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Tactile Systems Technology, Inc. Reports Third Quarter 2021 Financial Results; Updates Full Year 2021 Outlook

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  • TCMD

Third Quarter Revenue Increased 7% Year-Over-Year; First Nine Months Revenue Increased 14% Year-over-Year

MINNEAPOLIS, Nov. 08, 2021 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. (“Tactile Medical”) (Nasdaq: TCMD), a medical technology company focused on developing medical devices for the treatment of underserved chronic diseases at home, today reported financial results for the third quarter and nine months ended September 30, 2021.

Third Quarter 2021 Summary:

  • Total revenue increased 7% year-over-year to $52.5 million, compared to $49.1 million in third quarter 2020.

    • Total revenue in third quarter 2021 included $0.9 million of revenue from the recently acquired AffloVest respiratory therapy business.

  • Operating loss of $1.4 million, compared to operating income of $1.8 million in third quarter 2020.

    • Non-GAAP operating income of $1.0 million, compared to non-GAAP operating income of $2.6 million in third quarter of 2020.

  • Net loss of $3.4 million, compared to net income of $2.4 million in third quarter 2020.

    • Non-GAAP net loss of $1.6 million, compared to non-GAAP net income of $3.0 million in third quarter of 2020.

  • Adjusted EBITDA of $4.1 million, compared to Adjusted EBITDA of $6.2 million in third quarter 2020.

Third Quarter 2021 Highlights:

  • On September 8, 2021, the Company announced it acquired the assets of the AffloVest respiratory therapy business from International Biophysics Corporation, a privately-held company.

  • On September 30, 2021, the Company announced the enrollment of the first patient at Vanderbilt University in a multi-center randomized, controlled trial evaluating the effectiveness of its Flexitouch® Plus system for the treatment of head and neck lymphedema.

  • National Comprehensive Cancer Network® (NCCN®) Guidelines for Survivorship, a longtime advocate for the early identification and treatment of cancer-related lymphedema, published an update adding pneumatic compression devices to the list of therapies for home management.

“Third quarter operating and financial results were affected by the prolonged recovery from COVID-19 and increased impacts from the Delta variant,” said Dan Reuvers, President and Chief Executive Officer of Tactile Medical. “While we expected progressive improvements in the back half of the year, the Delta variant led to a resurgence in fewer patient visits, absenteeism within practices, and limited our access to patients and clinicians. The challenging labor market also impacted our ability to recruit and retain quality candidates for our sales team.”

Mr. Reuvers continued, “We are revising our 2021 financial outlook to account for our third quarter results, as well as our expectation for continued COVID-related headwinds and salesforce staffing challenges, which we expect to persist through the remainder of the year, offset in part by an anticipated $5.0 to $5.5 million revenue contribution from our recent acquisition of AffloVest. We believe that the headwinds are temporary and that we remain well-positioned longer-term. Importantly, we continue to see evidence of increasing awareness and consensus within the medical community of the prevalence of lymphedema and the importance of effective treatment. The integration of AffloVest is also progressing well and, combined with our lymphedema therapies, expands our addressable U.S. market opportunity to over $10 billion per year. Given our large addressable market, clinically proven products and commitment to advancing the at-home treatment of patients with underserved chronic conditions, we expect to deliver strong growth and improving profitability as conditions improve.”

Third Quarter 2021 Financial Results

Total revenue in the third quarter of 2021 increased $3.4 million, or 7%, to $52.5 million, compared to $49.1 million in the third quarter of 2020. The increase in total revenue was attributable to an increase of $1.1 million, or 3%, in sales and rentals of the Flexitouch system, an increase of $1.4 million, or 23%, in sales and rentals of the Entre system and $0.9 million in sales of the recently acquired AffloVest product line in the quarter ended September 30, 2021. Third quarter 2021 revenue was negatively impacted by the prolonged recovery from COVID-19, including the resurgence due to the Delta variant during the period, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. In addition, the challenging labor market impacted our ability to recruit and retain quality candidates for our direct sales force.

