Tactile Systems Technology, Inc. Reports Second Quarter 2024 Financial Results


MINNEAPOLIS, Aug. 05, 2024 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. (“Tactile Medical”; the “Company”) (Nasdaq: TCMD), a medical technology company providing therapies for people with chronic disorders, today reported financial results for the second quarter ended June 30, 2024.

Second Quarter 2024 Highlights:

  • Total revenue increased 7% year-over-year to $73.2 million
    • Lymphedema product revenue increased 8% year-over-year
    • Airway clearance product revenue increased 2% year-over-year
  • Net income of $4.3 million versus a net loss of $0.1 million in Q2 2023
  • Adjusted EBITDA of $9.1 million versus $6.1 million in Q2 2023
  • Operating cashflow of $13.1 million, ended Q2 2024 with $73.6 million in cash and cash equivalents
  • 510(k) clearance for Nimbl system, our next generation lymphedema therapy platform
  • Appointed Sheri Dodd as President and CEO, effective July 1, 2024

“We are pleased with our second quarter performance, delivering total revenue growth of 7% year-over-year and significant improvements in profitability, reflected in a 49% year-over-year increase in adjusted EBITDA,” said Sheri Dodd, President and Chief Executive Officer of Tactile Medical. “We also continued to strengthen our balance sheet, generating $13 million of operating cashflow in the quarter.”

Ms. Dodd continued, “My first few weeks as CEO of Tactile Medical have validated my confidence in the immense opportunity to transform care for patients with lymphedema and airway clearance disorders. As these markets continue to grow, patient populations remain chronically underdiagnosed, undertreated, and underserved. Looking ahead, we will continue investing in our products, patient services, and sales and order operations to provide increasingly innovative solutions, enable simplicity and scale, and ultimately widen market access. I believe we are well positioned to tangibly improve patient care while driving sustainable and profitable growth in 2024 and beyond.”

Second Quarter 2024 Financial Results

Total revenue in the second quarter of 2024 increased $4.9 million, or 7%, to $73.2 million, compared to $68.3 million in the second quarter of 2023. The increase in total revenue was attributable to an increase of $4.7 million, or 8%, in sales and rentals of the lymphedema product line and an increase of $0.2 million, or 2%, in sales of the airway clearance product line in the quarter ended June 30, 2024, compared to the second quarter of 2023.

Gross profit in the second quarter of 2024 increased $5.8 million, or 12%, to $54.1 million, compared to $48.3 million in the second quarter of 2023. Gross margin was 73.9% of revenue, compared to 70.7% of revenue in the second quarter of 2023. Non-GAAP gross margin was 74.3% of revenue, compared to 71.1% of revenue in the second quarter of 2023.

Operating expenses in the second quarter of 2024 increased $2.0 million, or 4%, to $48.3 million, compared to $46.2 million in the second quarter of 2023.

Operating income was $5.8 million in the second quarter of 2024, compared to $2.1 million in the second quarter of 2023. Non-GAAP operating income in the second quarter of 2024 was $6.5 million, compared to $3.6 million in the second quarter of 2023.

Other income was $0.2 million in the second quarter of 2024, compared to other expense of $0.8 million in the second quarter of 2023.

Income tax expense was $1.8 million in the second quarter of 2024, compared to $1.3 million in the second quarter of 2023.

Net income in the second quarter of 2024 was $4.3 million, or $0.18 per diluted share, compared to a net loss of $0.1 million, or ($0.00) per diluted share, in the second quarter of 2023. Non-GAAP net income in the second quarter of 2024 was $4.8 million, compared to $1.0 million in the second quarter of 2023.

Weighted average shares used to compute diluted net income (loss) per share were 24.1 million and 23.4 million for the second quarters of 2024 and 2023, respectively.

Adjusted EBITDA was $9.1 million in the second quarter of 2024, compared to $6.1 million in the second quarter of 2023.

