While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies. Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors rely on traditional forms of analysis on key valuation metrics to f ...

After reaching an important support level, Tactile Systems Technology (TCMD) could be a good stock pick from a technical perspective. TCMD surpassed resistance at the 20-day moving average, suggesting a short-term bullish trend. The 20-day simple moving average is a popular trading tool. It provides a look back at a stock's price over a 20-day period, and is beneficial to short-term traders since it smooths out price fluctuations and provides more trend reversal signals than longer-term moving averages. Lik ...

Company Overview - Tactile Systems Technology, Inc. (doing business as Tactile Medical) is a medical technology company focused on providing therapies for individuals with chronic disorders [4] - The company specializes in at-home therapies for conditions such as lymphedema, lipedema, chronic venous insufficiency, and chronic pulmonary disease [4] - Tactile Medical aims to improve the quality of life for patients by collaborating with clinicians to enhance clinical evidence, raise awareness, and increase access to care [4] Financial Results Announcement - The company will release its second quarter financial results for fiscal year 2024 after market close on August 5, 2024 [1] - A conference call will be held on the same day at 5:00 p.m. Eastern Time to discuss the quarterly results, which will include a question and answer session [3] - For those unable to attend the live call, a replay will be available for two weeks, and a webcast will be archived on the company's investor relations website [2]

MINNEAPOLIS, May 21, 2024 (GLOBE NEWSWIRE) -- Tactile Systems Technology, Inc. ("Tactile Medical"; the "Company") (Nasdaq: TCMD), a medical technology company providing therapies for people with chronic disorders, today announced that management will participate in the William Blair 44th Annual Growth Stock Conference, which is being held at the Loews Hotel in Chicago, IL from June 4th - 6th. Management will participate in a fireside chat on Tuesday, June 4th at 9:20 a.m. Central Time. A live audio webcast ...

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q1 2024 Earnings Conference Call May 6, 2024 5:00 PM ET Company Participants Sam Bentzinger – Investor Relations-Gilmartin Group LLC Dan Reuvers – President and Chief Executive Officer Elaine Birkemeyer – Chief Financial Officer Conference Call Participants Adam Maeder – Piper Sandler Margaret Kaczor – William Blair Suraj Kalia – Oppenheimer & Company Ryan Zimmerman – BTIG Operator Welcome, ladies and gentlemen, to the First Quarter 2024 Earnings Conference Cal ...

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, 2024 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) Indicate by check mark wh ...

Exhibit 99.1 Reaffirms Full Year 2024 Outlook MINNEAPOLIS, MN, May 6, 2024 – Tactile Systems Technology, Inc. ("Tactile Medical"; the "Company") (Nasdaq: TCMD), a medical technology company providing therapies for people with chronic disorders, today reported financial results for the first quarter ended March 31, 2024. First Quarter 2024 Summary: Recent Business Highlights: "We were pleased with our overall first quarter performance. Our lymphedema growth was in line with our expectations for the quarter, ...

Tactile Systems Technology Inc. (NASDAQ:TCMD) Q4 2023 Earnings Conference Call February 20, 2024 8:00 AM ET Company Participants Daniel Reuvers - President, Chief Executive Officer Elaine Birkemeyer - Chief Financial Officer Conference Call Participants Adam Maeder - Piper Sandler Izzy - BTIG Margaret Andrew - William Blair Suraj Kalia - Oppenheimer & Co. Operator Welcome ladies and gentlemen to the fourth quarter and fiscal year 2023 earnings conference call for Tactile Medical. At this time, all participa ...

PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Tactile Medical provides at-home medical devices for chronic diseases like lymphedema and respiratory conditions, generating $274.4 million revenue in 2023 [Overview](index=8&type=section&id=Overview) Tactile Medical specializes in at-home treatment for chronic diseases, using direct-to-patient and DME models for its lymphedema and respiratory products - Tactile Medical's mission is to help people suffering from chronic diseases live better and care for themselves at home, focusing on advancing the standard of care in treating underserved chronic diseases[25](index=25&type=chunk) - The company's therapeutic focus areas include vascular disease (lymphedema, chronic venous insufficiency), oncology (lymphedema in cancer survivors), and chronic respiratory conditions (airway clearance therapy)[25](index=25&type=chunk) - Tactile Medical uses a direct-to-patient and -provider model for its lymphedema portfolio, managing referrals, insurance claims, direct delivery, and patient training[26](index=26&type=chunk) - For respiratory therapy products, it uses a DME distribution model[26](index=26&type=chunk) Financial Performance (Millions) | Metric | 2023 (Millions) | 2022 (Millions) | | :----- | :-------------- | :-------------- | | Revenue | $274.4 | $246.8 | | Net Income | $28.5 | -$17.9 | Product Line Revenue Share | Product Line | 2023 Revenue Share | 2022 Revenue Share | | :------------- | :----------------- | :----------------- | | Lymphedema Products | 88% | 86% | | Airway Clearance Products | 12% | 14% | - As of December 31, 2023, the company employed **254 field sales representatives** for lymphedema products and **16** for airway clearance products, an increase from 241 and 10 respectively in 2022[31](index=31&type=chunk)[390](index=390&type=chunk) - The company is a national, accredited provider of home medical equipment services, approved by private payers, Medicare, Veterans Administration, and certain Medicaid programs, covering over **275 million lives** in the U.S[31](index=31&type=chunk)[33](index=33&type=chunk)[98](index=98&type=chunk) [Overview of Lymphedema and Chronic Venous Insufficiency](index=10&type=section&id=Overview%20of%20Lymphedema%20and%20Chronic%20Venous%20Insufficiency) Lymphedema and Chronic Venous Insufficiency are progressive, often misdiagnosed conditions causing chronic swelling and impaired blood flow, worsening without treatment - Lymphedema is a progressive, incurable chronic swelling resulting from impaired lymphatic vessels, leading to symptoms like swelling, decreased mobility, skin breakdown, pain, and increased infection risk[27](index=27&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - Chronic venous insufficiency (CVI) is a condition where venous walls/valves are ineffective, impeding blood return to the heart, often leading to phlebolymphedema when combined with lymphatic insufficiency[27](index=27&type=chunk)[40](index=40&type=chunk) - Misdiagnosis of lymphedema is common, delaying necessary medical care until significant symptoms manifest[39](index=39&type=chunk) [Market Opportunity (Lymphedema and CVI)](index=12&type=section&id=Market%20Opportunity%20%28Lymphedema%20and%20CVI%29) Lymphedema and CVI affect over 20 million Americans, with the Flexitouch system addressing a $1 billion market for head and neck lymphedema - Over **20 million people** in the United States are estimated to be living with lymphedema due to CVI, cancer-related, and primary lymphedema[41](index=41&type=chunk) - The Flexitouch head and neck system, cleared by the FDA in 2016, is the only pneumatic compression device indicated for debilitating head and neck lymphedema, a condition affecting over **75% of head and neck cancer survivors**[43](index=43&type=chunk) - The estimated market opportunity for the Flexitouch head and neck system in the United States is approximately **$1 billion**[43](index=43&type=chunk) [Traditional Treatment and Limitations (Lymphedema and CVI)](index=14&type=section&id=Traditional%20Treatment%20and%20Limitations%20%28Lymphedema%20and%20CVI%29) Traditional lymphedema and CVI treatments are costly, inconvenient, and often ineffective due to adherence issues and limited clinical benefits of simple devices - Traditional lymphedema treatment, Complete Decongestive Therapy (CDT), involves frequent