Gross profit in the third quarter of 2021 increased $2.0 million, or 6%, to $37.0 million, compared to $35.0 million in the third quarter of 2020. Gross margin was 70% of revenue, compared to 71% of revenue in the third quarter of 2020. Non-GAAP gross margin was 72% of revenue, compared to 71% of revenue in the third quarter of 2020.

Operating expenses in the third quarter of 2021 increased approximately $5.2 million, or 16%, to $38.3 million, compared to $33.2 million in the third quarter of 2020. The increase in operating expenses was primarily driven by an increase in sales and marketing expense of $2.7 million, or 14%, to $22.2 million, primarily due to increases in personnel-related compensation expense and travel-related expenses. Reimbursement, general and administrative expenses increased $2.1 million, or 17%, to $14.7 million, primarily due to a combined $1.0 million increase in occupancy costs, depreciation expense and legal fees, as well as a $0.8 million increase in acquisition-related fees and a $0.2 million increase in non-cash intangible amortization in connection with the purchase of AffloVest. Research and development expenses increased $0.3 million, or 28%, to $1.4 million, primarily due to an increase in professional services as new product projects advanced.

Operating loss in the third quarter of 2021 was $1.4 million, compared to operating income of $1.8 million in the third quarter of 2020. Non-GAAP operating income in the third quarter of 2021 was $1.0 million, compared to Non-GAAP operating income of $2.6 million in the third quarter of 2020.

Income tax expense in the third quarter of 2021 was $1.9 million, compared to an income tax benefit of $0.8 million in the third quarter of 2020. The increase in income tax expense was primarily due to changes in our effective tax rate, which was attributable to a change in projected taxable income as compared to the same period last year.

Net loss in the third quarter of 2021 was $3.4 million, or $0.17 per diluted share, compared to net income of $2.4 million, or $0.12 per diluted share, in the third quarter of 2020. Non-GAAP net loss in the third quarter of 2021 was $1.6 million, compared to Non-GAAP net income of $3.0 million in the third quarter of 2020.

Weighted average shares used to compute diluted net income/loss per share were 19.8 million and 19.7 million in the third quarters of 2021 and 2020, respectively.

Adjusted EBITDA was $4.1 million in the third quarter of 2021, compared to $6.2 million in the third quarter of 2020.

First Nine Months 2021 Financial Results:

Total revenue for the nine months ended September 30, 2021, increased $18.4 million, or 14%, to $146.3 million, compared to $127.9 million for the nine months ended September 30, 2020. The increase in revenue was driven by an increase of $13.9 million, or 12%, in sales and rentals of the Flexitouch system, an increase of $3.7 million, or 24%, in sales and rentals of the Entre system and $0.9 million in sales of the recently acquired AffloVest respiratory therapy business for the nine months ended September 30, 2021. Revenue for the nine months ended September 30, 2021, benefited from the initial stages of recovery from the COVID-19 pandemic through the second quarter of 2021, as well as an expanded prescriber base. However, in the third quarter of 2021 revenue was negatively impacted by the prolonged recovery from COVID-19, including the resurgence due to the Delta variant during the period, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. In addition, the challenging labor market impacted our ability to recruit and retain quality candidates for our direct sales force.

Net loss for the nine months ended September 30, 2021, was $4.3 million, or $0.22 per diluted share, compared to a net loss of $12.7 million, or $0.66 per diluted share, for the nine months ended September 30, 2020. Non-GAAP net loss for the nine months ended September 30, 2021, was $1.1 million, compared to Non-GAAP net loss of $8.5 million for the nine months ended September 30, 2020.

Weighted average shares used to compute diluted net income/loss per share were 20.0 million and 19.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Adjusted EBITDA was $8.2 million in the nine months ended September 30, 2021, compared to $5.2 million in the nine months ended September 30, 2020.

Balance Sheet Summary

On September 8, 2021, the Company entered into an amendment to its credit agreement that, among other things, adds a $30.0 million incremental term loan to the $25.0 million revolving credit facility provided by the credit agreement. The term loan and the revolving credit facility mature on September 8, 2024.

