Third Quarter 2019 Summary:
- Third quarter total revenue increased 37% year-over-year, to
$49.6 million , compared to$36.3 million in third quarter 2018; the adoption of new lease accounting standards contributed three percentage points of the year-over-year increase in total revenue. - Operating income of
$3.2 million , compared to$1.4 million in third quarter 2018. - Net income of
$2.4 million , compared to$1.7 million in third quarter 2018. - Adjusted EBITDA of
$6.4 million , compared to$4.6 million in third quarter 2018. - On
July 22, 2019 , the Company announced the appointment ofJay Stracke to the position of Vice President of Reimbursement and Payer Relations, effectiveJuly 15, 2019 . Mr. Stracke succeeded Tactile Medical’s Senior Vice President of Reimbursement and Payer Relations,Mary (Maggie) Thompson, RN , who retired from her full-time role and transitioned into a part-time role as Vice President, Payer Initiatives.
“Our strong execution continued in the third quarter with revenue growth of 37% year-over-year and steady improvements in profitability,” said
Mr. Mattys continued, “We are raising our 2019 revenue guidance today and look forward to closing out the year with financial and operational momentum as we continue to deliver on our strategy to raise awareness of lymphedema and chronic venous insufficiency, bring our at-home therapies to new patients and increase our share of the more than
Third Quarter 2019 Financial Results
Revenue for the third quarter of 2019 increased
Effective
In accordance with applicable guidance, we will continue to recognize rental agreements commencing prior to
Gross profit for the third quarter of 2019 increased
Operating expenses for the third quarter of 2019 increased
Operating income for the third quarter of 2019 increased
Income tax expense for the third quarter of 2019 was
Net income for the third quarter of 2019 increased
First Nine Months 2019 Financial Results:
Total revenue for the nine months ended September 30, 2019 increased $35.1 million, or 36%, to $132.4 million, compared to $97.3 million for the nine months ended September 30, 2018. The increase in revenue was driven by an increase of approximately $30.6 million, or 34%, year-over-year in sales and rentals of the Flexitouch system and an increase of
Net income for the nine months ended September 30, 2019 increased $2.4 million, or 57%, to $6.7 million, or
Adjusted EBITDA for the nine months ended
Cash Position
At
2019 Financial Outlook
The Company now expects full year 2019 total revenue in the range of
2019 total revenue guidance includes the impact of the Company’s adoption of ASC 842 which is estimated to increase revenue by approximately
- The updated guidance for total revenue growth of 29% to 30% year-over-year is expected to be driven by the following:
- Sales revenue for 2019 is expected to be in the range of
$159.0 million to $160.0 million , compared to sales revenue of$130.2 million in 2018. This compares to the Company’s prior guidance range of$157.0 million to $158.5 million . - Rental revenue for 2019 is expected to be approximately
$27.0 million , compared to rental revenue of$13.6 million in 2018. This compared to the Company’s prior guidance range of$25.0 million to $25.5 million . The projected year-over-year increase in rental revenue for 2019 is expected to be driven by:- the impact of the adoption of ASC 842 – representing 44% of the expected increase in rental revenue for 2019;
- operational growth of approximately 35% over 2018 rental revenue which compares to the Company’s prior operational growth expectations of 20% to 22% – representing approximately one third of the expected increase in rental revenue for 2019; and
- the remainder of the expected increase relates to the reclassification of garment revenue to rental revenue that was previously reported in sales revenue.
- Sales revenue for 2019 is expected to be in the range of
Management will host a conference call at
For those unable to participate, a replay of the call will be available for two weeks at 800-585-836 (416-621-4642 for international callers); access code 9563758. The webcast will be archived at investors.tactilemedical.com.
About
Tactile Medical is a leader in developing and marketing at-home therapy devices that treat chronic swelling conditions such as lymphedema and chronic venous insufficiency. Tactile Medical’s Mission is to help people suffering from chronic diseases live better and care for themselves at home. The Company’s unique offering includes advanced, clinically proven pneumatic compression devices, as well as continuity of care services provided by a national network of product specialists and trainers, reimbursement experts, patient advocates and clinicians. This combination of products and services ensures that tens of thousands of patients annually receive the at-home treatment necessary to better manage their chronic conditions. Tactile Medical takes pride in the fact that our solutions help increase clinical efficacy, reduce overall healthcare costs and improve the quality of life for patients with chronic conditions.