clinic visits (3-5 times/week for 4-8 weeks), which is costly, inconvenient, and often not completed by patients[44](index=44&type=chunk) - Manual lymphatic drainage is difficult for patients to self-administer, and simple pump-based compression lacks the proven clinical and economic benefits of advanced pneumatic pumps like Flexitouch[44](index=44&type=chunk) - Standard CVI treatment with compression stockings and wraps is challenging for patients to apply, and bandages can lose precise pressure between treatments, leading to inconsistent efficacy[45](index=45&type=chunk) - Consensus guidance from three independent societies in 2022 recommended sequential pneumatic compression for lymphedema patients (**92% agreement**) and considered CVI patients (stages C3-C6) as lymphedema patients (**72% agreement**)[47](index=47&type=chunk) [Overview of Bronchiectasis](index=16&type=section&id=Overview%20of%20Bronchiectasis) Bronchiectasis is a chronic respiratory condition causing inflamed, damaged bronchi, leading to trapped mucus and infections, requiring airway clearance - Bronchiectasis is a COPD-associated condition characterized by inflamed, widened, permanently damaged, and scarred lung bronchi, leading to trapped mucus and chronic infections[48](index=48&type=chunk) - Airway clearance therapies are essential for breaking the cycle of infection and inflammation by mobilizing mucus and phlegm[48](index=48&type=chunk)[50](index=50&type=chunk) [Market Opportunity (Bronchiectasis)](index=16&type=section&id=Market%20Opportunity%20%28Bronchiectasis%29) Bronchiectasis affects over 500,000 U.S. adults, with HFCWO therapy like AffloVest treating this and other respiratory conditions - Bronchiectasis affects over **500,000 U.S. adults** and is growing in the high single-digits annually, with over **4 million COPD patients** potentially affected[49](index=49&type=chunk) - High frequency chest wall oscillation (HFCWO) therapy is used to treat bronchiectasis and over **40 other ICD-10 diagnosis codes**[49](index=49&type=chunk) [Traditional Treatment and Limitations (Bronchiectasis)](index=16&type=section&id=Traditional%20Treatment%20and%20Limitations%20%28Bronchiectasis%29) Traditional airway clearance therapies face adherence and effectiveness challenges, while AffloVest offers portable HFCWO therapy for all lung lobes - Adherence and effectiveness of daily airway clearance therapies (ACT) are significant challenges for patients with chronic respiratory conditions[50](index=50&type=chunk) - AffloVest is a portable, battery-powered HFCWO therapy vest with eight oscillating motors designed to target all lung lobes, loosening and mobilizing secretions[51](index=51&type=chunk)[62](index=62&type=chunk) [Our Strategy](index=16&type=section&id=Our%20Strategy) Tactile Medical's strategy focuses on leading at-home chronic disease treatment through awareness, direct sales, innovation, clinical data, and expanded reimbursement - Key strategic elements include increasing awareness of solutions, utilizing direct sales and customer support teams, demonstrating ongoing innovation, continuing development of clinical and economic outcome data, and expanding third-party reimbursement[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - The company plans to educate physicians, nurses, therapists, patients, payers, and DME providers on diseases and the benefits of its products through training, advertising, tradeshows, and clinical publications[52](index=52&type=chunk) - Investment in internal R&D and external collaborations is focused on new products, features, and expanding the total addressable market through licensing or acquisitions[54](index=54&type=chunk) [Our Products](index=19&type=section&id=Our%20Products) Tactile Medical offers FDA-cleared Flexitouch Plus, Entre Plus, and AffloVest systems for lymphedema and airway clearance, aiming for improved outcomes - Flexitouch Plus and Entre Plus systems are marketed for lymphedema and chronic venous insufficiency, while AffloVest is for airway clearance, all with FDA 510(k) clearance[55](index=55&type=chunk) [Flexitouch Plus System](index=19&type=section&id=Flexitouch%20Plus%20System) Flexitouch Plus is an FDA-cleared automated pneumatic compression device for various edemas, offering 17 settings and Bluetooth for therapy tracking - Flexitouch Plus is an FDA 510(k) cleared