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Tactile Systems Technology, Inc. Reports Third Quarter 2020 Financial Results; Provides Updated Full Year 2020 Outlook

Tactile Systems Technology, Inc.
·24 min read

Third Quarter Revenue Decreased 1% Year-Over-Year; Flat Year-Over-Year on an Operational Basis

First Nine Months Revenue Decreased 3% Year-over-Year; Flat Year-over-Year on an Operational Basis

MINNEAPOLIS, Nov. 02, 2020 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. (“Tactile Medical”) (Nasdaq: TCMD), a medical technology company focused on developing medical devices for the at-home treatment of chronic diseases, today reported financial results for the third quarter and nine months ended September 30, 2020.

Third Quarter 2020 Summary:

  • Total revenue decreased 1% year-over-year, to $49.1 million, compared to $49.6 million in third quarter 2019.

    • Excluding the contribution to third quarter 2019 revenue related to the Company’s adoption of ASC 842, third quarter 2020 revenue reflects a flat year-over-year change on an operational basis.

    • Revenue for the third quarter of 2020 was negatively impacted by the COVID-19 pandemic.

  • Operating income of $1.8 million, compared to operating income of $3.2 million in third quarter 2019.

  • Net income of $2.4 million, compared to net income of $2.4 million in third quarter 2019.

  • Adjusted EBITDA of $6.0 million, compared to Adjusted EBITDA of $6.4 million in third quarter 2019.

  • Cash, cash equivalents, and marketable securities of $42.2 million at September 30, 2020, compared to $45.2 million at December 31, 2019.

“We were pleased with our strong execution in the third quarter, which resulted in better-than-expected financial results despite continued business disruption associated with the COVID-19 pandemic,” said Dan Reuvers, President and Chief Executive Officer of Tactile Medical. “While we’re pleased to see patients returning to seek treatment and healthcare facilities adapting to the environment, the challenge remains that many healthcare facilities are operating at significantly lower rates of productivity due to COVID-19. Despite many facilities still operating with constraints related to social distancing and safety protocols, our team has done an impressive job of supporting our clinicians and patients, while expanding our prescriber base, in part, by leveraging virtual education events.”

Mr. Reuvers continued, “We remain cautiously optimistic with respect to the near-term impacts of COVID-19 on our results. We are providing an updated 2020 financial outlook, which reflects expectations for a modest return to revenue growth on a year-over-year basis in the fourth quarter. We are well-capitalized, which allows us to continue to invest strategically in both expanding our industry leadership position, and our market development activities, in the $5B+ U.S. lymphedema market. We expect the combination of our strong execution, and the eventual subsiding of the pandemic, will result in the return to our long-term track record of strong growth and improving profitability.”

Third Quarter 2020 Financial Results

Total revenue in the third quarter of 2020 decreased $0.5 million, or 1%, to $49.1 million, compared to $49.6 million in the third quarter of 2019. Total revenue in the third quarter of 2020 was flat on an operational basis, excluding the contribution to third quarter 2019 revenue related to the Company’s adoption of ASC 842. The decrease in total revenue was attributable to a decrease of $1.8 million, or 4%, in sales and rentals of the Flexitouch system, which was partially offset by an increase of $1.3 million, or 26%, in sales and rentals of the Entre system in the quarter ended September 30, 2020. Third quarter revenue continued to be negatively impacted by COVID-19, primarily from social distancing requirements and safety protocols imposed within clinics. The decrease in third quarter revenue was partially offset by the continued expansion of our commercial team, effective virtual educational events, and an increase in the number of Medicare patients served.

Gross profit in the third quarter of 2020 decreased $0.4 million, or 1%, to $35.0 million, compared to $35.4 million in the third quarter of 2019. Gross margin was 71.2% of revenue, compared to 71.3% of revenue in the third quarter of 2019.

Operating expenses in the third quarter of 2020 increased $1.0 million, or 3%, to $33.2 million, compared to $32.2 million in the third quarter of 2019. The increase in operating expenses in the third quarter of 2020 was driven by reimbursement, general and administrative expenses, primarily due to a $1.6 million increase in personnel-related compensation expense in our reimbursement operations, payer development and corporate functions and a $1.0 million increase in occupancy costs, depreciation expense, legal and professional fees. The increase in reimbursement, general and administrative expenses was partially offset by lower sales and marketing expenses, which decreased $1.2 million, or 6%, to $19.5 million, compared to $20.7 million in the third quarter of 2019 and, to a lesser extent, by lower research and development expenses, which decreased $0.4 million, or 25%, to $1.1 million, compared to $1.5 million in the third quarter of 2019.

