Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-37799 Tactile Systems Technology, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdict ...

Financial Data and Key Metrics Changes - Total revenue for Q4 2020 increased by 4% year-over-year to $59.2 million, exceeding the high-end of annual revenue guidance [7][28] - Gross profit for Q4 2020 increased by $753,000 to $41.9 million, with a gross margin of 71% compared to 72% in the previous year [29][30] - Net income for Q4 2020 increased to $12.1 million, or $0.61 per diluted share, compared to $4.3 million, or $0.22 per diluted share, in Q4 2019 [35] Business Line Data and Key Metrics Changes - Sales and rentals of Entre systems increased by 44% year-over-year, while sales and rentals of Flexitouch Plus systems were essentially flat [8] - Flexitouch systems accounted for 87% of total revenue in Q4 2020, down from 90% in the prior year [28] - VA revenue declined by 17% year-over-year to $6.3 million, representing 11% of total Q4 revenue compared to 13% in the prior year [17] Market Data and Key Metrics Changes - Revenue by payer for Q4 2020 was approximately 71% commercial, 18% Medicare, and 11% VA, compared to 75%, 12%, and 13% respectively in Q4 2019 [29][38] - The company served approximately 60,000 patients in 2020, indicating significant underpenetration in the market with 1.4 million patients diagnosed with lymphedema [54] Company Strategy and Development Direction - The company aims to expand its prescriber base and enhance productivity through the addition of field support specialists, which is expected to improve sales rep efficiency [50][51] - Focus remains on the U.S. market development due to the significant underserved community, with plans to invest in clinical evidence generation and education [56][86] - The company anticipates a revenue growth of 15% to 20% year-over-year for 2021, with specific growth targets for Flexitouch and Entre systems [41] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing COVID-related headwinds impacting Q1 2021, expecting a mid-single-digit revenue decline in the first quarter [43][44] - The company remains optimistic about returning to a normalized growth environment in the latter half of 2021, driven by improved market conditions and vaccine distribution [62] - Management emphasized the resilience and resourcefulness of the organization and its customers in navigating the challenges posed by the pandemic [51][56] Other Important Information - The company received 510(k) clearance for its solutions for lipedema and phlebolymphedema, expanding its market dialogue [25] - Two new board members were appointed, bringing over 20 years of healthcare experience to the leadership team [27] Q&A Session Summary Question: Guidance and Q1 Expectations - Analysts inquired about the guidance for Q1 and the impact of COVID on revenue expectations, with management indicating that the VA business softness and holiday-related COVID impacts contributed to the guidance [60][61] Question: VA Business Trends - Questions were raised regarding the future of the VA business, with management stating that they do not expect a return to pre-COVID operations in the near term [64][65] Question: Sales Rep Changes and Productivity - Analysts asked about changes in the sales rep structure and expected productivity, with management explaining the rationale behind adding field support specialists to enhance sales rep efficiency [69][70] Question: International Initiatives - Questions were posed about international market initiatives, with management indicating a focus on the U.S. market due to its growth potential and delaying international expansion plans [84][86] Question: Contribution from New Prescribers - Analysts inquired about the contribution from new prescribers, with management noting that new prescribers typically start slow but are expected to ramp up over the year [88][90]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-37799 Tactile Systems Technology, Inc. (Exact name of registrant as specified in its charter) Delaware (State or o ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2020 was reported at $49.1 million, a decrease of 1% year-over-year, but a 40% sequential improvement from Q2 2020 [6][17] - Gross profit decreased by $400,000 to $35 million, with a gross margin of 71%, consistent with the same period last year [18] - Operating income decreased by 44% to $1.8 million compared to Q3 2019 [19] - Net income remained flat at $2.4 million or $0.12 per diluted share, with a slight increase in weighted average shares [20] - Adjusted EBITDA was approximately $6 million, down from $6.4 million in Q3 2019 [20] Business Line Data and Key Metrics Changes - Sales and rentals of Flexitouch systems accounted for 90% of total revenue, down from 92% in the prior year [17] - Entre Systems saw a 26% year-over-year increase in sales and rentals, contributing positively to overall revenue [6] Market Data and Key Metrics Changes - Revenue by payer in Q3 2020 was 70% commercial, 16% Medicare, and 14% VA, compared to 72%, 12%, and 16% respectively in Q3 2019 [17] - The company observed a strong recovery in privately-owned outpatient practices, particularly vascular clinics, which had fewer COVID-related restrictions [9] Company Strategy and Development Direction - The company aims to invest strategically in its business to capture the $5 billion market opportunity for lymphedema in the U.S. [25] - Continued focus on expanding the prescriber base through virtual education events and supporting existing clinicians [12][25] - The company plans to maintain a low 70% gross margin and an adjusted EBITDA margin of 7% to 8% for 2020 [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the business entering Q4, despite ongoing COVID-related challenges [24] - Positive trends in patient demand and clinician engagement were noted, with expectations for gradual recovery as COVID impacts lessen [15][24] Other Important Information - The company has no outstanding borrowings and a cash position of $42.2 million, positioning it well for future investments [21][24] - The company is facing a qui tam lawsuit, with a trial expected in late Q1 or early Q2 2021 [77] Q&A Session Summary Question: What is the likelihood of improvement in Q4 given recent COVID spikes? - Management indicated that while there are uncertainties, they are optimistic based on current trends and customer feedback [31][34] Question: How has the virtual education impacted new prescriber engagement? - The company reported significant participation in virtual events, which have been effective in expanding the prescriber base [36][39] Question: Can you provide insights on the increase in prescribers? - Management noted a meaningful increase in prescribers, although they did not disclose specific numbers, emphasizing the importance of this growth for future revenue [42][43] Question: What is the status of the VA channel and sales rep access? - There has been limited change in access to VA hospitals, but the company has seen a recovery in sales through community-based outpatient centers [52][53] Question: What is the update on the qui tam lawsuit? - The company filed a motion for partial summary judgment, with a trial expected in early 2021 [77]

PART I—FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The company reported a nine-month net loss of $12.7 million on total assets of $157.8 million as of September 30, 2020 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $157.8 million, driven by increased cash, while total stockholders' equity slightly decreased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $42,204 | $22,770 | | Accounts receivable | $36,033 | $33,444 | | Total current assets | $114,110 | $108,335 | | Total assets | $157,750 | $151,752 | | **Liabilities & Equity** | | | | Total current liabilities | $25,641 | $21,428 | | Total liabilities | $48,631 | $39,157 | | Total stockholders' equity | $109,119 | $112,595 | | Total liabilities and stockholders' equity | $157,750 | $151,752 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company posted a nine-month net loss of $12.7 million, a sharp decline from a $6.7 million profit in the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2020 | Q3 2019 | Nine Months 2020 | Nine Months 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $49,092 | $49,612 | $127,887 | $132,429 | | Gross Profit | $34,972 | $35,373 | $90,957 | $93,136 | | Income (loss) from operations | $1,794 | $3,197 | $(10,620) | $4,431 | | Net income (loss) | $2,424 | $2,431 | $(12,733) | $6,688 | | Diluted EPS | $0.12 | $0.12 | $(0.66) | $0.34 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was $2.2 million for the nine-month period, a reversal from cash provided in the prior year Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(2,245) | $2,421 | | Net cash provided by (used in) investing activities | $20,684 | $(3,289) | | Net cash provided by financing activities | $995 | $583 | | **Net increase (decrease) in cash** | **$19,434** | **$(285)** | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Key disclosures include COVID-19 impacts, a $4.0 million impairment charge, and revenue details by product and payer - The company is the sole manufacturer of the Flexitouch® and Entre™ systems, with seasonal business demand[29](index=29&type=chunk)[32](index=32&type=chunk) - In response to COVID-19, the company implemented a 'no contact' virtual patient training model and remote work policies[36](index=36&type=chunk)[37](index=37&type=chunk) - The company discontinued its Airwear wrap product line in Q2 2020, resulting in a **$4.0 million non-cash impairment charge**[42](index=42&type=chunk) Revenue by Product (Nine Months Ended Sep 30, in thousands) | Product | 2020 Revenue | 2019 Revenue | % Change | | :--- | :--- | :--- | :--- | | Flexitouch system | $112,621 | $119,767 | -6% | | Other products | $15,266 | $12,662 | +21% | | **Total** | **$127,887** | **$132,429** | **-3%** | Revenue by Payer (Nine Months Ended Sep 30, in thousands) | Payer | 2020 Revenue | 2019 Revenue | % Change | | :--- | :--- | :--- | :--- | | Private insurers and other | $90,459 | $93,932 | -4% | | Veterans Administration | $18,168 | $23,690 | -23% | | Medicare | $19,260 | $14,807 | +30% | | **Total** | **$127,887** | **$132,429** | **-3%** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes revenue declines to COVID-19 but confirms liquidity is sufficient for the next twelve months [Overview and COVID-19 Impact](index=32&type=section&id=Overview%20and%20COVID-19%20Impact) The pandemic negatively impacted business access, prompting a shift to virtual models and a product line discontinuation - The company's mission is to help people with chronic diseases care for themselves at home[102](index=102&type=chunk) - The Flexitouch system is the main revenue source, accounting for **88% of revenue** in the first nine months of 2020[103](index=103&type=chunk) - The company discontinued the Airwear wrap product line in Q2 2020, recording a **$4.0 million non-cash impairment charge**[105](index=105&type=chunk) - Due to COVID-19, the company moved to a 'no contact' virtual patient training model and suspended clinical study recruitment[107](index=107&type=chunk)[112](index=112&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Revenue decreased 3% over nine months due to COVID-19, while operating expenses rose, leading to an operating loss Revenue Change by Product (Q3 2020 vs Q3 2019) | Product | Q3 2020 Revenue (in thousands) | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | | Flexitouch system | $42,908 | $(1,791) | -4% | | Other products | $6,184 | $1,271 | +26% | | **Total** | **$49,092** | **$(520)** | **-1%** | - **Gross margin remained stable at 71%** for both the three and nine-month periods ended September 30, 2020[126](index=126&type=chunk) - Sales and marketing expenses decreased 6% in Q3 2020 but increased 6% over nine months due to sales team investments[127](index=127&type=chunk)[128](index=128&type=chunk) - RG&A expenses increased 34% for the nine months, driven by a **$3.6 million impairment charge** and higher professional fees[133](index=133&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $42.2 million in cash and an undrawn $10.0 million credit facility - Principal sources of liquidity are **$42.2 million in cash and cash equivalents** and borrowing capacity under a Credit Agreement[136](index=136&type=chunk) - The company has a **$10.0 million revolving credit facility** expiring in August 2021, with no outstanding borrowings[144](index=144&type=chunk)[145](index=145&type=chunk) - Under the CARES Act, the company received **$1.2 million in relief funds** and collected **$2.9 million from NOL carrybacks**[151](index=151&type=chunk)[152](index=152&type=chunk) - Management believes current capital resources are sufficient to meet needs for at least the next twelve months[148](index=148&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposures have not materially changed from the disclosures in the 2019 Annual Report on Form 10-K - There have been **no material changes** to market risk disclosures since the 2019 Annual Report on Form 10-K[159](index=159&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2020[160](index=160&type=chunk) - **No material changes** to the internal control over financial reporting occurred during the quarter ended September 30, 2020[161](index=161&type=chunk) PART II—OTHER INFORMATION [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a *qui tam* action from a competitor and a securities class action lawsuit - The company is defending a *qui tam* lawsuit alleging violations of the Federal Anti-Kickback Statute and False Claims Act[163](index=163&type=chunk) - A securities class action lawsuit was filed on September 29, 2020, alleging materially false and misleading statements[164](index=164&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) A new significant risk factor has been added detailing the ongoing adverse impacts of the COVID-19 pandemic - A new risk factor has been added specifically addressing the **adverse effects of the COVID-19 pandemic** on the business[166](index=166&type=chunk) - Potential negative impacts from COVID-19 include reduced demand, supply chain disruptions, and workforce limitations[168](index=168&type=chunk)[169](index=169&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company confirms no unregistered sales of equity securities occurred during the reporting period - There were **no unregistered sales** of common or preferred stock during the reporting period[172](index=172&type=chunk) [Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section is not applicable as there were no defaults upon senior securities - Not applicable[173](index=173&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[174](index=174&type=chunk) [Other Information](index=51&type=section&id=Item%205.%20Other%20Information) No other material information was required to be reported during the period - None[175](index=175&type=chunk) [Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including officer certifications and XBRL data - The exhibits filed include officer certifications (31.1, 31.2, 32.1, 32.2) and financial data in Inline XBRL format (101.1)[178](index=178&type=chunk)

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q2 2020 Earnings Conference Call August 3, 2020 5:00 PM ET Company Participants Dan Reuvers – President and Chief Executive Officer Brent Moen – Chief Financial Officer Conference Call Participants Ryan Zimmerman – BTIG Matthew O'Brien – Piper Sandler Margaret Kaczor – William Blair Chris Pasquale – Guggenheim Cecilia Furlong – Canaccord Genuity Suraj Kalia – Oppenheimer Operator Good evening, ladies and gentlemen, and welcome to the Second Quarter 2010 Earning ...

[Report Overview](index=1&type=section&id=Report%20Overview) This section provides an overview of the company's Form 10-Q filing, forward-looking statements, and associated risks [Filing Information and Company Details](index=1&type=section&id=Filing%20Information%20and%20Company%20Details) This section provides the cover page details for the Form 10-Q filing, identifying Tactile Systems Technology, Inc. as the registrant, its incorporation state (Delaware), principal executive offices, telephone number, and common stock trading symbol (TCMD) on The Nasdaq Stock Market. It also confirms the company is a large accelerated filer and not a shell company, with 19,413,004 shares outstanding as of July 31, 2020 - Tactile Systems Technology, Inc. (**TCMD**) filed its **Form 10-Q** for the quarterly period ended **June 30, 2020**[1](index=1&type=chunk)[2](index=2&type=chunk) Company Filing Details | Detail | Value | | :----- | :---- | | Trading Symbol | TCMD | | Exchange | The Nasdaq Stock Market | | Filer Status | Large accelerated filer | | Shares Outstanding (as of July 31, 2020) | 19,413,004 | [Forward-Looking Information](index=4&type=section&id=Forward-Looking%20Information) This section outlines the nature of forward-looking statements within the report, emphasizing that actual results may differ materially due to various known and unknown risks and uncertainties. It advises readers to review the 'Risk Factors' section and other SEC filings. Key risks highlighted include the COVID-19 pandemic's impact, liquidity, reimbursement, CEO transition, competition, supply chain, and regulatory changes - The report contains **forward-looking statements** regarding business, operations, and financial performance, which are subject to **known and unknown risks and uncertainties**[11](index=11&type=chunk) - Impacts of the **COVID-19 pandemic** on business, financial condition, and results of operations[13](index=13&type=chunk) - Adequacy of **liquidity** to pursue business objectives[13](index=13&type=chunk) - Ability to obtain **reimbursement** from third-party