advanced pneumatic compression device (APCD) for lymphedema, phlebolymphedema, lipedema, other edemas, venous insufficiencies, and certain leg ulcers[56](index=56&type=chunk) - The system offers **17 treatment settings** and multiple garment configurations for the trunk, chest, head, neck, arms, and legs, making it the only pneumatic compression system with such flexibility[57](index=57&type=chunk) - Beginning November 2022, Flexitouch Plus controllers include Bluetooth capability to report therapy data through the Kylee companion application[58](index=58&type=chunk) [Entre Plus System](index=19&type=section&id=Entre%20Plus%20System) Entre Plus, launched in March 2023, is a basic pneumatic compression device for venous disorders, suitable for simpler needs or specific reimbursement criteria - The Entre Plus system, launched in March 2023, is a basic pneumatic compression device for at-home treatment of venous disorders, including lymphedema and chronic venous insufficiency[59](index=59&type=chunk) - It is designed for patients with cognitive/dexterity issues or those who do not yet qualify for insurance reimbursement for advanced compression devices[59](index=59&type=chunk) [Kylee](index=19&type=section&id=Kylee) Kylee, a 2022 mobile app, supports lymphedema self-care by tracking symptoms, treatments, and sharing progress, integrating with Flexitouch Plus - Kylee™, a free mobile application introduced in 2022, helps lymphedema patients learn about their condition, track symptoms and treatment, and share progress with their doctors[60](index=60&type=chunk) - The app supports self-care by providing onboarding tutorials, treatment/symptom recording, and photo capture for healthcare team sharing, with Bluetooth integration for Flexitouch Plus controllers[60](index=60&type=chunk)[61](index=61&type=chunk) [AffloVest](index=21&type=section&id=AffloVest) Acquired in 2021, AffloVest is a portable HFCWO vest for airway clearance, treating conditions like bronchiectasis by mobilizing secretions - AffloVest, acquired in September 2021, is the first truly portable, battery-powered high-frequency chest wall oscillation (HFCWO) vest[62](index=62&type=chunk) - It treats patients with retained pulmonary secretions from bronchiectasis, cystic fibrosis, and neuromuscular disorders, promoting airway clearance by enhancing bronchial drainage[62](index=62&type=chunk) [Clinical Results and Studies](index=21&type=section&id=Clinical%20Results%20and%20Studies) Over 25 studies confirm Tactile Medical products' safety and efficacy, showing Flexitouch reduces costs and improves lymphedema outcomes, while AffloVest enhances lung function - Over **25 studies** involving more than **2,100 subjects** have been completed, supporting the safety and efficacy of Tactile Medical's products[63](index=63&type=chunk) [Economic Impact of our Flexitouch System in Patients with Phlebolymphedema](index=21&type=section&id=Economic%20Impact%20of%20our%20Flexitouch%20System%20in%20Patients%20with%20Phlebolymphedema) A 2018 study showed the Flexitouch system significantly reduced healthcare costs and resource utilization for phlebolymphedema patients compared to other therapies - A 2018 study found Flexitouch patients had **69% lower** per patient per year total phlebolymphedema-related costs compared to conservative therapy alone[65](index=65&type=chunk) - Flexitouch was associated with **59% fewer** mean annual hospitalizations and **82% lower** inpatient costs compared to conservative therapy[65](index=65&type=chunk) - Compared to simple PCDs, Flexitouch showed **85% lower** total costs, and compared to other APCDs, **53% lower** total costs and reduced cellulitis infections (**22.4% vs 44.9%**)[65](index=65&type=chunk) [Impact on Clinical Outcomes and Healthcare Costs with Use of our Flexitouch System](index=23&type=section&id=Impact%20on%20Clinical%20Outcomes%20and%20Healthcare%20Costs%20with%20Use%20of%20our%20Flexitouch%20System) A JAMA Dermatology study found Flexitouch system use led to significant clinical improvements and cost reductions for lymphedema patients - Flexitouch system use was associated with a **79% decline** in cellulitis diagnosis for cancer-related lymphedema patients and **75%** for non-cancer-related lymphedema patients[67](index=67&type=chunk) - Inpatient hospitalization rates declined by **22%** in the cancer-related