3,634
2028		3,631
Thereafter		18,344
Total	$	35,805

In the third quarter of 2023, we performed our annual goodwill impairment test utilizing both the qualitative and quantitative approach described in FASB ASU No. 2021-03, “Intangibles—Goodwill and Other (Topic 350) – Accounting Alternative for Evaluating Triggering Events.” Based on the testing using the qualitative approach, it was determined that it was not more likely than not that the fair value of the reporting unit was less than the carrying value. As a result, it was not deemed necessary to proceed to the quantitative test and no impairment was recognized.

Stockholders' Equity

3 Months Ended

Mar. 31, 2024

Stockholders' Equity

Stockholders' Equity

Note 10. Stockholders' Equity

Stock-Based Compensation

Our 2016 Equity Incentive Plan (the “2016 Plan”) authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors. There were up to 4,800,000 shares of our common stock initially reserved for issuance pursuant to the 2016 Plan. The 2016 Plan provides that the number of shares reserved and available for issuance under the 2016 Plan will automatically increase annually on January 1 of each calendar year, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the lesser of: (a) 5% of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares; provided, however, that our Board of Directors may determine that any annual increase be a lesser number. In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expired, cancelled, settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Pursuant to the automatic increase feature of the 2016 Plan, 1,180,019 shares were added as available for issuance thereunder on January 1, 2024. Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2023. As of March 31, 2024, 6,451,155 shares were available for future grant pursuant to the 2016 Plan.

Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms.

We recorded stock-based compensation expense of $2.0 million for each of the three months ended March 31, 2024 and 2023. This expense was allocated as follows:


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Cost of revenue	$	83	$	103
Sales and marketing expenses		738		752
Research and development expenses		33		49
Reimbursement, general and administrative expenses		1,185		1,119
Total stock-based compensation expense	$	2,039	$	2,023

Stock Options

Stock options issued to participants other than non-employees typically vest over three or four years and typically have a contractual term of seven or ten years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $0.1 million and $0.3 million for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, there was approximately $0.1 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.0 years.

Our stock option activity for the three months ended March 31, 2024, was as follows:


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except options and per share data)	Outstanding	Per Share ⁽¹⁾		Contractual Life	Value ⁽²⁾
Balance at December 31, 2023	429,960	$	40.74	3.8 years	$	223
Exercised	(354)	$	1.35		$	5
Forfeited	—	$	—
Cancelled/Expired	(6,849)	$	44.62
Balance at March 31, 2024	422,757	$	40.71	3.6 years	$	289

Options exercisable at March 31, 2024	395,952	$	41.94	3.5 years	$	160

(1)	The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant.

(2)

Options exercisable of 479,622 as of March 31, 2023, had a weighted-average exercise price of $44.60 per share.

Time-Based Restricted Stock Units

We have granted time-based restricted stock units to certain participants under the 2016 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2016 Plan vest over one to three years. Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for time-based restricted stock units was $1.4 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, there was approximately $9.9 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 2.2 years.

Our time-based restricted stock unit activity for the three months ended March 31, 2024, was as follows:


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2023	589,142	$	16.35	$	8,425
Granted	367,036	$	13.88
Vested	(133,324)	$	17.60
Cancelled	(9,252)	$	18.20
Balance at March 31, 2024	813,602	$	15.01	$	13,221

(1)	The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period.

Performance-Based Restricted Stock Units

We have granted performance-based restricted stock units (“PSUs”) to certain participants under the 2016 Plan. These PSUs have both performance-based and time-based vesting features. The PSUs granted in 2023 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in each of 2023 and 2024 (ranging from 25% to 175% of target), and one-third will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA change are achieved in 2025 (ranging from 25% to 175% of target). The PSUs granted in 2024 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in 2024 (ranging from 25% to 175% of target), one-third will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA change are achieved in 2025 (ranging from 25% to 175% of target), and one-third will be earned if and to the extent performance goals to be established are achieved in 2026. All earned and vested PSUs will be settled in shares of common stock.

Stock-based compensation expense recognized for PSUs was $0.4 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively. At March 31, 2024, there was approximately $3.1 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.5 years.

Our PSU activity for the three months ended March 31, 2024, was as follows:


		Weighted-
		Average Grant		Aggregate
	PSUs	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2023	198,232	$	18.93	$	2,785
Granted	160,659	$	13.88
Vested	(38,842)	$	29.02
Cancelled	—	$	—
Balance at March 31, 2024	320,049	$	15.17	$	5,201

(1)	The aggregate intrinsic value of PSUs outstanding was based on our closing stock price on the last trading day of the period.

Employee Stock Purchase Plan

Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016, and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The ESPP is available to all of our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. The ESPP provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year.