payers[13](index=13&type=chunk) - **Chief Executive Officer transition** and potential impact on business and strategic direction[13](index=13&type=chunk) - Loss or retirement of key executives[13](index=13&type=chunk) - Adverse economic conditions or intense **competition**[13](index=13&type=chunk) - Loss of a key supplier[13](index=13&type=chunk) - Adverse federal, state, and local government regulation[13](index=13&type=chunk) - Technological obsolescence of products[13](index=13&type=chunk) [PART I—FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This item provides the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive (loss) income, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, and specific financial line items - The **financial statements are unaudited** and prepared in accordance with **GAAP** for interim reporting, not necessarily indicative of full-year results[30](index=30&type=chunk)[31](index=31&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and equity at specific reporting dates Condensed Consolidated Balance Sheet Highlights (In thousands) | Item | June 30, 2020 | December 31, 2019 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $31,341 | $22,770 | $8,571 | 37.6% | | Marketable securities | $6,013 | $22,464 | $(16,451) | (73.2)% | | Total current assets | $104,576 | $108,335 | $(3,759) | (3.5)% | | Total assets | $141,530 | $151,752 | $(10,222) | (6.7)% | | Total current liabilities | $20,486 | $21,428 | $(942) | (4.4)% | | Total liabilities | $38,145 | $39,157 | $(1,012) | (2.6)% | | Total stockholders' equity | $103,385 | $112,595 | $(9,210) | (8.2)% | [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Presents the company's financial performance, detailing revenues, expenses, and net income or loss over specific periods Condensed Consolidated Statements of Operations Highlights (In thousands, except per share data) | Item | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change ($) | Change (%) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenue | $35,120 | $45,200 | $(10,080) | (22.3)% | $78,795 | $82,817 | $(4,022) | (4.9)% | | Gross profit | $24,912 | $31,505 | $(6,593) | (20.9)% | $55,985 | $57,763 | $(1,778) | (3.1)% | | Total operating expenses | $32,875 | $28,463 | $4,412 | 15.5% | $68,399 | $56,529 | $11,870 | 21.0% | | (Loss) income from operations | $(7,963) | $3,042 | $(11,005) | N.M. | $(12,414) | $1,234 | $(13,648) | N.M. | | Net (loss) income | $(13,850) | $2,785 | $(16,635) | N.M. | $(15,157) | $4,257 | $(19,414) | N.M. | | Basic EPS | $(0.72) | $0.15 | $(0.87) | N.M. | $(0.79) | $0.23 | $(1.02) | N.M. | | Diluted EPS | $(0.72) | $0.14 | $(0.86) | N.M. | $(0.79) | $0.22 | $(1.01) | N.M. | [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) Presents the company's comprehensive income or loss, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive (Loss) Income (In thousands) | Item | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net (loss) income | $(13,850) | $2,785 | $(15,157) | $4,257 | | Total other comprehensive (loss) income | $(9) | $25 | $3 | $48 | | Comprehensive (loss) income | $(13,859) | $2,810 | $(15,154) | $4,305 | [Condensed Consolidated Statements of Stockholders' Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Details changes in the company's stockholders' equity, including stock-based compensation and comprehensive income Stockholders' Equity Changes (In thousands) | Item | Balances, Dec 31, 2019 | Stock-based compensation | Exercise of options/RSUs | Taxes paid for RSU settlement | ESPP shares issued | Comprehensive (loss) income | Balances, June 30, 2020 | | :-------------------------------- | :----------------------- | :----------------------- | :----------------------- | :---------------------------- | :------------------ | :---------------------------- | :---------------------- | | Additional paid-in capital | $91,874 | $5,124 | $548 | $(1,553) | $1,825 | — | $97,818 | | Retained earnings | $20,676 | — | — | — | — | $(15,157) | $5,519 | | Total stockholders' equity | $112,595 | $5,124 | $548 | $(1,553) | $1,825 | $(15,154) | $103,385 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Net cash (used in) provided by operating activities | $(7,980) | $851 | $(8,831) | | Net cash provided by investing activities | $15,731 | $3,714 | $12,017 | | Net cash provided by financing activities | $820 | $376 | $444 | | Net increase in cash and cash equivalents | $8,571 | $4,941 | $3,630 | | Cash and cash equivalents – end of period | $31,341 | $25,040 | $6,301 | [Notes to the Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the company's business, accounting policies, financial instruments, commitments, contingencies, and equity-related transactions. It highlights the impact of COVID-19, the discontinuation of the Airwear wrap product line, and changes in revenue recognition for sales-type leases - The **unaudited condensed consolidated financial statements** are prepared in accordance with **GAAP** for interim financial reporting and **SEC rules**, and include the accounts of **Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc.**[30](index=30&type=chunk)[32](index=32&type=chunk) [Note 1. Nature of Business and Operations](index=13&type=section&id=Note%201.%20Nature%20of%20Business%20and%20Operations) This section describes Tactile Medical's core business as a manufacturer and distributor of medical devices for lymphedema and venous insufficiency, highlighting the seasonality of its business and the potential impact of COVID-19 on 2020 trends - **Tactile Medical** is the **sole manufacturer and distributor** of **Flexitouch® and Entre™ systems**, medical devices for lymphedema and venous insufficiency, used for **at-home treatment**[26](index=26&type=chunk) - The company's business is affected by **seasonality**, with **reduced demand in Q1** and **higher revenue in Q3/Q4**, primarily due to **patient insurance deductibles**. **COVID-19** may significantly alter **2020 seasonality trends**[29](index=29&type=chunk) [Note 2. Basis of Presentation](index=13&type=section&id=Note%202.%20Basis%20of%20Presentation) This section outlines the principles of consolidation, the impact of COVID-19 on operations, the use of estimates in financial reporting, and the definition of comprehensive (loss) income [Principles of Consolidation](index=15&type=section&id=Principles%20of%20Consolidation) Outlines the consolidation of financial statements for the company and its wholly-owned subsidiary - The financial statements consolidate **Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc.**, eliminating all intercompany balances and transactions[32](index=32&type=chunk) [Risks and Uncertainties (COVID-19)](index=15&type=section&id=Risks%20and%20Uncertainties%20%28COVID-19%29) Details the significant negative impacts and operational adjustments due to the COVID-19 pandemic - The **COVID-19 pandemic** has **negatively affected the U.S. economy and the company's business**, with **long-term impacts currently unestimable**[33](index=33&type=chunk) - Modified operations with rotational shifts and stringent safety measures (**face masks, social distancing, temperature checks**)[35](index=35&type=chunk) - Incorporated remote and flexible work arrangements, including online training for new sales representatives[35](index=35&type=chunk) - Continued employee travel and contact restrictions[35](index=35&type=chunk) - Collaborated with payers to modify coverage requirements for virtual patient interactions[35](index=35&type=chunk) - Transitioned to a "**no contact**" virtual patient training model, inactivating independent healthcare practitioners[35](index=35&type=chunk) - Transitioned large, in-person medical education programs to virtual meetings[35](index=35&type=chunk) [Use of Estimates](index=17&type=section&id=Use%20of%20Estimates) Highlights the reliance on management estimates and assumptions in financial statement preparation - Financial statements require **management estimates and assumptions**, which may lead to **actual results differing from reported amounts**[37](index=37&type=chunk) [Comprehensive (Loss) Income](index=17&type=section&id=Comprehensive%20%28Loss%29%20Income) Defines comprehensive income as net income adjusted for specific unrealized gains and losses - **Comprehensive (loss) income** includes **net (loss) income** adjusted for **unrealized gains and losses on available-for-sale marketable securities and related taxes**[38](index=38&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=17&type=section&id=Note%203.