group and **54%** in the non-cancer-related group[67](index=67&type=chunk) - Total lymphedema-related healthcare costs (excluding DME) were reduced by **37%** for cancer-related patients and **36%** for non-cancer-related patients following Flexitouch use[68](index=68&type=chunk) [Flexitouch System Impact on Limb Volume and Patient-Reported Outcomes](index=23&type=section&id=Flexitouch%20System%20Impact%20on%20Limb%20Volume%20and%20Patient-Reported%20Outcomes) A prospective study showed Flexitouch system use significantly reduced limb volume, improved skin condition, increased daily activity ability, and enhanced patient satisfaction - Flexitouch system use led to a statistically significant reduction in limb volume, with **88% of patients** experiencing a reduction and **35%** achieving a substantial reduction (**>10%**)[70](index=70&type=chunk) - Clinician assessment showed improvement in skin condition (**86% reduction in fibrosis**) and increased ability to perform daily activities (**85%**) and range of motion (**77%**)[70](index=70&type=chunk) - **66% of patients** reported being 'very satisfied' and **30% 'satisfied'** with Flexitouch treatment, with **95%** perceiving positive limb volume outcomes[71](index=71&type=chunk)[76](index=76&type=chunk) [Comparison of our Flexitouch System with Simple Pneumatic Compression Devices](index=25&type=section&id=Comparison%20of%20our%20Flexitouch%20System%20with%20Simple%20Pneumatic%20Compression%20Devices) A randomized trial demonstrated the Flexitouch system provided superior clinical outcomes for breast cancer-related lymphedema compared to simple pneumatic compression devices - A randomized controlled trial showed the Flexitouch system provided better clinical outcomes for breast cancer-related lymphedema than simple pneumatic compression devices[73](index=73&type=chunk) - The Flexitouch group achieved an average **29% reduction in edema**, while the simple pneumatic compression device group experienced a **16% increase**[74](index=74&type=chunk) [Study of Patient-Reported Satisfaction with Use of our Flexitouch System](index=25&type=section&id=Study%20of%20Patient-Reported%20Satisfaction%20with%20Use%20of%20our%20Flexitouch%20System) A retrospective study indicated high patient satisfaction with the Flexitouch system for lymphedema, showing positive limb volume outcomes and improved health - **90% of patients** in a retrospective study reported satisfaction with the Flexitouch system, with over **65%** being 'extremely satisfied'[76](index=76&type=chunk) - **95% of patients** reported positive limb volume outcomes (maintained or reduced), with **42%** seeing decreases of up to **20%**[76](index=76&type=chunk) - Clinically and statistically significant improvements were observed across all areas of physical and emotional health[76](index=76&type=chunk) [Flexitouch System Impact on Patient-Reported Improved Quality-of-Life](index=25&type=section&id=Flexitouch%20System%20Impact%20on%20Patient-Reported%20Improved%20Quality-of-Life) A prospective study showed Flexitouch system use significantly improved patient-reported quality of life, reduced cellulitis and ulcers, and decreased limb girths - Flexitouch system use was associated with overall improvement in lower extremity-related symptoms, with **54%** reporting greatly improved symptom control[78](index=78&type=chunk) - Cellulitis episodes decreased from **26 to 5** (P=0.002) and lower-extremity ulcers from **7 to 2** (P=0.007) after Flexitouch initiation[78](index=78&type=chunk)[80](index=80&type=chunk) - Statistically significant decreases in overall limb girth were observed at the ankle (**28.3 cm vs. 27.5 cm, P=0.01**) and calf (**44.7 cm vs. 43.8 cm, P=0.018**)[80](index=80&type=chunk) [Advanced Pneumatic Compression for Treatment of Lymphedema of the Head and Neck](index=27&type=section&id=Advanced%20Pneumatic%20Compression%20for%20Treatment%20of%20Lymphedema%20of%20the%20Head%20and%20Neck) A randomized trial supported the Flexitouch system's safety and feasibility for head and neck lymphedema, showing improved control, reduced swelling, and pain - The Flexitouch system APCD was found safe and feasible for treating secondary lymphedema in head and neck cancer patients, with no device-related serious adverse events reported[81](index=81&type=chunk)[82](index=82&type=chunk) - Patients using