Operating income in the third quarter of 2020 decreased $1.4 million, or 44%, to $1.8 million, compared to $3.2 million in the third quarter of 2019.

Income tax benefit in the third quarter of 2020 was $0.8 million, compared to income tax expense of $0.9 million in the third quarter of 2019. The year-over-year change in income tax expense/benefit was primarily due to changes in our effective tax rate, which was primarily attributable to a change in projected taxable income, including proportionately higher tax benefits for stock-based compensation as compared to the same period last year.

Net income in the third quarter of 2020 was $2.4 million, or $0.12 per diluted share, compared to net income of $2.4 million, or $0.12 per diluted share, in the third quarter of 2019. Weighted average shares used to compute diluted net income per share were 19.7 million and 19.6 million in the third quarters of 2020 and 2019, respectively.

Adjusted EBITDA was $6.0 million in the third quarter of 2020, compared to Adjusted EBITDA of $6.4 million in the third quarter of 2019.

First Nine Months 2020 Financial Results:

Total revenue for the nine months ended September 30, 2020, decreased $4.5 million, or 3%, to $127.9 million, compared to $132.4 million for the nine months ended September 30, 2019. Total revenue for the nine months ended September 30, 2020, was flat on an operational basis, excluding the contribution to revenue in the nine months ended September 30, 2019 related to the Company’s adoption of ASC 842. The decrease in revenue was driven by a decrease of approximately $7.1 million, or 6%, in sales and rentals of the Flexitouch system, offset partially by an increase of $2.6 million, or 21%, in sales and rentals of the Entre system for the nine months ended September 30, 2020. Revenue in the first two months of 2020 was ahead of our expectations. Beginning in March 2020 and continuing through the third quarter, revenue was impacted by the COVID-19 pandemic, which limited our ability to access our clinician customers and their patients. Specifically, we saw healthcare facilities and clinics restricting access to their clinicians, reducing patient consultations, or closing temporarily due to COVID-19.

Net loss for the nine months ended September 30, 2020 was $12.7 million, or $(0.66) per diluted share, compared to net income of $6.7 million, or $0.34 per diluted share, for the nine months ended September 30, 2019. Weighted average shares used to compute diluted net loss/income per share were 19.3 million and 19.6 million for the nine months ended September 30, 2020 and 2019, respectively.

Adjusted EBITDA was $4.8 million in the nine months ended September 30, 2020, compared to adjusted EBITDA of $14.9 million in the nine months ended September 30, 2019.

Cash Position

At September 30, 2020, cash, cash equivalents and marketable securities were $42.2 million, compared to $45.2 million at December 31, 2019. The Company had no outstanding borrowings on its $10.0 million revolving credit facility at September 30, 2020.

2020 Financial Outlook

The Company is providing updated full year 2020 revenue guidance. The Company originally provided full year 2020 revenue guidance on February 26, 2020, but subsequently withdrew its guidance on April 6, 2020, due to the rapidly evolving environment and continued uncertainties associated with COVID-19.

The Company expects full year 2020 total revenue in the range of $184.9 million to $186.9 million, representing a decline of 1% to 2% year-over-year, compared to total revenue of $189.5 million in 2019.

Pursuant to the Company’s adoption of ASC 842, full year 2019 revenue included approximately $5.0 million of rental revenue related to operating leases, which will not contribute to the Company’s revenue results going forward. Excluding the contribution to full year 2019 revenue related to the Company’s adoption of ASC 842, the 2020 expected revenue range reflects revenue growth of approximately 0% to 1% year-over-year on an operational basis.

Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on November 2, 2020, to discuss the results of the quarter with a question and answer session. Those who would like to participate may dial 877-407-3088 (201-389-0927 for international callers) and provide access code 13711024. 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 13711024. 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 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,” “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 impacts of the COVID-19 pandemic on the Company’s business, financial condition and results of operations; the course of the COVID-19 pandemic and its impact on general economic, business and market conditions; the Company’s inability to execute on its plans to respond to the COVID-19 pandemic; 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; the Company’s Chief Executive Officer transition, including disruptions and uncertainties related thereto, the potential impact on the Company’s business and future strategic direction resulting from the transition to a new Chief Executive Officer and the Company’s ability to retain other key members of senior management; adverse economic conditions or intense competition; loss of a key supplier; entry of new competitors and products; adverse federal, state and local government regulation; technological obsolescence of the Company’s products; technical problems with the Company’s research and products; the Company’s ability to expand its business through strategic acquisitions; the Company’s ability to integrate acquisitions and related businesses; price increases for supplies and components; the effects of current and future 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 revenue change, adjusted gross margin and Adjusted EBITDA margin, 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 impairment charges and inventory write-offs and plus CEO transition costs. Adjusted EBITDA margin in this release represents net margin (net income or loss divided by total revenue), plus or less the same items as with Adjusted EBITDA, but on a percentage of revenue basis. Reconciliations of Adjusted EBITDA to net income (loss), and Adjusted EBITDA margin to net margin, are included in this press release.