%20Summary%20of%20Significant%20Accounting%20Policies) This section confirms no material changes in significant accounting policies during the six months ended June 30, 2020, except for the discontinuation of the Airwear wrap product line and the adoption of ASU 2016-13 - **No material changes in significant accounting policies** during the six months ended **June 30, 2020**, except as noted[39](index=39&type=chunk) [Impairment of Long-Lived Assets](index=17&type=section&id=Impairment%20of%20Long-Lived%20Assets) Details the non-cash impairment charge related to the discontinuation of the Airwear wrap product line - In **Q2 2020**, the company discontinued the **Airwear wrap product line** to **focus on core Flexitouch and Entre franchises**[41](index=41&type=chunk) - A **$4.0 million non-cash impairment charge** was recorded to **fully write-off the inventory** (**$0.4 million**) and **long-lived assets** (**$3.6 million**) of the **Airwear wrap**[41](index=41&type=chunk) [Recently Adopted Accounting Pronouncements](index=17&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) Discusses the adoption of new accounting standards and their impact on financial statements - **ASU 2016-13 (CECL model)** was adopted on **January 1, 2020**, with **no impact on the financial statements**[42](index=42&type=chunk) [Accounting Pronouncements Issued Not Yet Adopted](index=19&type=section&id=Accounting%20Pronouncements%20Issued%20Not%20Yet%20Adopted) Outlines accounting pronouncements issued but not yet adopted by the company - The company is **evaluating ASU No. 2019-12**, "**Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes**," effective for fiscal years beginning after **December 15, 2020**[43](index=43&type=chunk) [Note 4. Marketable Securities](index=19&type=section&id=Note%204.%20Marketable%20Securities) Provides details on the company's marketable securities, including changes in holdings and unrealized gains Marketable Securities (In thousands) | Item | June 30, 2020 | December 31, 2019 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | U.S. government and agency obligations | $6,013 | $19,963 | $(13,950) | (69.9)% | | Corporate debt securities | — | $2,501 | $(2,501) | (100.0)% | | Total Marketable securities | $6,013 | $22,464 | $(16,451) | (73.2)% | - **Net pre-tax unrealized gains** for marketable securities were recorded as a component of **accumulated other comprehensive income**. **No sales of marketable securities occurred** during the six months ended **June 30, 2020**[44](index=44&type=chunk) [Note 5. Inventories](index=20&type=section&id=Note%205.%20Inventories) Details the composition and changes in the company's inventory balances Inventories (In thousands) | Item | June 30, 2020 | December 31, 2019 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Finished goods | $9,730 | $6,508 | $3,222 | 49.5% | | Component parts and work-in-process | $15,096 | $12,551 | $2,545 | 20.3% | | Total inventories | $24,826 | $19,059 | $5,767 | 30.3% | [Note 6. Intangible Assets](index=20&type=section&id=Note%206.%20Intangible%20Assets) Presents the company's intangible assets, including patents and customer accounts, and related amortization Intangible Assets (In thousands) | Item | June 30, 2020 | December 31, 2019 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Patents (Net) | $291 | $3,939 | $(3,648) | (92.6)% | | Defensive intangible assets (Net) | $790 | $875 | $(85) | (9.7)% | | Customer accounts (Net) | $75 | $88 | $(13) | (14.8)% | | Patents pending | $518 | $410 | $108 | 26.3% | | Total intangible assets | $1,674 | $5,312 | $(3,638) | (68.5)% | - **Amortization expense was $0.1 million** for each of the three months ended **June 30, 2020** and **2019**, and **$0.3 million** for each of the six months ended **June 30, 2020** and **2019**[47](index=47&type=chunk) [Note 7. Accrued Expenses](index=21&type=section&id=Note%207.%20Accrued%20Expenses) Details the company's accrued expenses, including warranty, legal, and travel costs Accrued Expenses (In thousands) | Item | June 30, 2020 | December 31, 2019 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Warranty | $1,347 | $1,218 | $129 | 10.6% | | Legal and consulting | $817 | $617 | $200 | 32.4% | | Travel and business | $457 | $776 | $(319) | (41.1)% | | Lease termination costs | — | $1,200 | $(1,200) | (100.0)% | | Total | $3,743 | $4,498 | $(755) | (16.8)% | [Note 8. Warranty Reserves](index=21&type=section&id=Note%208.%20Warranty%20Reserves) Outlines the activity and balance of the company's warranty reserves Warranty Reserve Activity (In thousands) | Item | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Beginning balance | $3,759 | $2,572 | $1,187 | 46.1% | | Warranty provision | $1,277 | $857 | $420 | 49.0% | | Processed warranty claims | $(828) | $(427) | $(401) | 93.9% | | Ending balance | $4,208 | $3,002 | $1,206 | 40.2% | [Note 9. Credit Agreement](index=21&type=section&id=Note%209.%20Credit%20Agreement) Details the company's revolving credit facility and compliance with financial covenants - The company has a **$10.0 million revolving credit facility**, with **potential to increase to $35.0 million**, expiring **August 3, 2021**[51](index=51&type=chunk) - As of **June 30, 2020**, and the filing date, there were **no outstanding borrowings**, and the company was in **compliance with all financial covenants**[51](index=51&type=chunk)[52](index=52&type=chunk) [Note 10. Commitments and Contingencies](index=23&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) This section details the company's lease obligations, major vendor relationships, purchase commitments, and retirement plan contributions - The company leases property and equipment under operating leases, with **ROU assets and liabilities recorded for terms greater than 12 months**[53](index=53&type=chunk) [Lease Obligations](index=23&type=section&id=Lease%20Obligations) Details the company's lease commitments, including new headquarters leases and termination costs - In **December 2019**, the company terminated the lease for its former corporate headquarters, incurring a **$1.1 million net loss**[56](index=56&type=chunk) - New corporate headquarters leases commenced in **September 2019**, with **additional space to be occupied in the second half of 2020 and 2021**[57](index=57&type=chunk) Operating Lease Liabilities (In thousands) | Item | June 30, 2020 | December 31, 2019 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Right of use operating lease assets | $15,126 | $15,885 | $(759) | (4.8)% | | Operating lease liabilities (Current) | $1,508 | $1,454 | $54 | 3.7% | | Operating lease liabilities (Non-current) | $14,798 | $15,134 | $(336) | (2.2)% | | Total Operating lease liabilities | $16,306 | $16,588 | $(282) | (1.7)% | - As of **June 30, 2020**, the company has **additional lease commitments of $13.9 million for uncommenced building leases**[60](index=60&type=chunk) [Major Vendors](index=27&type=section&id=Major%20Vendors) Identifies major vendors and their significant contribution to total purchases - Two major vendors accounted for **33% and 32% of total purchases** for the three and six months ended **June 30, 2020**, respectively[62](index=62&type=chunk) [Purchase Commitments](index=27&type=section&id=Purchase%20Commitments) Outlines the company's future purchase commitments for goods - The company had **$24.4 million in purchase commitments for goods expected within the next year** as of **June 30, 2020**[63](index=63&type=chunk) [Retirement Plan](index=27&type=section&id=Retirement%20Plan) Details the company's discretionary contributions to its 401(k) retirement plan - **Discretionary contributions to the 401(k) plan were $0.1 million** for each of the three and six months ended **June 30, 2020** and **2019**[64](index=64&type=chunk) [Note 11. Stockholders' Equity](index=27&type=section&id=Note%2011.%20Stockholders%27%20Equity) This section details the company's equity incentive plan, stock-based compensation expenses, and awards granted to the new President and CEO - The **2016 Equity Incentive Plan** authorizes grants of **stock options, RSUs, and other awards**, with **4,709,363 shares available for future grant** as of **June 30, 2020**[65](index=65&type=chunk) - A new **President and CEO** was appointed effective **June 8, 2020**, and will receive **restricted stock units and stock option awards under the 2016 Plan**, with **specific vesting conditions**[67](index=67&type=chunk) [Stock-Based Compensation](index=27&type=section&id=Stock-Based%20Compensation) Details the company's stock-based compensation expense across various categories Stock-Based Compensation Expense (In thousands) | Expense Category | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $105 | $76 | $187 | $174 | | Sales and marketing expenses | $1,233 | $1,067 | $2,479 | $2,233 | | Research and development expenses | $94 | $100 | $182 | $180 | | Reimbursement, general and administrative expenses | $964 | $1,031 | $2,276 | $2,470 | | Total stock-based compensation expense | $2,396 | $2,274 | $5,124 | $5,057 | [Stock Options](index=29&type=section&id=Stock%20Options) Outlines the expense and unrecognized compensation related to stock options Stock Option Expense (In thousands) | Period | Stock Option Expense | | :-------------------------------- | :------------------- | | 3 Months Ended June 30, 2020 | $1,000 | | 3 Months Ended June 30, 2019 | $700 | | 6 Months Ended June 30, 2020 | $1,800 | | 6 Months Ended June 30, 2019 | $1,400 | - As of **June 30, 2020**, **$8.5 million of unrecognized pre-tax stock option expense remains**, to be **recognized over a weighted-average period of 2.3 years**[70](index=70&type=chunk) [Time-Based Restricted Stock Units](index=29&type=section&id=Time-Based%20Restricted%20Stock%20Units) Details the expense and unrecognized compensation for time-based restricted stock units Time-Based Restricted Stock Unit Expense (In thousands) | Period | Time-Based RSU Expense | | :-------------------------------- | :--------------------- | | 3 Months Ended June 30, 2020 | $1,400 | | 3 Months Ended June 30, 2019 | $1,000 | | 6 Months Ended June 30, 2020 | $2,600 | | 6 Months Ended June 30, 2019 | $1,900 | - As of **June 30, 2020**, **$8.6 million of unrecognized pre-tax compensation expense for time-based RSUs** is **expected to be recognized over a weighted-average period of 2.1 years**[72](index=72&type=chunk) [Performance-Based Restricted Stock Units](index=31&type=section&id=Performance-Based%20Restricted%20Stock%20Units) Details the expense and unrecognized compensation for performance-based restricted stock units Performance-Based Restricted Stock Unit Expense (In thousands) | Period | PSU Expense (Benefit) | | :-------------------------------- | :-------------------- | | 3 Months Ended June 30, 2020 | $(300) | | 3 Months Ended June 30, 2019 | $500 | | 6 Months Ended June 30, 2020 | $100 | | 6 Months Ended June 30, 2019 | $1,200 | - The **Q2 2020 benefit** includes a **$1.0 million adjustment** due to **2019 PSUs falling below the minimum performance target**[75](index=75&type=chunk) - As of **June 30, 2020**, **$1.9 million of unrecognized pre-tax compensation expense for PSUs** is expected to be recognized over a **weighted-average period of 2.1 years**[75](index=75&type=chunk) [Employee Stock Purchase Plan](index=32&type=section&id=Employee%20Stock%20Purchase%20Plan) Describes the Employee Stock Purchase Plan and related compensation expense - The **ESPP** allows employees to purchase common stock at **85%** of the lower of the closing market price on the first or last trading day of each **six-month purchase period**[77](index=77&type=chunk) - As of **June 30, 2020**, **1,618,335 shares** were available for future issuance under the **ESPP**[78](index=78&type=chunk) ESPP Stock-Based Compensation Expense (In thousands) | Period | ESPP Expense | | :-------------------------------- | :----------- | | 3 Months Ended June 30, 2020 | $300 | | 3 Months Ended June 30, 2019 | $200 | | 6 Months Ended June 30, 2020 | $600 | | 6 Months Ended June 30, 2019 | $500 | [Note 12. Revenue](index=33&type=section&id=Note%2012.%20Revenue) Provides a detailed breakdown of revenue by product category and payer type Revenue by Product Category (In thousands) | Product Category | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change ($) | Change (%) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Flexitouch system | $31,127 | $40,959 | $(9,832) | (24.0)% | $69,713 | $75,068 | $(5,355) | (7.1)% | | Other products (primarily Entre) | $3,993 | $4,241 | $(248) | (5.8)% | $9,082 | $7,749 | $1,333 | 17.2% | | Total Revenue | $35,120 | $45,200 | $(10,080) | (22.3)% | $78,795 | $82,817 | $(4,022) | (4.9)% | Revenue by Payer (In thousands) | Payer | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change ($) | Change (%) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Private insurers and other payers | $25,668 | $32,143 | $(6,475) | (20.1)% | $55,905 | $58,025 | $(2,120) | (3.7)% | | Veterans Administration | $4,322 | $8,255 | $(3,933) | (47.6)% | $11,380 | $15,925 | $(4,545) | (28.5)% | | Medicare | $5,130 | $4,802 | $328 | 6.8% | $11,510 | $8,867 | $2,643 | 29.8% | | Total | $35,120 | $45,200 | $(10,080) | (22.3)% | $78,795 | $82,817 | $(4,022) | (4.9)% | - **Rental agreements initiated after January 1, 2019**, are recognized as **sales-type leases**, with **revenue and cost of revenue recognized upon lease commencement**[82](index=82&type=chunk)[83](index=83&type=chunk) [Note 13. Income Taxes](index=35&type=section&id=Note%2013.%20Income%20Taxes) Details the company's income tax expense or benefit and effective tax rates Income Tax Expense (Benefit) (In thousands) | Period | Income Tax Expense (Benefit) | Effective Tax Rate | | :-------------------------------- | :--------------------------- | :----------------- | | 3 Months Ended June 30, 2020 | $5,923 | 75% | | 3 Months Ended June 30, 2019 | $422 | 14% | | 6 Months Ended June 30, 2020 | $3,045 | 25% | | 6 Months Ended June 30, 2019 | $(2,691) | (172)% | - The **change in effective tax rate** is primarily due to a **change in projected taxable income and proportionately lower benefits for stock-based compensation**[88](index=88&type=chunk)[89](index=89&type=chunk) [Note 14. Net Income Per Share](index=36&type=section&id=Note%2014.%20Net%20Income%20Per%20Share) Presents the company's basic and diluted net income per share calculations Net (Loss) Income Per Share | Item | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net (loss) income | $(13,850) | $2,785 | $(15,157) | $4,257 | | Basic EPS | $(0.72) | $0.15 | $(0.79) | $0.23 | | Diluted EPS | $(0.72) | $0.14 | $(0.79) | $0.22 | - **Common stock equivalents** (restricted stock units, stock options, performance stock units, **ESPP**) totaling **1,330,395** for **Q2 2020** and **1,327,074** for **H1 2020** were excluded from diluted EPS as they were anti-dilutive due to the **net loss**[92](index=92&type=chunk) [Note 15. Fair Value Measurements](index=36&type=section&id=Note%2015.%20Fair%20Value%20Measurements) Describes the company's fair value measurements hierarchy and asset valuations - **Fair value measurements** use a **three-level hierarchy**, with **money market mutual funds and U.S. government/agency obligations valued using Level 1 inputs**[93](index=93&type=chunk)[94](index=94&type=chunk) - The **fair value of intangible assets related to the Airwear wrap product line was re-measured to $0** as of **June 30, 2020**, due to **impairment**[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting the significant impact of the COVID-19 pandemic on revenue and operations. It details the results of operations for the three and six months ended June 30, 2020, compared to 2019, and discusses liquidity, capital resources, and the effects of the CARES Act - As of **June 30, 2020**, **principal liquidity sources were $31.3 million in cash and cash equivalents, $6.0 million in marketable securities, and $30.6 million in net accounts receivable**[134](index=134&type=chunk) - The company believes its **current capital resources**, including the **Credit Agreement**, will be **sufficient to meet working capital and capital expenditure requirements for at least the next twelve months**, despite the **COVID-19 pandemic**[147](index=147&type=chunk) [Coronavirus (COVID-19) Impact](index=38&type=section&id=Coronavirus%20%28COVID-19%29%20Impact) Details the significant negative impacts and operational adjustments due to the COVID-19 pandemic - The **COVID-19 pandemic** has negatively impacted the global economy and the company's business, with **long-term effects currently unestimable**[98](index=98&type=chunk) - Modified manufacturing shifts and implemented stringent safety measures[99](index=99&type=chunk) - Incorporated remote and flexible work arrangements[99](index=99&type=chunk) - Continued employee travel and contact restrictions[99](index=99&type=chunk) - Collaborated with payers for virtual patient interactions[99](index=99&type=chunk) - Moved to a "**no contact**" virtual patient training model, inactivating independent healthcare practitioners[99](index=99&type=chunk) - Transitioned medical education programs to virtual meetings[99](index=99&type=chunk) [Overview of Business and Products](index=40&type=section&id=Overview%20of%20Business%20and%20Products) Provides an overview of the company's medical device products, strategic focus, and sales force adjustments - **Tactile Medical** develops and provides innovative **medical devices** (**Flexitouch and Entre systems**) for chronic diseases, primarily **lymphedema and chronic venous insufficiency**, with a focus on **at-home care**[100](index=100&type=chunk) - The **Flexitouch system** is the primary revenue driver, accounting for **88% and 91% of revenue in H1 2020 and H1 2019**, respectively[101](index=101&type=chunk) - The company discontinued the **Airwear wrap product line** in **Q2 2020** to **focus on core franchises**, leading to a **$4.0 million non-cash impairment charge**[103](index=103&type=chunk) - The direct sales force grew to **250 employees** as of **June 30, 2020**, and the company transitioned to a "**no contact**" virtual patient training model due to **COVID-19**[104](index=104&type=chunk)[105](index=105&type=chunk) [Results of Operations