On September 8, 2021, in connection with the closing of the AffloVest acquisition, the Company 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. As of September 30, 2021, the Company had $22.4 million in cash and cash equivalents and $55.0 million of outstanding borrowings under its credit agreement, compared to $47.9 million in cash and cash equivalents and no outstanding borrowings on its revolving credit facility as of December 31, 2020.

2021 Financial Outlook

The Company now expects full year 2021 total revenue in the range of $203.5 million to $206.0 million, representing growth of approximately 9% to 10% year-over-year, compared to total revenue of $187.1 million in 2020. This includes the AffloVest expected revenue range of approximately $5.0 million to $5.5 million from the closing date of September 8, 2021 to December 31, 2021. The Company’s prior 2021 revenue guidance expectations called for total revenue in the range of $216.3 million to $224.5 million, representing an increase of 16% to 20%.

Conference Call

Management will host a conference call at 5:00 p.m. Eastern Time on November 8, 2021, 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 13723889. 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 13723889. 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. The company 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 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, including prior to identifying a successor; 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 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 impairment charges and inventory write-offs, plus litigation defense costs, plus acquisition costs and plus executive transition costs. Non-GAAP gross margin in this release represents gross margin plus non-cash intangible amortization expense, inventory write-offs and inventory purchase price adjustments. Non-GAAP operating income (loss) in this release represents operating income (loss) plus non-cash intangible amortization expense, inventory write-offs, inventory purchase price adjustments, impairment of intangibles, acquisition costs and expenses, litigation defense costs and executive transition expenses. Non-GAAP net income (loss) represents net income (loss) adjusted for non-cash intangible amortization expense, inventory write-offs, inventory purchase price adjustments, impairment of intangibles, acquisition costs and expenses, litigation defense costs 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)

September 30,

December 31,

(In thousands, except share and per share data)

2021

2020

Assets

Current assets

Cash and cash equivalents

$

22,401

$

47,855

Accounts receivable

44,257

43,849

Net investment in leases

12,385

10,708

Inventories

23,830

18,563

Prepaid expenses and other current assets

3,701

2,638

Total current assets

106,574

123,613

Non-current assets

Property and equipment, net

6,458

6,957

Right of use operating lease assets

23,919

20,132

Intangible assets, net

54,970

1,680

Goodwill

31,063

Accounts receivable, non-current

12,422

9,433

Deferred income taxes

11,907

10,198

Other non-current assets

2,082

2,074

Total non-current assets

142,821

50,474

Total assets

$

249,395

$

174,087

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

6,192

$

4,197

Note payable

2,210

Accrued payroll and related taxes

10,322

11,588

Accrued expenses

5,350

4,423

Income taxes payable

1,129

2,658

Operating lease liabilities

2,412

2,006

Other current liabilities

3,694

1,842

Total current liabilities

31,309

26,714

Non-current liabilities

Revolving line of credit, non-current

24,844

Note payable, non-current

27,673

Earn-out, non-current

6,400

Accrued warranty reserve, non-current

3,358

3,235

Income taxes payable, non-current

348

Operating lease liabilities, non-current

23,357

19,388

Total non-current liabilities

85,980

22,623

Total liabilities

117,289

49,337

Stockholders’ equity:

Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2021 and December 31,
2020

Common stock, $0.001 par value, 300,000,000 shares authorized; 19,797,723 shares issued and outstanding as of September 30, 2021; 19,492,718 shares issued and outstanding as of December 31, 2020

20

19

Additional paid-in capital

116,346

104,675

Retained earnings

15,740

20,056

Total stockholders’ equity

132,106

124,750

Total liabilities and stockholders’ equity

$

249,395

$

174,087


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)