Non-GAAP revenue change in this release represents third quarter and first nine months of 2020 revenue compared to third quarter and first nine months of 2019 revenue less operating lease revenue that was recognized in those 2019 periods in connection with the Company’s adoption of ASC 842. This release also includes the Company’s projected full year 2020 non-GAAP revenue change compared to full year 2019 revenue less operating lease revenue that was recognized in 2019 in connection with the Company’s adoption of ASC 842. Reconciliations of historical and projected non-GAAP revenue change to historical and projected GAAP revenue change are included in this press release.

Adjusted gross margin in this release represents gross margin plus inventory write-offs. A reconciliation of adjusted gross margin to gross margin is 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 budget and financial projections. The Company believes these measures are useful to investors as supplemental information and because they are frequently used by analysts, investors and other interested parties to evaluate companies in its industry. The Company 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.

Adjusted EBITDA, non-GAAP revenue change, adjusted gross margin and Adjusted EBITDA margin are non-GAAP financial measures and should not be considered as an alternative to, or superior to, net income or loss, GAAP revenue change, gross margin or net margin, respectively, as measures of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP, and they should not be construed to imply that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, Adjusted EBITDA 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)

September 30,

December 31,

(In thousands, except share and per share data)

2020

2019

Assets

Current assets

Cash and cash equivalents

$

42,204

$

22,770

Marketable securities

22,464

Accounts receivable

36,033

33,444

Net investment in leases

9,451

8,147

Inventories

22,419

19,059

Prepaid expenses and other current assets

4,003

2,451

Total current assets

114,110

108,335

Non-current assets

Property and equipment, net

7,177

7,408

Right of use operating lease assets

20,717

15,885

Intangible assets, net

1,671

5,312

Accounts receivable, non-current

7,100

4,184

Deferred income taxes

5,010

8,970

Other non-current assets

1,965

1,658

Total non-current assets

43,640

43,417

Total assets

$

157,750

$

151,752

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

5,053

$

3,843

Accrued payroll and related taxes

10,864

10,098

Accrued expenses

3,582

4,498

Income taxes payable

1,459

632

Operating lease liabilities

2,010

1,454

Other current liabilities

2,673

903

Total current liabilities

25,641

21,428

Non-current liabilities

Accrued warranty reserve, non-current

3,071

2,541

Income taxes, non-current

54

Operating lease liabilities, non-current

19,919

15,134

Total non-current liabilities

22,990

17,729

Total liabilities

48,631

39,157

Stockholders’ equity:

Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2020 and December 31, 2019

Common stock, $0.001 par value, 300,000,000 shares authorized; 19,424,679 shares issued and outstanding as of September 30, 2020; 19,152,715 shares issued and outstanding as of December 31, 2019

19

19

Additional paid-in capital

101,157

91,874

Retained earnings

7,943

20,676

Accumulated other comprehensive income

26

Total stockholders’ equity

109,119

112,595

Total liabilities and stockholders’ equity

$

157,750

$

151,752


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)

2020

2019

2020

2019

Revenue

Sales revenue

$

42,573

$

42,882

$

109,714

$

112,503

Rental revenue

6,519

6,730

18,173

19,926

Total revenue

49,092

49,612

127,887

132,429

Cost of revenue

Cost of sales revenue

11,558

12,233

30,868

33,231

Cost of rental revenue

2,562

2,006

6,062

6,062

Total cost of revenue

14,120

14,239

36,930

39,293

Gross profit

Gross profit - sales revenue

31,015

30,649

78,846

79,272

Gross profit - rental revenue

3,957

4,724

12,111

13,864

Gross profit

34,972

35,373

90,957

93,136

Operating expenses

Sales and marketing

19,488

20,737

59,856

56,546

Research and development

1,102

1,467

3,891

3,982

Reimbursement, general and administrative

12,588

9,972

37,830

28,177

Total operating expenses

33,178

32,176

101,577

88,705

Income (loss) from operations

1,794

3,197

(10,620

)