Comparison](index=43&type=section&id=Results%20of%20Operations%20Comparison) This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2020, versus 2019. It highlights significant revenue declines, increased operating expenses (especially G&A due to impairment), and a shift from net income to net loss, largely driven by the COVID-19 pandemic and the Airwear wrap discontinuation [Revenue Analysis](index=45&type=section&id=Revenue%20Analysis) Analyzes the company's revenue performance, highlighting declines due to the COVID-19 pandemic Revenue Performance (In thousands) | Item | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change ($) | Change (%) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenue | $35,120 | $45,200 | $(10,080) | (22)% | $78,795 | $82,817 | $(4,022) | (5)% | | Flexitouch system revenue | $31,127 | $40,959 | $(9,832) | (24)% | $69,713 | $75,068 | $(5,355) | (7)% | | Other products (Entre) revenue | $3,993 | $4,241 | $(248) | (6)% | $9,082 | $7,749 | $1,333 | 17% | - The decrease in revenue was primarily attributable to the **COVID-19 pandemic**, which limited access to clinician customers and patients[116](index=116&type=chunk)[117](index=117&type=chunk) - **Veterans Administration revenue decreased by 47.6% in Q2 2020 and 28.5% in H1 2020**[118](index=118&type=chunk) - **Medicare revenue increased by 6.8% in Q2 2020 and 29.8% in H1 2020**[118](index=118&type=chunk) [Cost of Revenue and Gross Margin Analysis](index=46&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin%20Analysis) Analyzes the cost of revenue and gross margin, noting impacts from sales declines and impairment charges Cost of Revenue and Gross Margin (In thousands) | Item | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | Change ($) | Change (%) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total cost of revenue | $10,208 | $13,695 | $(3,487) | (25)% | $22,810 | $25,054 | $(2,244) | (9)% | | Gross profit | $24,912 | $31,505 | $(6,593) | (21)% | $55,985 | $57,763 | $(1,778) | (3)% | | Gross margin rate | 71% | 70% | 1% | 1.4% | 71% | 70% | 1% | 1.4% | - The decrease in cost of revenue was primarily due to lower **Flexitouch system** sales/rentals and a **$0.4 million inventory impairment charge** for the **Airwear wrap**[122](index=122&type=chunk) [Sales and Marketing Expenses Analysis](index=46&type=section&id=Sales%20and%20Marketing%20Expenses%20Analysis) Details changes in sales and marketing expenses, driven by personnel costs and reduced external activities Sales and Marketing Expenses (In thousands) | Period | Sales and Marketing Expenses | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------- | :--------- | | 3 Months Ended June 30, 2020 | $17,398 | $(1,020) | (6)% | | 3 Months Ended June 30, 2019 | $18,418 | | | | 6 Months Ended June 30, 2020 | $40,368 | $4,559 | 13% | | 6 Months Ended June 30, 2019 | $35,809 | | | - **Q2 2020** decrease driven by[124](index=124&type=chunk) - **$1.7 million** reduction in external patient training[124](index=124&type=chunk) - **$0.8 million** reduction in travel and entertainment[124](index=124&type=chunk) - **$0.6 million** decrease from reduced tradeshows and professional services[124](index=124&type=chunk) - Partially offset by **$2.1 million** increase in personnel-related compensation[124](index=124&type=chunk) - **H1 2020** increase driven by[125](index=125&type=chunk) - **$5.8 million** increase in personnel-related compensation expense[125](index=125&type=chunk) - Partially offset by **$1.2 million** reduction in other sales associated expenses (patient training, travel)[125](index=125&type=chunk) [Research and Development Expenses Analysis](index=48&type=section&id=Research%20and%20Development%20Expenses%20Analysis) Analyzes R&D expenses, noting impacts from clinical study slowdowns and team investments Research and Development Expenses (In thousands) | Period | R&D Expenses | Change ($) | Change (%) | | :-------------------------------- | :------------- | :--------- | :--------- | | 3 Months Ended June 30, 2020 | $1,105 | $(129) | (10)% | | 3 Months Ended June 30, 2019 | $1,234 | | | | 6 Months Ended June 30, 2020 | $2,789 | $274 | 11% | | 6 Months Ended June 30, 2019 | $2,515 | | | - **Q2 2020** decrease primarily due to slowing clinical studies activities as a result of **COVID-19**[128](index=128&type=chunk) - **H1 2020** increase primarily due to **Q1** investments in R&D team and clinical studies, partially offset by **COVID-19** related slowdown[129](index=129&type=chunk) [Reimbursement, General and Administrative Expenses Analysis](index=48&type=section&id=Reimbursement%2C%20General%20and%20Administrative%20Expenses%20Analysis) Details changes in G&A expenses, primarily due to impairment charges and increased occupancy costs Reimbursement, General and Administrative Expenses (In thousands) | Period | Reimbursement, G&A Expenses | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :--------- | :--------- | | 3 Months Ended June 30, 2020 | $14,372 | $5,561 | 63% | | 3 Months Ended June 30, 2019 | $8,811 | | | | 6 Months Ended June 30, 2020 | $25,242 | $7,037 | 39% | | 6 Months Ended June 30, 2019 | $18,205 | | | - Key drivers for increase[130](index=130&type=chunk)[131](index=131&type=chunk) - **$3.6 million impairment charge** for **Airwear wrap long-lived assets**[130](index=130&type=chunk)[131](index=131&type=chunk) - Increased occupancy costs, depreciation expense, legal and professional fees (**$1.7 million in Q2, $2.5 million in H1**)[130](index=130&type=chunk)[131](index=131&type=chunk) - Increased personnel-related compensation expense (**$0.3 million in Q2, $0.9 million in H1**) due to increased headcount[130](index=130&type=chunk)[131](index=131&type=chunk) [Other Income, Net Analysis](index=48&type=section&id=Other%20Income%2C%20Net%20Analysis) Analyzes other income, net, primarily influenced by interest income and a one-time gain Other Income, Net (In thousands) | Period | Other Income, Net | Change ($) | Change (%) | | :-------------------------------- | :---------------- | :--------- | :--------- | | 3 Months Ended June 30, 2020 | $36 | $(129) | (78)% | | 3 Months Ended June 30, 2019 | $165 | | | | 6 Months Ended June 30, 2020 | $302 | $(30) | (9)% | | 6 Months Ended June 30, 2019 | $332 | | | - Other income was primarily impacted by interest income on marketable securities and a one-time gain on a cost method investment in **Q1 2020**[132](index=132&type=chunk) [Income Taxes Analysis](index=48&type=section&id=Income%20Taxes%20Analysis) Analyzes income tax expense, primarily due to changes in tax-deductible share-based compensation Income Tax Expense (Benefit) (In thousands) | Period | Income Tax Expense (Benefit) | | :-------------------------------- | :--------------------------- | | 3 Months Ended June 30, 2020 | $5,923 | | 3 Months Ended June 30, 2019 | $422 | | 6 Months Ended June 30, 2020 | $3,045 | | 6 Months Ended June 30, 2019 | $(2,691) | - The change in income tax expense was primarily due to a decrease in tax-deductible share-based compensation activity[133](index=133&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows, credit agreement details, assessment of capital adequacy, impact of the CARES Act, and other financial commitments and policies [Cash Flows Analysis](index=50&type=section&id=Cash%20Flows%20Analysis) Analyzes the company's cash flows from operating, investing, and financing activities Cash Flow Summary (In thousands) | Activity | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | Change ($) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Operating activities | $(7,980) | $851 | $(8,831) | | Investing activities | $15,731 | $3,714 | $12,017 | | Financing activities | $820 | $376 | $444 | | Net increase in cash and cash equivalents | $8,571 | $4,941 | $3,630 | - **Net cash used in operating activities for H1 2020 was $8.0 million**, primarily due to a **net loss of $15.2 million** and a **$7.7 million net decrease in operating assets and liabilities**, partially offset by **$14.8 million in non-cash adjustments**[136](index=136&type=chunk) - **Net cash provided by investing activities for H1 2020 was $15.7 million**, mainly from **$16.5 million in proceeds from marketable securities maturities**[138](index=138&type=chunk) - **Net cash provided by financing activities for H1 2020 was $0.8 million**, from **$2.4 million in stock option/ESPP proceeds**, offset by **$1.6 million in taxes paid for RSU settlements**[140](index=140&type=chunk) [Credit Agreement Details](index=52&type=section&id=Credit%20Agreement%20Details) Details the company's revolving credit facility and compliance with financial covenants - The company has a **$10.0 million revolving credit facility**, with **potential to increase to $35.0 million**, expiring **August 3, 2021**[144](index=144&type=chunk) - As of **June 30, 2020**, and the filing date, there were **no outstanding borrowings**, and the company was in **compliance with all financial covenants**[144](index=144&type=chunk)[145](index=145&type=chunk) [Adequacy