First Six Months 2024 Financial Results

Total revenue for the six months ended June 30, 2024, increased $7.1 million, or 6%, to $134.3 million, compared to $127.2 million for the six months ended June 30, 2023. The increase in total revenue was attributable to an increase of $7.2 million, or 7%, in sales and rentals of the lymphedema product line, slightly offset by a decrease of $0.1 million, or 1%, in sales of the airway clearance product line for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Net income for the six months ended June 30, 2024, was $2.1 million, or $0.09 per diluted share, compared to a net loss of $2.0 million, or ($0.09) per diluted share, for the six months ended June 30, 2023. Non-GAAP net income for the six months ended June 30, 2024, was $3.5 million, compared to $0.4 million for the six months ended June 30, 2023.

Weighted average shares used to compute diluted net income (loss) per share were 24.1 million and 22.3 million for the six months ended June 30, 2024 and 2023, respectively.

Adjusted EBITDA was $10.1 million in the six months ended June 30, 2024, compared to $6.6 million in the six months ended June 30, 2023.

Balance Sheet Summary

As of June 30, 2024, the Company had $73.6 million in cash and cash equivalents and $27.8 million of outstanding borrowings under its credit agreement, compared to $61.0 million in cash and cash equivalents and $29.3 million of outstanding borrowings under its credit agreement as of December 31, 2023.

2024 Financial Outlook

The Company is updating its 2024 financial outlook and now expects full year 2024 total revenue in the range of $293 million to $298 million, representing growth of approximately 7% to 9% year-over-year, compared to total revenue of $274.4 million in 2023. The Company’s prior 2024 guidance expectation was total revenue in the range of $300 million to $305 million, representing growth of approximately 9% to 11%.

Conference Call

Management will host a conference call with a question-and-answer session at 5:00 p.m. Eastern Time on August 5, 2024, to discuss the results of the quarter. Those who would like to participate may dial 877-407-3088 (201-389-0927 for international callers) and provide access code 13747225. A live webcast of the call will also be provided on the investor relations section of the Company's website at investors.tactilemedical.com.

For those unable to participate, a replay of the call will be available for two weeks at 877-660-6853 (201-612-7415 for international callers); access code 13747225. The webcast will be archived at investors.tactilemedical.com.

About Tactile Systems Technology, Inc. (DBA Tactile Medical)

Tactile Medical is a leader in developing and marketing at-home therapies for people suffering from underserved, chronic conditions including lymphedema, lipedema, chronic venous insufficiency and chronic pulmonary disease by helping them live better and care for themselves at home. Tactile Medical collaborates with clinicians to expand clinical evidence, raise awareness, increase access to care, reduce overall healthcare costs and improve the quality of life for tens of thousands of patients each year.

Legal Notice Regarding Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements are generally identifiable by the use of words like “may,” “will,” “should,” “could,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” “continue,” “confident,” “outlook,” “guidance,” “project,” “goals,” “look forward,” “poised,” “designed,” “plan,” “return,” “focused,” “prospects” or “remain” or the negative of these words or other variations on these words or comparable terminology. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties outside of the Company’s control that can make such statements untrue, including, but not limited to, the Company’s ability to obtain reimbursement from third-party payers for its products; the impacts of inflation, rising interest rates or a recession; the adequacy of the Company’s liquidity to pursue its business objectives; adverse economic conditions or intense competition; price increases for supplies and components; wage and component price inflation; loss of a key supplier; entry of new competitors and products; compliance with and changes in federal, state and local government regulation; loss or retirement of key executives, including transition matters related to the Company’s recent Chief Executive Officer change; 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; 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 SEC. Investors and security holders are urged to read these documents free of charge on the SEC’s website at http://www.sec.gov. The Company undertakes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

Use of Non-GAAP Financial Measures

This press release includes the non-GAAP financial measures of Adjusted EBITDA, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), and non-GAAP net income (loss), which differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).