2021

2020

2021

2020

Revenue

Sales revenue

$

44,460

$

42,573

$

124,215

$

109,714

Rental revenue

8,037

6,519

22,114

18,173

Total revenue

52,497

49,092

146,329

127,887

Cost of revenue

Cost of sales revenue

13,096

11,558

36,425

30,868

Cost of rental revenue

2,433

2,562

6,501

6,062

Total cost of revenue

15,529

14,120

42,926

36,930

Gross profit

Gross profit - sales revenue

31,364

31,015

87,790

78,846

Gross profit - rental revenue

5,604

3,957

15,613

12,111

Gross profit

36,968

34,972

103,403

90,957

Operating expenses

Sales and marketing

22,231

19,488

61,949

59,856

Research and development

1,409

1,102

3,885

3,891

Reimbursement, general and administrative

14,500

12,539

42,802

37,682

Intangible asset amortization

195

49

294

148

Total operating expenses

38,335

33,178

108,930

101,577

(Loss) income from operations

(1,367

)

1,794

(5,527

)

(10,620

)

Other (expense) income

(120

)

(121

)

(154

)

181

(Loss) income before income taxes

(1,487

)

1,673

(5,681

)

(10,439

)

Income tax expense (benefit)

1,868

(751

)

(1,365

)

2,294

Net (loss) income

$

(3,355

)

$

2,424

$

(4,316

)

$

(12,733

)

Net (loss) income per common share

Basic

$

(0.17

)

$

0.12

$

(0.22

)

$

(0.66

)

Diluted

$

(0.17

)

$

0.12

$

(0.22

)

$

(0.66

)

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

Basic

19,790,838

19,415,640

19,676,749

19,309,344

Diluted

19,790,838

19,747,365

19,676,749

19,309,344


Tactile Systems Technology, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended September 30,

(In thousands)

2021

2020

Cash flows from operating activities

Net loss

$

(4,316

)

$

(12,733

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

2,150

2,102

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

(91

)

Deferred income taxes

(1,709

)

3,934

Stock-based compensation expense

7,703

8,288

Gain on other investments and maturities of marketable securities

10

Impairment losses

4,025

Loss on disposal of property and equipment

7

Changes in assets and liabilities, net of acquisition:

Accounts receivable

(408

)

(2,589

)

Net investment in leases

(1,677

)

(1,304

)

Inventories

(3,641

)

(3,538

)

Income taxes

(1,181

)

773

Prepaid expenses and other assets

(1,133

)

(1,553

)

Right of use operating lease assets

588

509

Medicare accounts receivable, non-current

(2,989

)

(2,916

)

Accounts payable

1,995

938

Accrued payroll and related taxes

(1,266

)

766

Accrued expenses and other liabilities

2,902

1,134

Net cash used in operating activities

(2,975

)

(2,245

)

Cash flows from investing activities

Proceeds from maturities of securities available-for-sale

22,500

Payments related to acquisition

(79,829

)

Purchases of property and equipment

(1,221

)

(1,623

)

Intangible assets costs

(187

)

(163

)

Other investments

(30

)

Net cash (used in) provided by investing activities

(81,237

)

20,684

Cash flows from financing activities

Proceeds from issuance of note payable

30,000

Proceeds from revolving line of credit

25,000

Payment of deferred debt issuance costs

(211

)

Taxes paid for net share settlement of performance and restricted stock units

(1,157

)

(1,592

)

Proceeds from exercise of common stock options

3,584

762

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

1,542

1,825

Net cash provided by financing activities

58,758

995

Net (decrease) increase in cash and cash equivalents

(25,454

)

19,434

Cash and cash equivalents – beginning of period

47,855

22,770

Cash and cash equivalents – end of period

$

22,401

$

42,204

Supplemental cash flow disclosure

Cash paid for taxes

$

1,541

$

475

Capital expenditures incurred but not yet paid

$

$

41

The following table summarizes revenue by product for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

2021

2020

2021

2020

Revenue

Flexitouch system

$

44,014

$

42,908

$

126,544

$

112,621

Entre system

7,622

6,184

18,924

15,266

AffloVest

861

861

Total

$

52,497

$

49,092

$

146,329

$

127,887

Percentage of total revenue

Flexitouch system

84

%

87

%

86

%

88

%

Entre system

14

%

13

%

13

%

12

%

AffloVest

2

%

%

1

%

%

Total

100

%

100

%

100

%

100

%

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

Tactile Systems Technology, Inc.