Legal Notice Regarding Forward-Looking Statements
This release contains forward-looking statements. Forward-looking statements are generally identifiable by the use of words like “may,” “will,” “should,” “could,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “continue,” “confident,” “outlook,” “guidance,” “project,” “goals” or “look forward” or the negative of these words or other variations on these words or comparable terminology. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties outside of the Company’s control that can make such statements untrue, including, but not limited to, the adequacy of the Company’s liquidity to pursue its business objectives; the Company’s ability to obtain reimbursement from third party payers for its products; loss or retirement of key executives; adverse economic conditions or intense competition; loss of a key supplier; entry of new competitors and products; adverse federal, state and local government regulation; technological obsolescence of the Company’s products; technical problems with the Company’s research and products; the Company’s ability to expand its business through strategic acquisitions; the Company’s ability to integrate acquisitions and related businesses; price increases for supplies and components; the effects of current and future U.S. and foreign trade policy and tariff actions; or the inability to carry out research, development and commercialization plans. In addition, other factors that could cause actual results to differ materially are discussed in the Company’s filings with the
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measure of Adjusted EBITDA, which differs from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Adjusted EBITDA in this release represents net income less interest income, net, less income tax benefit or plus income tax expense, plus depreciation and amortization, and plus stock-based compensation expense. A reconciliation of Adjusted EBITDA to net income is included in this press release.
Adjusted EBITDA is presented because the Company believes it is a useful indicator of its operating performance. Management uses the measure principally as a measure of the Company’s operating performance and for planning purposes, including the preparation of the Company’s annual operating budget and financial projections. The Company believes this measure is useful to investors as supplemental information and because it is frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company believes Adjusted EBITDA is useful to its management and investors as a measure of comparative operating performance from period to period. In addition, Adjusted EBITDA is used as a performance metric in the Company’s compensation program.
Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to, or superior to, net income or loss, as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP, and it should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating Adjusted EBITDA, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of Adjusted EBITDA should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on the Company’s GAAP results in addition to using non-GAAP financial measures on a supplemental basis. The Company’s definition of Adjusted EBITDA is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
Tactile Systems Technology, Inc. | |||||||
Condensed Consolidated Balance Sheets | |||||||
(Unaudited) | |||||||
September 30, | December 31, | ||||||
(In thousands, except share and per share data) | 2019 | 2018 | |||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 19,814 | $ | 20,099 | |||
Marketable securities | 24,920 | 25,786 | |||||
Accounts receivable, net | 27,681 | 24,332 | |||||
Net investment in leases | 7,628 | — | |||||
Inventories | 16,882 | 11,189 | |||||
Income taxes receivable | 3,847 | 1,793 | |||||
Prepaid expenses and other current assets | 1,956 | 1,762 | |||||
Total current assets | 102,728 | 84,961 | |||||
Non-current assets | |||||||
Property and equipment, net | 7,499 | 4,810 | |||||