4,431

Other (expense) income

(121

)

166

181

498

Income (loss) before income taxes

1,673

3,363

(10,439

)

4,929

Income tax (benefit) expense

(751

)

932

2,294

(1,759

)

Net income (loss)

$

2,424

$

2,431

$

(12,733

)

$

6,688

Net income (loss) per common share

Basic

$

0.12

$

0.13

$

(0.66

)

$

0.35

Diluted

$

0.12

$

0.12

$

(0.66

)

$

0.34

Weighted-average common shares used to compute net income (loss) per common share

Basic

19,415,640

18,981,015

19,309,344

18,870,622

Diluted

19,747,365

19,641,853

19,309,344

19,630,721


Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

(In thousands)

2020

2019

Cash flows from operating activities

Net (loss) income

$

(12,733

)

$

6,688

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization

2,102

2,808

Net amortization of premiums and discounts on securities available-for-sale

(91

)

(225

)

Deferred income taxes

3,934

(31

)

Stock-based compensation expense

8,288

7,387

Gain on other investments and maturities of marketable securities

10

Impairment losses

4,025

Changes in assets and liabilities:

Accounts receivable

(2,589

)

(3,349

)

Net investment in leases

(1,304

)

(7,628

)

Inventories

(3,538

)

(5,693

)

Income taxes

773

(2,051

)

Prepaid expenses and other assets

(1,553

)

(418

)

Right of use operating lease assets

509

107

Medicare accounts receivable, non-current

(2,916

)

(1,141

)

Accounts payable

938

979

Accrued payroll and related taxes

766

3,915

Accrued expenses and other liabilities

1,134

1,073

Net cash (used in) provided by operating activities

(2,245

)

2,421

Cash flows from investing activities

Proceeds from maturities of securities available-for-sale

22,500

16,000

Purchases of securities available-for-sale

(14,859

)

Purchases of property and equipment

(1,623

)

(4,276

)

Intangible assets costs

(163

)

(154

)

Other investments

(30

)

Net cash provided by (used in) investing activities

20,684

(3,289

)

Cash flows from financing activities

Taxes paid for net share settlement of restricted stock units

(1,592

)

(3,107

)

Proceeds from exercise of common stock options

762

1,838

Proceeds from the issuance of common stock from the employee stock purchase plan

1,825

1,852

Net cash provided by financing activities

995

583

Net increase (decrease) in cash and cash equivalents

19,434

(285

)

Cash and cash equivalents – beginning of period

22,770

20,099

Cash and cash equivalents – end of period

$

42,204

$

19,814

Supplemental cash flow disclosure

Cash paid for taxes

$

475

$

326

Capital expenditures incurred but not yet paid

$

41

$

801

The following table summarizes revenue by product for the three and nine months ended September 30, 2020 and 2019:

Tactile Systems Technology, Inc.

Supplemental Financial Information

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

Change

September 30,

Change

(Dollars in thousands)

2020

2019

$

%

2020

2019

$

%

Flexitouch System

$

42,908

$

44,699

$

(1,791

)

(4

)

%

$

112,621

$

119,767

$

(7,146

)

(6

)

%

Other products(1)

6,184

4,913

1,271

26

%

15,266

12,662

2,604

21

%

Total Revenue

$

49,092

$

49,612

$

(520

)

(1

)

%

$

127,887

$

132,429

$

(4,542

)

(3

)

%

(1) The “other products” line primarily includes revenue from our Entre system. The Actitouch system and Airwear wrap contributed immaterial amounts of revenue for both of the three and nine months ended September 30, 2020 and 2019.

The following table contains a reconciliation of the revenue change rate to the non-GAAP revenue change rate for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019:

Tactile Systems Technology, Inc.

Reconciliation of Third Quarter and Year to Date Revenue Change Rates

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2020

2019

% Change

2020

2019

% Change

Total revenue

$

49,092

$

49,612

(1

)

%

$

127,887

$

132,429

(3

)

%

Less: Operating lease revenue(1)

N/A

(640

)

1

%

N/A

(4,835

)

3

%

Total non-GAAP revenue

$

49,092

$

48,972

0

%

$

127,887

$

127,594

0

%

(1) The operating lease revenue excluded from revenue for the three and nine months ended September 30, 2019, in the adjustment was related to rental agreements commencing prior to December 31, 2018, which were recognized as month-to-month operating leases for the three and nine months ended September 30, 2019, and did not contribute to the Company’s revenue results in 2020.