Adjusted EBITDA in this release represents net income or loss, plus interest expense, net, or less interest income, net, less income tax benefit or plus income tax expense, plus depreciation and amortization, plus stock-based compensation expense, plus or minus the change in fair value of earn-out and plus executive transition costs. Non-GAAP gross profit in this release represents gross profit plus non-cash intangible amortization expense. Non-GAAP gross margin in this release represents non-GAAP gross profit divided by revenue. Non-GAAP operating income (loss) in this release represents operating income (loss) adjusted for non-cash intangible amortization expense, change in fair value of earn-out and executive transition expenses. Non-GAAP net income (loss) represents net income (loss) adjusted for non-cash intangible amortization expense, change in fair value of earn-out and executive transition expenses, and adjusted for the income tax effect on reconciling items. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP measures are included in this press release.

These non-GAAP financial measures are presented because the Company believes they are useful indicators of its operating performance. Management uses these measures principally as measures of the Company’s operating performance and for planning purposes, including the preparation of the Company’s annual operating plan and financial projections. The Company believes these measures are useful to investors as supplemental information and because they are frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company also believes these non-GAAP financial measures are useful to its management and investors as a measure of comparative operating performance from period to period. In addition, Adjusted EBITDA is used as a performance metric in the Company’s compensation program.

The non-GAAP financial measures presented in this release should not be considered as an alternative to, or superior to, their respective GAAP financial measures, as measures of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP, and they should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not reflect certain cash requirements such as tax payments, debt service requirements, capital expenditures and certain other cash costs that may recur in the future. Adjusted EBITDA contains certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating non-GAAP financial measures, you should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on the Company’s GAAP results in addition to using non-GAAP financial measures on a supplemental basis. The Company’s definition of these non-GAAP financial measures is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

       
Tactile Systems Technology, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
     June 30,    December 31,
(In thousands, except share and per share data)    2024    2023
Assets     
Current assets      
Cash and cash equivalents $73,618 $61,033
Accounts receivable  41,935  43,173
Net investment in leases  13,551  14,195
Inventories  18,846  22,527
Prepaid expenses and other current assets  3,909  4,366
Total current assets  151,859  145,294
Non-current assets      
Property and equipment, net  5,691  6,195
Right of use operating lease assets  17,828  19,128
Intangible assets, net  44,883  46,724
Goodwill  31,063  31,063
Accounts receivable, non-current  4,511  10,936
Deferred income taxes  19,408  19,378
Other non-current assets  3,541  2,720
Total non-current assets  126,925  136,144
Total assets $278,784 $281,438
Liabilities and Stockholders' Equity      
Current liabilities      
Accounts payable $5,094 $6,659
Note payable  2,956  2,956
Accrued payroll and related taxes  12,090  16,789
Accrued expenses  6,702  5,904
Income taxes payable  496  1,467
Operating lease liabilities  2,799  2,807
Other current liabilities  4,075  4,475
Total current liabilities  34,212  41,057
Non-current liabilities      
Note payable, non-current  24,698  26,176
Accrued warranty reserve, non-current  1,561  1,681
Income taxes payable, non-current  495  446
Operating lease liabilities, non-current  17,142  18,436
Total non-current liabilities  43,896  46,739
Total liabilities  78,108  87,796
       
Stockholders’ equity:      
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of June 30, 2024 and December 31, 2023    
Common stock, $0.001 par value, 300,000,000 shares authorized; 23,966,748 shares issued and outstanding as of June 30, 2024; 23,600,584 shares issued and outstanding as of December 31, 2023  24  24
Additional paid-in capital  179,669  174,724
Retained earnings  20,983  18,894
Total stockholders’ equity  200,676  193,642
Total liabilities and stockholders’ equity $278,784 $281,438