Right of use operating lease assets | 15,204 | — | |||||
Intangible assets, net | 5,074 | 5,339 | |||||
Medicare accounts receivable, non-current | 3,025 | 1,884 | |||||
Deferred income taxes | 8,840 | 8,820 | |||||
Other non-current assets | 1,405 | 1,257 | |||||
Total non-current assets | 41,047 | 22,110 | |||||
Total assets | $ | 143,775 | $ | 107,071 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities | |||||||
Accounts payable | $ | 6,289 | $ | 5,110 | |||
Accrued payroll and related taxes | 11,336 | 7,421 | |||||
Accrued expenses | 3,696 | 2,785 | |||||
Operating lease liabilities | 1,990 | — | |||||
Other current liabilities | 817 | 760 | |||||
Total current liabilities | 24,128 | 16,076 | |||||
Non-current liabilities | |||||||
Accrued warranty reserve, non-current | 2,227 | 1,725 | |||||
Income taxes, non-current | 54 | — | |||||
Operating lease liabilities, non-current | 13,399 | — | |||||
Total non-current liabilities | 15,680 | 1,725 | |||||
Total liabilities | 39,808 | 17,801 | |||||
Stockholders’ equity: | |||||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2019 and December 31, 2018 |
— | — | |||||
Common stock, $0.001 par value, 300,000,000 shares authorized; 19,016,032 shares issued and outstanding as of September 30, 2019; 18,631,125 shares issued and outstanding as of December 31, 2018 |
19 | 19 | |||||
Additional paid-in capital | 87,524 | 79,554 | |||||
Retained earnings | 16,393 | 9,705 | |||||
Accumulated other comprehensive income (loss) | 31 | (8 | ) | ||||
Total stockholders’ equity | 103,967 | 89,270 | |||||
Total liabilities and stockholders’ equity | $ | 143,775 | $ | 107,071 | |||
Tactile Systems Technology, Inc. | |||||||||||||||
Condensed Consolidated Statements of Operations | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
(In thousands, except share and per share data) | 2019 | 2018 | 2019 |
2018 |
|||||||||||
Revenue | |||||||||||||||
Sales revenue | $ | 42,882 | $ | 32,969 | $ | 112,503 | $ | 87,731 | |||||||
Rental revenue | 6,730 | 3,353 | 19,926 | 9,572 | |||||||||||
Total revenue | 49,612 | 36,322 | 132,429 | 97,303 | |||||||||||
Cost of revenue | |||||||||||||||
Cost of sales revenue | 12,233 | 9,153 | 33,231 | 24,275 | |||||||||||
Cost of rental revenue | 2,006 | 988 | 6,062 | 2,785 | |||||||||||
Total cost of revenue | 14,239 | 10,141 | 39,293 | 27,060 | |||||||||||
Gross profit | |||||||||||||||
Gross profit - sales revenue | 30,649 | 23,816 | 79,272 | 63,456 | |||||||||||
Gross profit - rental revenue | 4,724 | 2,365 | 13,864 | 6,787 | |||||||||||
Gross profit | 35,373 | 26,181 | 93,136 | 70,243 | |||||||||||
Operating expenses | |||||||||||||||
Sales and marketing | 20,737 | 15,632 | 56,546 | 42,641 | |||||||||||
Research and development | 1,467 | 1,223 | 3,982 | 3,949 | |||||||||||
Reimbursement, general and administrative | 9,966 | 7,956 | 28,159 | 22,799 | |||||||||||
Total operating expenses | 32,170 | 24,811 | 88,687 | 69,389 | |||||||||||
Income from operations | 3,203 | 1,370 | 4,449 | 854 | |||||||||||
Other income | 160 | 128 | 480 | 351 | |||||||||||
Income before income taxes | 3,363 | 1,498 | 4,929 | 1,205 | |||||||||||
Income tax expense (benefit) | 932 | (248 | ) | (1,759 | ) | (3,063 | ) | ||||||||
Net income | $ | 2,431 | $ | 1,746 | $ | 6,688 | $ | 4,268 | |||||||
Net income per common share | |||||||||||||||
Basic | $ | 0.13 | $ | 0.10 | $ | 0.35 | $ | 0.23 | |||||||
Diluted | $ | 0.12 | $ | 0.09 | $ | 0.34 | $ | 0.22 | |||||||
Weighted-average common shares used to compute net income per common share | |||||||||||||||
Basic | 18,981,015 | 18,344,956 | 18,870,622 | 18,166,999 | |||||||||||
Diluted | 19,641,853 | 19,525,686 | 19,630,721 | 19,328,947 | |||||||||||
Tactile Systems Technology, Inc. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(Unaudited) | ||||||||
Nine Months Ended | ||||||||
September 30, | ||||||||
(In thousands) | 2019 |
2018 |
||||||
Cash flows from operating activities | ||||||||
Net income | $ | 6,688 | $ | 4,268 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 2,583 | 2,474 | ||||||