Flexitouch reported significant improvements in perceived ability to control lymphedema (**84% good/excellent at 8 weeks vs. 26% at baseline**), visible external swelling, and reduced pain[82](index=82&type=chunk) - Statistically significant improvements were also noted in swallowing solids and mucous-related symptoms[82](index=82&type=chunk) [AffloVest Clinical Evidence](index=27&type=section&id=AffloVest%20Clinical%20Evidence) Clinical evidence for AffloVest demonstrates improved lung function, reduced hospitalizations, and strong patient preference for its portability - A 2016 prospective study showed **12 out of 25 cystic fibrosis patients** using AffloVest demonstrated measurable improvements in lung function tests (FVC increased **15.22%**, FEV1 increased **17.41%**, FEF 25-75% increased **11.21%**)[83](index=83&type=chunk) - A 2018 study found AffloVest performed favorably to traditional HFCWO vests, showing no significant decline in forced vital capacity or forced expiratory volume in healthy patients[84](index=84&type=chunk) - A 2020 chart review of **30 patients** showed a **96.2% reduction in hospitalizations**, **82.4% reduction in emergency room visits**, and **87.3% reduction in antibiotic usage** for post-AffloVest patients[85](index=85&type=chunk) - A 2023 patient preference study found **93% of symptomatic adults** preferred AffloVest over traditional bladder-style vests, with **90%** reporting it fit their lifestyle[87](index=87&type=chunk) [Sales and Marketing](index=29&type=section&id=Sales%20and%20Marketing) Tactile Medical uses a direct-to-patient model for lymphedema products and a DME channel for AffloVest, expanding its sales force to 270 representatives by 2023 - The direct-to-patient and -provider model for lymphedema products allows for direct engagement with patients and clinics, capturing both manufacturer and distributor margins[88](index=88&type=chunk) - For AffloVest, the company uses the respiratory DME channel, providing access to a larger network and leveraging DME providers' existing services for chronic respiratory patients[89](index=89&type=chunk)[92](index=92&type=chunk) - As of December 31, 2023, the company employed **270 field sales representatives** for lymphedema and respiratory therapies, up from 251 in 2022[94](index=94&type=chunk) [Reimbursement, Payer Relations and Customer Support Process](index=31&type=section&id=Reimbursement%2C%20Payer%20Relations%20and%20Customer%20Support%20Process) Tactile Medical leverages extensive reimbursement expertise and payer relationships covering 275 million lives, with high approval rates for Medicare and private insurer claims Payer Type Revenue Share | Payer Type | 2023 Revenue Share | 2022 Revenue Share | | :----------- | :----------------- | :----------------- | | Private Insurers & Other | 54% | 57% | | Medicare | 24% | 19% | | Veterans Administration | 10% | 10% | | DME Distributors | 12% | 14% | - The company is contracted or enrolled as an in-network provider with payers covering nearly **275 million lives** in the United States[98](index=98&type=chunk) - Tactile Medical maintains a commercial payer approval rate greater than **80%** and a Medicare claims submitted approval rate greater than **90%** for the last seven years[99](index=99&type=chunk) - Flexitouch Plus is reimbursed under HCPCS code E0652, Entre Plus under E0651, and AffloVest under E0483 (HFCWO device)[100](index=100&type=chunk)[101](index=101&type=chunk) [Research and Clinical Operations](index=32&type=section&id=Research%20and%20Clinical%20Operations) Tactile Medical commits to R&D and clinical operations to enhance technologies, focusing on ease-of-use, functionality, and cost reduction, with $7.8 million R&D expenses in 2023 - R&D efforts focus on improving design for ease-of-use, enhancing clinical functionality, and reducing production costs of solutions[102](index=102&type=chunk) R&D Expenses (Millions) | Metric | 2023 (Millions) | 2022 (Millions) | | :----- | :-------------- | :-------------- | | R&D Expenses | $7.8 | $7.1 | [Manufacturing and Quality Assurance](index=32&type=section&id=Manufacturing%20and%20Quality%20Assurance) The company combines internal assembly with third-party component suppliers, maintaining dual-source vendors and a quality management system compliant with FDA and ISO standards - Manufacturing combines