A total of 1,600,000 shares of common stock was initially reserved for issuance under the ESPP. This share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (a) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine. Pursuant to the automatic increase feature of the ESPP, 236,003 shares were added as available for issuance thereunder on January 1, 2024. Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2023. As of March 31, 2024, 1,605,871 shares were available for future issuance under the ESPP. We recognized stock-based compensation expense associated with the ESPP of $0.1 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.

Commitments and Contingencies - Retirement Plan (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2024	Mar. 31, 2023
401(k)
Retirement Plan
Discretionary contributions	$ 0.7	$ 0.4

Commitments and Contingencies - Legal Proceedings (Details)	May 24, 2022 item
The "Weaver Lawsuit"
Loss Contingencies [Line Items]
Number of former officers and directors	8

Fair Value Measurements - Fair Value Hierarchy (Details) - USD ($)	Nov. 28, 2023	May 25, 2023
Fair Value Measurements
Earn-out liability payment	$ 5,600,000	$ 5,000,000.0
Imputed interest payment		$ 250,000

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies

Summary of lease-related assets and liabilities


(In thousands)	At March 31, 2024		At December 31, 2023
Right of use operating lease assets	$	18,480	$	19,128

Operating lease liabilities:
Current	$	2,740	$	2,807
Non-current		17,857		18,436
Total	$	20,597	$	21,243

Operating leases:
Weighted average remaining lease term		6.5 years		6.7 years
Weighted average discount rate		4.3%		4.3%

	Three Months Ended March 31,
	2024		2023
Supplemental cash flow information for our operating leases:
Cash paid for operating lease liabilities	$	867	$	860

Summary of undiscounted cash flows


(In thousands)
2024 (April 1 - December 31)	$	2,667
2025		3,644
2026		3,715
2027		3,210
2028		3,185
Thereafter		6,943
Total minimum lease payments		23,364
Less: Amount of lease payments representing interest		(2,767)
Present value of future minimum lease payments		20,597
Less: Current obligations under operating lease liabilities		(2,740)
Non-current obligations under operating lease liabilities	$	17,857

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Mar. 31, 2024	Mar. 31, 2023
Income Taxes
Income tax benefit	$ (600)	$ (2,913)
Effective Income Tax Rate Reconciliation, Percent
Net effective rate	(21.40%)	(60.70%)

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Summary of Significant Accounting Policies (Policies)	3 Months Ended
Summary of Significant Accounting Policies (Policies)	Mar. 31, 2024
Summary of Significant Accounting Policies
Basis of Presentation	The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. The results for the three months ended March 31, 2024, are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any other interim period or for any future year. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.
Principles of Consolidation	Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Accounting Pronouncement Not Yet Adopted	Accounting Pronouncement Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which requires entities to enhance disclosures around segment reporting. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” which requires entities to enhance disclosures around income taxes. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

Commitments and Contingencies - Purchase Commitments (Details) $ in Millions	Mar. 31, 2024 USD ($)
Purchase commitments
Purchase orders issued	$ 25.7

Revenue

3 Months Ended

Mar. 31, 2024

Revenue

Revenue

Note 11. Revenue

We derive our revenue from the sale and rental of our products to our customers in the United States. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product line:


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Revenue
Lymphedema products	$	52,313	$	49,752
Airway clearance products		8,775		9,094
Total	$	61,088	$	58,846

Percentage of total revenue
Lymphedema products		86%		85%
Airway clearance products		14%		15%
Total		100%		100%

Our revenue by channel, inclusive of sales and rental revenue, for the three months ended March 31, 2024 and 2023, are summarized in the following table:


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Private insurers and other payers	$	31,277	$	25,425
Veterans Administration		6,826		5,823
Medicare		14,210		18,504
Durable medical equipment distributors		8,775		9,094
Total	$	61,088	$	58,846

Our rental revenue is derived from rent-to-purchase arrangements that typically range from three to ten months. As title transfers to the patient, with whom we have the contract, upon the termination of the lease term and because collectability is probable, under ASC 842, these are recognized as sales-type leases. Each rental agreement contains two components, the controller and related garments, both of which are interdependent and recognized as one lease component.

The revenue and associated cost of revenue of sales-type leases are recognized on the lease commencement date and a net investment in leases is recorded on the Condensed Consolidated Balance Sheets. We bill the patients’ insurance payers monthly over the duration of the rental term. We record the net investment in leases and recognize revenue upon commencement of the lease in the amount of the expected consideration to be received through the monthly payments. Similar to our sales revenue, the transaction price is impacted by multiple factors, including the terms and conditions contracted by third-party payers. As the rental contract resides with the patients, we have elected the portfolio approach, at the payer level, to determine the expected consideration, which considers the impact of early terminations. While the contract is with the

patient, in certain circumstances, the third-party payer elects an initial rental period with an option to extend. We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably certain to be exercised. As the lease is short-term in nature, we anticipate collection of substantially all of the net investment within the first year of the lease agreement. Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.