of Capital Resources Assessment](index=52&type=section&id=Adequacy%20of%20Capital%20Resources%20Assessment) Assesses the sufficiency of the company's liquidity sources to meet future capital requirements - The company believes its **current liquidity sources are sufficient to meet working capital and capital expenditure requirements for at least the next twelve months**[147](index=147&type=chunk) - Future capital requirements depend on factors including[146](index=146&type=chunk)[149](index=149&type=chunk) - Impact of the **COVID-19 pandemic**[146](index=146&type=chunk)[149](index=149&type=chunk) - Sales and marketing resources for market penetration[146](index=146&type=chunk)[149](index=149&type=chunk) - Expansion of operations[146](index=146&type=chunk)[149](index=149&type=chunk) - Costs associated with clinical research and new product development[146](index=146&type=chunk)[149](index=149&type=chunk) - Use of capital for acquisitions or licenses[146](index=146&type=chunk)[149](index=149&type=chunk) [CARES Act Impact](index=54&type=section&id=CARES%20Act%20Impact) Outlines the financial impacts of the CARES Act, including NOL carrybacks and relief funds - The **CARES Act** enabled the company to carry back NOLs, leading to a **$2.6 million income tax receivable in Q1 2020**[151](index=151&type=chunk) - The company received **$1.2 million in relief funds** for healthcare providers under the **CARES Act** and is evaluating its financial statement impact[152](index=152&type=chunk) [Contractual and Commercial Commitments Summary](index=54&type=section&id=Contractual%20and%20Commercial%20Commitments%20Summary) Confirms no material changes to contractual and commercial commitments - **No material changes to contractual and commercial commitments** since **December 31, 2019**[153](index=153&type=chunk) [Off-Balance Sheet Arrangements](index=54&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of off-balance sheet arrangements - The company has **no off-balance sheet arrangements, special purpose entities, undisclosed borrowings, debt, derivative contracts, or synthetic leases**[154](index=154&type=chunk) [Recent Accounting Pronouncements](index=54&type=section&id=Recent%20Accounting%20Pronouncements) Refers to detailed disclosures on recent accounting pronouncements - Refer to **Note 3** for details on recent accounting pronouncements[155](index=155&type=chunk) [Critical Accounting Policies and Estimates](index=54&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights critical accounting policies and estimates relying on management's judgment - **Critical accounting policies and estimates** are discussed in the Annual Report on **Form 10-K**, highlighting their importance and reliance on management's judgment[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's market risks since December 31, 2019, as previously discussed in the Annual Report on Form 10-K - **No material changes in market risks** since **December 31, 2019**[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2020, and concluded they were effective at a reasonable assurance level. There were no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=55&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures as evaluated by management - As of **June 30, 2020**, the **CEO and CFO concluded that disclosure controls and procedures were effective at the reasonable assurance level**[158](index=158&type=chunk) [Changes in Internal Control over Financial Reporting](index=55&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Confirms no material changes in internal control over financial reporting during the quarter - **No material changes in internal control over financial reporting** occurred during the quarter ended **June 30, 2020**[159](index=159&type=chunk) [PART II—OTHER INFORMATION](index=55&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal claims in the ordinary course of business. A significant ongoing case is a qui tam action filed in February 2019, alleging violations of the Federal Anti-Kickback Statute and False Claims Act. The company denies the allegations and is vigorously defending the lawsuit, with a motion to dismiss counterclaims currently pending - The company is defending against a **qui tam action** filed in **February 2019**, alleging violations of the **Federal Anti-Kickback Statute and False Claims Act**[161](index=161&type=chunk) - The **United States declined to intervene in the action**, and the company believes the allegations are without merit[161](index=161&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors, emphasizing that the COVID-19 pandemic is likely to impact and exacerbate many existing risks. It details potential negative impacts of the pandemic, including reduced product demand, reimbursement issues, inability to conduct virtual operations, supply chain disruptions, workforce limitations, and increased cybersecurity risks, all of which could materially adversely affect the business - The **COVID-19 pandemic is expected to adversely affect the business, financial condition, and results of operations**, and may exacerbate or trigger existing risk factors[163](index=163&type=chunk) - Further reduced demand for products[165](index=165&type=chunk)[167](index=167&type=chunk) - Reductions in coverage or reimbursement of products by payers[165](index=165&type=chunk)[167](index=167&type=chunk) - Inability to effectively conduct virtual patient demonstrations and trainings[165](index=165&type=chunk)[167](index=167&type=chunk) - Continued restricted access to clinicians and healthcare facilities[165](index=165&type=chunk)[167](index=167&type=chunk) - Disruptions to the supply chain[165](index=165&type=chunk)[167](index=167&type=chunk) - Limitations on workforce ability to perform duties[165](index=165&type=chunk)[167](index=167&type=chunk) - Increased risks of cybersecurity attacks[165](index=165&type=chunk)[167](index=167&type=chunk) - Increased unemployment rates leading to reduced insurance coverage[165](index=165&type=chunk)[167](index=167&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no recent unregistered sales of preferred or common stock. The company received net proceeds of approximately $35.4 million from its initial public offering in August 2016, which were held in a diversified portfolio of liquid investments. There has been no material change in the planned uses of these proceeds - **No recent unregistered sales of equity securities**[169](index=169&type=chunk) - **Net proceeds of approximately $35.4 million from the August 2016 IPO were held in liquid investments**, with **no material change in planned uses**[171](index=171&type=chunk)[172](index=172&type=chunk) [Item 3. Defaults Upon Senior Securities](index=59&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - **Not applicable**[173](index=173&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - **Not applicable**[174](index=174&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section discloses the termination of the License Agreement with Sun Scientific, Inc. for the Airwear wrap, effective July 31, 2020, due to failure to meet minimum net sales. This follows the company's strategic decision in Q2 2020 to discontinue the Airwear wrap product line and focus on core franchises, which resulted in a $4.0 million non-cash impairment charge - The **License Agreement with Sun Scientific, Inc. for the Airwear wrap was terminated effective July 31, 2020**, due to the company not meeting **minimum net sales requirements**[176](index=176&type=chunk) - The termination follows a **Q2 2020 strategic decision to discontinue the Airwear wrap product line**, resulting in a **$4.0 million non-cash impairment charge to write-off inventory and long-lived assets**[177](index=177&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, offer letters, certifications (e.g., CEO/CFO certifications), and XBRL financial statements - The **exhibit index lists documents such as amended certificates of incorporation and by-laws, an offer letter for the new CEO, CEO/CFO certifications, and Inline XBRL financial statements**[181](index=181&type=chunk) [Signatures](index=62&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming the registrant's due authorization for filing, signed by the Chief Financial Officer - The report is signed by **Brent A. Moen, Chief Financial Officer**, on behalf of **Tactile Systems Technology, Inc.**[185](index=185&type=chunk)

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q1 2020 Earnings Conference Call May 4, 2020 8:00 AM ET Company Participants Gerald Mattys - Chief Executive Officer Brent Moen - Chief Financial Officer Conference Call Participants Matthew O’Brien - Piper Sandler Companies Cecilia Furlong - Canaccord Genuity, Inc. Margaret Kaczor - William Blair & Company Christopher Pasquale - Guggenheim Partners Ryan Zimmerman - BTIG LLC Operator Please stand by. Good morning, ladies and gentlemen, and welcome to the First ...