              
Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
              
              
  Three Months Ended Six Months Ended
  June 30, June 30,
(In thousands, except share and per share data)    2024    2023     2024    2023     
Revenue             
Sales revenue $64,267 $59,802  $117,574 $112,593  
Rental revenue  8,951  8,537   16,732  14,592  
Total revenue  73,218  68,339   134,306  127,185  
Cost of revenue             
Cost of sales revenue  16,263  16,865   31,207  31,507  
Cost of rental revenue  2,852  3,175   5,567  5,911  
Total cost of revenue  19,115  20,040   36,774  37,418  
Gross profit             
Gross profit - sales revenue  48,004  42,937   86,367  81,086  
Gross profit - rental revenue  6,099  5,362   11,165  8,681  
Gross profit  54,103  48,299   97,532  89,767  
Operating expenses             
Sales and marketing  28,608  28,206   55,965  54,508  
Research and development  2,234  1,833   4,377  4,066  
Reimbursement, general and administrative  16,779  14,991   33,040  30,425  
Intangible asset amortization and earn-out  633  1,211   1,265  2,516  
Total operating expenses  48,254  46,241   94,647  91,515  
Income (loss) from operations  5,849  2,058   2,885  (1,748) 
Other income (expense)  225  (838)  380  (1,831) 
Income (loss) before income taxes  6,074  1,220   3,265  (3,579) 
Income tax expense (benefit)  1,776  1,320   1,176  (1,593) 
Net income (loss) $4,298 $(100) $2,089 $(1,986) 
Net income (loss) per common share             
Basic $0.18 $0.00  $0.09 $(0.09) 
Diluted $0.18 $0.00  $0.09 $(0.09) 
Weighted-average common shares used to compute net income (loss) per common share             
Basic  23,873,379  23,352,530   23,769,604  22,323,856  
Diluted  24,099,047  23,352,530   24,073,986  22,323,856  


       
Tactile Systems Technology, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
   
  Six Months Ended June 30, 
(In thousands)    2024     2023 
Cash flows from operating activities      
Net income (loss) $2,089  $(1,986)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depreciation and amortization  3,345   3,269 
Deferred income taxes  (30)   
Stock-based compensation expense  3,899   3,831 
Loss on disposal of property and equipment and intangibles  54   3 
Change in fair value of earn-out liability     1,230 
Changes in assets and liabilities, net of acquisition:      
Accounts receivable  1,238   8,273 
Net investment in leases  644   2,911 
Inventories  3,681   2,809 
Income taxes  (922)  (3,967)
Prepaid expenses and other assets  (364)  (697)
Right of use operating lease assets  (2)  50 
Accounts receivable, non-current  6,425   7,631 
Accounts payable  (1,592)  (696)
Accrued payroll and related taxes  (4,699)  (3,300)
Accrued expenses and other liabilities  300   (5,954)
Net cash provided by operating activities  14,066   13,407 
Cash flows from investing activities      
Purchases of property and equipment  (982)  (1,043)
Proceeds from sale of property and equipment  12    
Intangible assets expenditures  (57)  (99)
Net cash used in investing activities  (1,027)  (1,142)
Cash flows from financing activities      
Payments on earn-out     (5,000)
Payments on note payable  (1,500)  (1,500)
Proceeds from exercise of common stock options  2   11 
Proceeds from the issuance of common stock from the employee stock purchase plan  1,044   882 
Proceeds from issuance of common stock at market     34,625 
Net cash (used in) provided by financing activities  (454)  29,018 
Net increase in cash and cash equivalents  12,585   41,283 
Cash and cash equivalents – beginning of period  61,033   21,929 
Cash and cash equivalents – end of period $73,618  $63,212 
       
Supplemental cash flow disclosure      
Cash paid for interest $1,099  $1,925 
Cash paid for taxes $2,177  $2,415 
Capital expenditures incurred but not yet paid $27  $8 


The following table summarizes revenue by product line for the three and six months ended June 30, 2024 and 2023:

             
  Three Months Ended Six Months Ended
  June 30, June 30,
(In thousands)    2024  2023  2024  2023 
Revenue            
Lymphedema products $64,683  $59,999  $116,996  $109,751 
Airway clearance products  8,535   8,340   17,310   17,434 
Total $73,218  $68,339  $134,306  $127,185 
             