Reconciliation of Gross Margin to Non-GAAP Gross Margin

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2021

2020

2021

2020

Revenue

$

52,497

$

49,092

$

146,329

$

127,887

Gross profit, as reported

$

36,968

$

34,972

$

103,403

$

90,957

Gross margin, as reported

70.4

%

71.2

%

70.7

%

71.1

%

Reconciling items affecting gross margin:

Non-cash intangible amortization expense

$

84

$

8

$

104

$

165

Inventory write-offs

588

588

428

Inventory purchase price adjustments

50

50

Non-GAAP gross profit

$

37,690

$

34,980

$

104,145

$

91,550

Non-GAAP gross margin

71.8

%

71.3

%

71.2

%

71.6

%

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

Tactile Systems Technology, Inc.

Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Operating Income (Loss)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2021

2020

2021

2020

GAAP operating income/(loss)

$

(1,367

)

$

1,794

$

(5,527

)

$

(10,620

)

Reconciling items affecting operating income/(loss):

Non-cash intangible amortization expense impacting gross profit

$

84

$

8

$

104

$

165

Inventory write-offs

588

588

428

Inventory purchase price adjustments

50

50

Non-cash intangible amortization expense impacting operating expenses

195

49

294

148

Impairment of intangibles

3,597

Acquisition costs and expenses

774

774

Litigation defense costs

631

202

2,352

430

Executive transition expenses

499

186

876

Non-GAAP operating income/(loss):

$

955

$

2,552

$

(1,179

)

$

(4,976

)

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

Tactile Systems Technology, Inc.

Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2021

2020

2021

2020

GAAP net (loss) income

$

(3,355

)

$

2,424

$

(4,316

)

$

(12,733

)

Reconciling items affecting net (loss) income:

Non-cash intangible amortization expense impacting gross profit

$

84

$

8

$

104

$

165

Inventory write-offs

588

588

428

Inventory purchase price adjustments

50

50

Non-cash intangible amortization expense impacting operating expenses

195

49

294

148

Impairment of intangibles

3,597

Acquisition costs & expenses

774

774

Litigation defense costs

631

202

2,352

430

Executive transition expenses

499

186

876

Income tax (expense) benefit on reconciling items*

(581

)

(190

)

(1,087

)

(1,411

)

Non-GAAP net (loss) income

$

(1,614

)

$

2,992

$

(1,055

)

$

(8,500

)

* 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 (loss) income to Adjusted EBITDA for the three and nine months ended September 30, 2021 and 2020, as well as the dollar and percentage change between the comparable periods:

Tactile Systems Technology, Inc.

Reconciliation of Net (Loss) Income to Non-GAAP Adjusted EBITDA

(Unaudited)

Three Months Ended

Increase

Nine Months Ended

Increase

September 30,

(Decrease)

September 30,

(Decrease)

(Dollars in thousands)

2021

2020

$

%

2021

2020

$

%

Net (loss) income

$

(3,355

)

$

2,424

$

(5,779

)

N.M.

%

$

(4,316

)

$

(12,733

)

$

8,417

(66

)

%

Interest expense (income), net

105

19

86

N.M.

%

121

(61

)

182

N.M.

%

Income tax expense (benefit)

1,868

(751

)

2,619

N.M.

%

(1,365

)

2,294

(3,659

)

(160

)

%

Depreciation and amortization

863

652

211

32

%

2,150

2,102

48

2

%

Stock-based compensation

2,588

3,164

(576

)

(18

)

%

7,703

8,288

(585

)

(7

)

%

Impairment charges and inventory write-offs

588

588

%

588

4,025

(3,437

)

(85

)

%

Acquisition costs

824

824

%

824

824

%

Litigation defense costs

631

202

429

N.M.

%

2,351

430

1,921

N.M.

%

Executive transition costs

499

(499

)

(100

)

%

186

876

(690

)

(79

)

%

Adjusted EBITDA

$

4,112

$

6,209

$

(2,097

)

(34

)

%

$

8,242

$

5,221

$

3,021

58

%


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