The following table contains a reconciliation of net income (loss) to Adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019, 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

Nine Months Ended

Increase

September 30,

(Decrease)

September 30,

(Decrease)

(Dollars in thousands)

2020

2019

$

%

2020

2019

$

%

Net income (loss)

$

2,424

$

2,431

$

(7

)

(0

)

%

$

(12,733

)

$

6,688

$

(19,421

)

N.M.

%

Interest expense (income), net

19

(86

)

105

(122

)

%

(61

)

(262

)

201

(77

)

%

Income tax expense (benefit)

(751

)

932

(1,683

)

(181

)

%

2,294

(1,759

)

4,053

N.M.

%

Depreciation and amortization

652

830

(178

)

(21

)

%

2,102

2,808

(706

)

(25

)

%

Stock-based compensation

3,164

2,330

834

36

%

8,288

7,387

901

12

%

Impairment charges and inventory write-offs

%

4,025

4,025

%

Executive transition costs

499

499

%

876

876

%

Adjusted EBITDA

$

6,007

$

6,437

$

(430

)

(7

)

%

$

4,791

$

14,862

$

(10,071

)

(68

)

%

The following table contains a reconciliation of net margin to Adjusted EBITDA margin for the three and nine months ended September 30, 2020 and 2019, as well as the basis point change between the comparable periods:

Tactile Systems Technology, Inc.

Reconciliation of Net Margin to Adjusted EBITDA Margin

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

Increase

September 30,

Increase

(As a percentage of revenue)

2020

2019

(Decrease)

2020

2019

(Decrease)

Net margin

4.9

%

4.9

%

bps

(10.0

)

%

5.1

%

(1,510

)

bps

Interest expense (income), net

%

(0.2

)

%

20

bps

%

(0.2

)

%

20

bps

Income tax expense (benefit)

(1.5

)

%

1.9

%

(340

)

bps

1.8

%

(1.4

)

%

320

bps

Depreciation and amortization

1.3

%

1.7

%

(40

)

bps

1.6

%

2.1

%

(50

)

bps

Stock-based compensation

6.5

%

4.7

%

180

bps

6.5

%

5.6

%

90

bps

Impairment charges and inventory write-offs

%

%

bps

3.1

%

%

310

bps

Executive transition costs

1.0

%

%

100

bps

0.7

%

%

70

bps

Adjusted EBITDA margin

12.2

%

13.0

%

(80

)

bps

3.7

%

11.2

%

(750

)

bps

The following table contains a reconciliation of gross margin to adjusted gross margin for the three and nine months ended September 30, 2020 and 2019:

Tactile Systems Technology, Inc.

Reconciliation of Gross Margin to Adjusted Gross Margin

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2020

2019

2020

2019

Gross profit, as reported

$

34,972

$

35,373

$

90,957

$

93,136

Gross margin, as reported

71.2

%

71.3

%

71.1

%

70.3

%

Reconciling item affecting gross margin:

Inventory write-offs

428

Non-GAAP adjusted gross profit

$

34,972

$

91,385

Non-GAAP adjusted gross margin

71.2

%

71.5

%

The following table contains a reconciliation of the projected revenue change rate to the projected non-GAAP revenue change rate:

Tactile Systems Technology, Inc.

Reconciliation of Projected 2020 Revenue Change Rate to Projected 2020 Non-GAAP Revenue Change Rate

(Unaudited)

Projected Year Ended

Year Ended

Projected Change Rate

December 31, 2020

December 31, 2019

% Change

% Change

(Dollars in thousands)

Low

High

Reported

Low

High

Total revenue

$

184,900

$

186,900

$

189,492

(2

)

%

(1

)

%

Less: Operating lease revenue(1)

N/A

N/A

(5,018

)

2

%

2

%

Total non-GAAP revenue

$

184,900

$

186,900

$

184,474

0

%

1

%

(1) The operating lease revenue excluded from 2019 revenue in the adjustment was related to rental agreements commencing prior to December 31, 2018, which were recognized as month-to-month operating leases in 2019 and do not contribute to the Company’s revenue results in 2020. The 2020 expected revenue range reflects revenue growth of approximately 0% to 1% year-over-year on an operational basis.


CONTACT: Investor Inquiries: Mike Piccinino, CFA Managing Director Westwicke Partners 443-213-0500 investorrelations@tactilemedical.com