Rental revenue for the three months ended March 31, 2024 and 2023, was primarily from private insurers. Sales-type lease revenue and the associated cost of revenue for the three months ended March 31, 2024 and 2023, was:


	Three Months Ended March 31,
(In thousands)	2024		2023
Sales-type lease revenue	$	7,781	$	6,055
Cost of sales-type lease revenue		2,715		2,736
Gross profit	$	5,066	$	3,319

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Goodwill And Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2024	Sep. 30, 2023	Mar. 31, 2023	Dec. 31, 2023	Sep. 30, 2021
Goodwill and Intangible Assets
Goodwill	$ 31,063			$ 31,063
Impairment recognized		$ 0
Definite-lived intangible assets:
Gross Carrying Amount	46,289			46,268
Accumulated Amortization	10,484			9,535
Total	35,805			36,733
Unamortized intangible assets:
Total intangible assets (Gross)	56,279			56,259
Total intangible assets (Net)	45,795			46,724
Amortization expense	900		$ 1,000
Future Amortization
2024 (April 1 - December 31)	2,847
2025	3,707
2026	3,642
2027	3,634
2028	3,631
Thereafter	18,344
Total	35,805			36,733
Tradenames
Unamortized intangible assets:
Gross Carrying Amount, Indefinite	9,500			9,500
Patents pending
Unamortized intangible assets:
Gross Carrying Amount, Indefinite	$ 490			$ 491
Patents pending
Definite-lived intangible assets:
Weighted Average Amortization Period	12 years			12 years
Gross Carrying Amount	$ 1,039			$ 1,018
Accumulated Amortization	269			248
Total	770			770
Future Amortization
Total	$ 770			$ 770
Defensive intangible assets
Definite-lived intangible assets:
Weighted Average Amortization Period	1 year			1 year
Gross Carrying Amount	$ 1,125			$ 1,125
Accumulated Amortization	956			920
Total	169			205
Future Amortization
Total	169			205
Customer accounts
Definite-lived intangible assets:
Gross Carrying Amount	125			125
Accumulated Amortization	$ 125			$ 125
Customer relationships
Definite-lived intangible assets:
Weighted Average Amortization Period	10 years			11 years
Gross Carrying Amount	$ 31,000			$ 31,000
Accumulated Amortization	6,107			5,511
Total	24,893			25,489
Future Amortization
Total	$ 24,893			$ 25,489
Developed technology
Definite-lived intangible assets:
Weighted Average Amortization Period	8 years			9 years
Gross Carrying Amount	$ 13,000			$ 13,000
Accumulated Amortization	3,027			2,731
Total	9,973			10,269
Future Amortization
Total	$ 9,973			$ 10,269
AffloVest APA
Goodwill and Intangible Assets
Goodwill					$ 31,100

Warranty Reserves

3 Months Ended

Mar. 31, 2024

Warranty Reserves

Warranty Reserves

Note 7. Warranty Reserves

The activity in the warranty reserve during and as of the end of the reporting periods presented was as follows:


	Three Months Ended
	March 31,
(In thousands)	2024		2023
Beginning balance	$	4,038	$	4,212
Warranty provision		840		874
Processed warranty claims		(1,042)		(1,086)
Ending balance	$	3,836	$	4,000

Accrued warranty reserve, current	$	2,191	$	1,916
Accrued warranty reserve, non-current		1,645		2,084
Total accrued warranty reserve	$	3,836	$	4,000

Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2024	May 02, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2024
Document Transition Report	false
Entity File Number	001-37799
Entity Registrant Name	Tactile Systems Technology, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-1801204
Entity Address, Address Line One	3701 Wayzata Blvd, Suite 300
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55416
City Area Code	612
Local Phone Number	355-5100
Title of 12(b) Security	Common Stock, Par Value $0.001 Per Share
Trading Symbol	TCMD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		23,762,164
Entity Central Index Key	0001027838
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q1
Amendment Flag	false

Fair Value Measurements - Earn out liability (Details) - USD ($) $ in Thousands			3 Months Ended
	Nov. 28, 2023	May 25, 2023	Mar. 31, 2023
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Payment on earn-out	$ (5,600)	$ (5,000)
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Earn-out liability, beginning balance			$ 13,050
Fair value adjustments			660
Earn-out liability, ending balance			$ 13,710