[PART I—FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section contains the unaudited condensed consolidated financial statements for the quarter ended March 31, 2020, Management's Discussion and Analysis (MD&A) of the company's financial condition and results of operations, and disclosures on market risk and internal controls [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) For the three months ended March 31, 2020, Tactile Systems Technology reported total assets of **$155.5 million** and total liabilities of **$42.5 million**, with revenue of **$43.7 million** and a net loss of **$1.3 million** [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands of dollars) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $32,297 | $22,770 | | Total current assets | $112,321 | $108,335 | | Total assets | $155,519 | $151,752 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $24,721 | $21,428 | | Total liabilities | $42,479 | $39,157 | | Total stockholders' equity | $113,040 | $112,595 | | Total liabilities and stockholders' equity | $155,519 | $151,752 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2020 vs Q1 2019 Statement of Operations (in thousands of dollars, except per share data) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Total revenue | $43,675 | $37,617 | | Gross profit | $31,073 | $26,258 | | Total operating expenses | $35,524 | $28,060 | | Loss from operations | ($4,451) | ($1,802) | | Net (loss) income | ($1,307) | $1,472 | | Diluted EPS | ($0.07) | $0.08 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2020 vs Q1 2019 Cash Flow Summary (in thousands of dollars) | Cash Flow Activity | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $909 | $1,273 | | Net cash provided by investing activities | $9,606 | $3,725 | | Net cash used in financing activities | ($988) | ($1,549) | | **Net increase in cash and cash equivalents** | **$9,527** | **$3,449** | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) - The company's business is seasonal, with substantially reduced demand in the first quarter due to patients' insurance deductibles resetting. This trend may be significantly different in 2020 due to the COVID-19 pandemic[29](index=29&type=chunk) - In response to COVID-19, the company has implemented measures such as remote work, virtual patient training, and modified manufacturing shifts to protect employees while continuing operations as an essential business[33](index=33&type=chunk)[36](index=36&type=chunk) Revenue by Product (in thousands of dollars) | Product | Q1 2020 Revenue | Q1 2019 Revenue | % of Total (2020) | | :--- | :--- | :--- | :--- | | Flexitouch system | $38,586 | $34,109 | 88% | | Other products | $5,089 | $3,508 | 12% | | **Total** | **$43,675** | **$37,617** | **100%** | Revenue by Payer (in thousands of dollars) | Payer | Q1 2020 Revenue | Q1 2019 Revenue | | :--- | :--- | :--- | | Private insurers and other payers | $30,237 | $25,882 | | Veterans Administration | $7,058 | $7,670 | | Medicare | $6,380 | $4,065 | | **Total** | **$43,675** | **$37,617** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a **16%** year-over-year revenue increase to **$43.7 million** for Q1 2020, driven by Flexitouch system sales, despite COVID-19 impact, leading to an operating loss of **$4.5 million** [Overview](index=24&type=section&id=Overview) - The company's direct sales force expanded to **over 250 employees** as of March 31, 2020, from **over 210 employees** a year prior, supporting its direct-to-patient and -provider model[107](index=107&type=chunk) - The COVID-19 pandemic has restricted access to clinicians and patients, prompting a shift to virtual interactions, and patient recruitment for clinical studies has been suspended[108](index=108&type=chunk)[110](index=110&type=chunk) - To date, the company's supply chain has not been materially impacted by COVID-19, and it believes it has sufficient safety stock for short and mid-term demand[112](index=112&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) - Revenue increased **16%** to **$43.7 million** in Q1 2020, with strong growth in January and February negatively impacted by the COVID-19 pandemic beginning in March[116](index=116&type=chunk) - The increase in revenue was driven by a **$4.5 million (13%)** rise in Flexitouch system sales and a **$1.6 million (45%)** increase in sales of other products, primarily the Entre system[117](index=117&type=chunk) - Sales and marketing expenses rose by **$5.6 million (32%)** year-over-year, mainly due to continued investment in the field sales team, including increased personnel-related compensation[123](index=123&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2020, principal sources of liquidity included **$32.3 million** in cash and cash equivalents, **$12.5 million** in marketable securities, and an undrawn **$10.0 million** revolving credit facility[128](index=128&type=chunk)[136](index=136&type=chunk) - The company believes its existing cash, marketable securities, and operating cash flows, along with its credit facility, will be sufficient to meet capital requirements for at least the next twelve months[139](index=139&type=chunk) - Under the CARES Act, the company was able to carry back net operating losses (NOLs), resulting in the recording of a **$2.6 million** income tax receivable[143](index=143&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reported no material changes to its market risks since its Annual Report on Form 10-K for the year ended December 31, 2019 - There have been no material changes in the company's market risks from those disclosed in the 2019 Annual Report on Form 10-K[148](index=148&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective at a reasonable assurance level[150](index=150&type=chunk) - No changes occurred during the quarter ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[151](index=151&type=chunk) [PART II—OTHER INFORMATION](index=33&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section covers other required disclosures, including legal proceedings, risk factors, and information on equity securities, highlighting an ongoing qui tam lawsuit and COVID-19 as a new risk [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a qui tam lawsuit filed by a competitor alleging violations of the Federal Anti-Kickback Statute and False Claims Act, with the U.S. government declining to intervene - The company is defending a qui tam action filed by a competitor alleging violations related to Medicare and Medicaid programs, with the United States declining to intervene in the case[153](index=153&type=chunk) - A motion to dismiss the case was denied in February 2020, and the company filed its answer and asserted counterclaims in March 2020, believing the plaintiff's allegations are without merit[153](index=153&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 pandemic is identified as a new, significant risk factor expected to adversely affect the business through reduced demand, supply chain disruptions, and workforce limitations - The COVID-19 pandemic is introduced as a new risk factor that has adversely affected the business and is expected to continue doing so[155](index=155&type=chunk) - Key potential negative impacts from the pandemic include reduced demand for products, disruptions to the supply chain, continued restricted access to clinicians, and limitations on the ability of the workforce to perform their duties effectively[158](index=158&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during Q1 2020 and no material change in the planned use of IPO proceeds - There were no unregistered sales of common or preferred stock during the quarter[158](index=158&type=chunk) - There has been no material change in the company's planned use of the net proceeds from its initial public offering in 2016[161](index=161&type=chunk) [Item 3. Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable as the company has no defaults upon senior securities to report - Not applicable[162](index=162&type=chunk) [Item 4. Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[163](index=163&type=chunk) [Item 5. Other Information](index=35&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the quarter - None[164](index=164&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer - The report includes various exhibits, such as forms of stock option and restricted stock unit agreements, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act[167](index=167&type=chunk)

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q4 2019 Earnings Conference Call February 26, 2020 5:00 PM ET Company Participants Gerald Mattys - Chief Executive Officer Brent Moen - Chief Financial Officer Conference Call Participants Malgorzata Kaczor - William Blair & Company LLC Christopher Pasquale - Guggenheim Securities, LLC Ryan Zimmerman - BTIG LLC Matthew O'Brien - Piper Jaffray John Young - Canaccord Genuity Operator Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter of 2019 ...