Percentage of total revenue            
Lymphedema products  88%   88%   87%   86% 
Airway clearance products  12%   12%   13%   14% 
Total  100%   100%   100%   100% 


The following table contains a reconciliation of GAAP gross profit and margin to non-GAAP gross profit and margin:

         
Tactile Systems Technology, Inc.  
Reconciliation of Gross Profit and Margin to Non-GAAP Gross Profit and Margin  
(Unaudited)  
                   
  Three Months Ended Six Months Ended  
  June 30,June 30,  
(Dollars in thousands)    2024    2023    2024    2023  
Gross profit, as reported $54,103  $48,299  $97,532  $89,767   
Gross margin, as reported   73.9%   70.7%   72.6%   70.6%  
Reconciling items:                  
Non-cash intangible amortization expense $317  $315  $633  $629   
Non-GAAP gross profit $54,420  $48,614  $98,165  $90,396   
Non-GAAP gross margin   74.3%   71.1%   73.1%   71.1%  


The following table contains a reconciliation of GAAP operating income (loss) to non-GAAP operating income:

                 
Tactile Systems Technology, Inc.
Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income
(Unaudited)
                 
  Three Months Ended Six Months Ended
  June 30,June 30,
(Dollars in thousands)    2024    2023    2024    2023
GAAP operating income (loss) $5,849   $2,058  $2,885   $(1,748) 
Reconciling items:                
Non-cash intangible amortization expense impacting gross profit $317   $315  $633   $629  
Non-cash intangible amortization expense impacting operating expenses  632    641   1,265    1,286  
Change in fair value of earn-out      570       1,230  
Executive transition expenses  (340)      (25)     
Non-GAAP operating income: $6,458   $3,584  $4,758   $1,397  


The following table contains a reconciliation of GAAP net income (loss) to non-GAAP net income:

                 
Tactile Systems Technology, Inc.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income
(Unaudited)
                 
  Three Months Ended Six Months Ended
  June 30,June 30,
(Dollars in thousands)    2024    2023    2024    2023
GAAP net income (loss) $4,298   $(100)  $2,089   $(1,986) 
Reconciling items:                
Non-cash intangible amortization expense impacting gross profit $317   $315   $633   $629  
Non-cash intangible amortization expense impacting operating expenses  632    641    1,265    1,286  
Change in fair value of earn-out      570        1,230  
Executive transition expenses  (340)       (25)     
Income tax expense on reconciling items*  (152)   (382)   (468)   (786) 
Non-GAAP net income $4,755   $1,044   $3,494   $373  
* The effect of income tax on the reconciling items is estimated using the Company's effective statutory tax rate.


The following table contains a reconciliation of net income (loss) to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023, as well as the dollar and percentage change between the comparable periods:

                         
Tactile Systems Technology, Inc.
Reconciliation of Net Income (Loss) to Non-GAAP Adjusted EBITDA
(Unaudited)
                         
  Three Months Ended Increase Six Months Ended Increase
  June 30, (Decrease) June 30, (Decrease)
(Dollars in thousands)    2024     2023     $    %    2024     2023  $    %
Net income (loss) $4,298  $(100) $4,398  N.M.% $2,089  $(1,986) $4,075  205 %
Interest (income) expense, net  (225)  838   (1,063) (127)%  (371)  1,831   (2,202) (120)%
Income tax expense (benefit)  1,776   1,320   456  35 %  1,176   (1,593)  2,769  (174) 
Depreciation and amortization  1,711   1,640   71  4 %  3,345   3,269   76  2 %
Stock-based compensation  1,860   1,808   52  3 %  3,899   3,831   68  2 %
Change in fair value of earn-out     570   (570) (100)%     1,230   (1,230) (100)%
Executive transition costs  (340)     (340)  %  (25)     (25)  %
Adjusted EBITDA $9,080  $6,076  $3,004  49 % $10,113  $6,582  $3,531  54 %


Investor Inquiries:

Sam Bentzinger
Gilmartin Group
investorrelations@tactilemedical.com