Deferred income taxes | (31 | ) | (1,411 | ) | ||||
Stock-based compensation expense | 7,387 | 5,638 | ||||||
Loss on disposal of equipment | — | 3 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | (3,349 | ) | (2,556 | ) | ||||
Net investment in leases | (7,628 | ) | — | |||||
Inventories | (5,693 | ) | (3,879 | ) | ||||
Income taxes | (2,051 | ) | (2,090 | ) | ||||
Prepaid expenses and other assets | (418 | ) | (1,358 | ) | ||||
Right of use operating lease assets | 107 | — | ||||||
Medicare accounts receivable, non-current | (1,141 | ) | 1,707 | |||||
Accounts payable | 979 | (508 | ) | |||||
Accrued payroll and related taxes | 3,915 | 1,586 | ||||||
Accrued expenses and other liabilities | 1,073 | (190 | ) | |||||
Net cash provided by operating activities | 2,421 | 3,684 | ||||||
Cash flows from investing activities | ||||||||
Proceeds from sales of securities available-for-sale | — | 2,000 | ||||||
Proceeds from maturities of securities available-for-sale | 16,000 | 11,000 | ||||||
Purchases of securities available-for-sale | (14,859 | ) | (14,792 | ) | ||||
Purchases of property and equipment | (4,276 | ) | (2,384 | ) | ||||
Intangible assets costs | (154 | ) | (1,052 | ) | ||||
Net cash used in investing activities | (3,289 | ) | (5,228 | ) | ||||
Cash flows from financing activities | ||||||||
Taxes paid for net share settlement of restricted stock units | (3,107 | ) | (1,922 | ) | ||||
Proceeds from exercise of common stock options | 1,838 | 1,218 | ||||||
Proceeds from the issuance of common stock from the employee stock purchase plan | 1,852 | 1,416 | ||||||
Net cash provided by financing activities | 583 | 712 | ||||||
Net decrease in cash and cash equivalents | (285 | ) | (832 | ) | ||||
Cash and cash equivalents – beginning of period | 20,099 | 23,968 | ||||||
Cash and cash equivalents – end of period | $ | 19,814 | $ | 23,136 | ||||
Supplemental cash flow disclosure | ||||||||
Cash paid for interest | $ | — | $ | 3 | ||||
Cash paid for taxes | $ | 326 | $ | 448 | ||||
Capital expenditures incurred but not yet paid | $ | 801 | $ | 184 | ||||
Tactile Systems Technology, Inc. | |||||||||||||||||||||||||||||||
Reconciliation of Net Income to Non-GAAP Adjusted EBITDA | |||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||
Three Months Ended | Increase | Nine Months Ended | Increase | ||||||||||||||||||||||||||||
September 30, | (Decrease) | September 30, | (Decrease) | ||||||||||||||||||||||||||||
(Dollars in thousands) | 2019 |
2018 |
$ | % | 2019 |
2018 |
$ | % | |||||||||||||||||||||||
Net income | $ | 2,431 | $ | 1,746 | $ | 685 | 39 % | $ | 6,688 | $ | 4,268 | $ | 2,420 | 57 % | |||||||||||||||||
Interest income, net | (86 | ) | (95 | ) | 9 | (9)% | (262 | ) | (339 | ) | 77 | (23)% | |||||||||||||||||||
Income tax expense (benefit) | 932 | (248 | ) | 1,180 | N.M.% | (1,759 | ) | (3,063 | ) | 1,304 | (43)% | ||||||||||||||||||||
Depreciation and amortization | 750 | 787 | (37 | ) | (5)% | 2,583 | 2,474 | 109 | 4 % | ||||||||||||||||||||||
Stock-based compensation | 2,330 | 2,380 | (50 | ) | (2)% | 7,387 | 5,638 | 1,749 | 31 % | ||||||||||||||||||||||
Adjusted EBITDA | $ | 6,357 | $ | 4,570 | $ | 1,787 | 39 % | $ | 14,637 | $ | 8,978 | $ | 5,659 | 63 % | |||||||||||||||||
Tactile Systems Technology, Inc. | ||||||||||||||||||||||||
Supplemental Financial Information | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
September 30, | Increase | September 30, | Increase | |||||||||||||||||||||
(Dollars in thousands) | 2019 | 2018 | $ | % | 2019 | 2018 | $ | % | ||||||||||||||||
Flexitouch System | $ | 44,699 | $ | 33,330 | $ | 11,369 | 34 % | $ | 119,767 | $ | 89,216 | $ | 30,551 | 34 % | ||||||||||
Entre / Actitouch Systems | 4,913 | 2,992 | 1,921 | 64 % | 12,662 | 8,087 | 4,575 | 57 % | ||||||||||||||||
Total Revenue | $ | 49,612 | $ | 36,322 | $ | 13,290 | 37 % | $ | 132,429 | $ | 97,303 | $ | 35,126 | 36 % | ||||||||||
Investor Inquiries:Mike Piccinino , CFA Managing DirectorWestwicke Partners 443-213-0500 [email protected]
Source: Tactile Systems Technology, Inc.