internal resources (quality inspection, assembly, packaging, warehousing, shipping) with outsourced component manufacturing from third-party suppliers worldwide[103](index=103&type=chunk) - Dual-source vendors are maintained for critical components to mitigate supply chain risks, and contingency plans are developed for disruptions[103](index=103&type=chunk)[106](index=106&type=chunk) - A quality management system is implemented to comply with FDA Quality System Regulation and ISO 13485:2016 standards, with MDSAP certification renewed in 2023[107](index=107&type=chunk) [Order Fulfillment and Patient Education](index=33&type=section&id=Order%20Fulfillment%20and%20Patient%20Education) Flexitouch and Entre Plus systems are shipped directly to patients with professional training, while AffloVest uses DME providers, supplemented by the Kylee app - Flexitouch Plus and Entre Plus systems are shipped directly to patients, followed by virtual or at-home education and instruction from trained professionals[108](index=108&type=chunk) - AffloVest products are shipped to DME providers or directly to patients, with self-training materials and DME provider support[109](index=109&type=chunk) - The Kylee™ mobile application offers patients educational resources and tools to manage their conditions by tracking treatments and symptoms[108](index=108&type=chunk) [Competition](index=33&type=section&id=Competition) The pneumatic compression market is competitive, with Tactile Medical differentiating through its direct sales force, while AffloVest competes on portability and DME distribution - Primary manufacturing competitors in the pneumatic compression pump market are Bio Compression Systems, Inc. and Lympha Press USA[110](index=110&type=chunk) - Tactile Medical believes it is the only pneumatic compression home-therapy device company with a meaningful U.S. market position supported by a direct sales force, offering a competitive advantage over competitors relying solely on DME distribution[111](index=111&type=chunk) - Competitors in the airway clearance market include Baxter (formerly Hill-Rom), Philips Medical, and Electromed, with AffloVest's portability and DME distribution as differentiators[114](index=114&type=chunk) [Government Regulation](index=35&type=section&id=Government%20Regulation) Tactile Medical's medical devices are extensively regulated by the FDA, FTC, CMS, and state agencies, requiring compliance with 510(k) clearances, QSR, and fraud and abuse laws - Medical devices are subject to extensive regulation by the FDA, FTC, CMS, and state/foreign agencies, covering all aspects from design to post-market surveillance[115](index=115&type=chunk)[116](index=116&type=chunk) - All current Flexitouch, Entre, and AffloVest systems are Class II devices requiring 510(k) clearance, which has been obtained and maintained[118](index=118&type=chunk) - Compliance with the FDA's Quality System Regulation (QSR) is mandatory for manufacturing, and the company has been found in compliance during FDA audits[123](index=123&type=chunk) - The company must comply with federal and state fraud and abuse laws, including the Anti-Kickback Statute, Stark Law, False Claims Act, and Civil Monetary Penalties Law, which carry severe penalties for non-compliance[127](index=127&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[137](index=137&type=chunk) - HIPAA and HITECH Act regulations govern the privacy and security of individually identifiable health information, with non-compliance leading to significant civil and criminal penalties[142](index=142&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk) [Third-Party Reimbursement](index=45&type=section&id=Third-Party%20Reimbursement) Medical device sales heavily rely on third-party payer coverage, with Medicare and Medicaid as key governmental payers whose policy changes can significantly impact business - Sales of medical devices are significantly dependent on the availability of coverage and reimbursement from third-party payers, including private insurance and governmental programs like Medicare and Medicaid[150](index=150&type=chunk)[151](index=151&type=chunk) - CMS determines Medicare coverage based on whether products/services are 'reasonable and necessary,' through National Coverage Determinations (NCDs) or Local Coverage Determinations (LCDs)[152](index=152&type=chunk) - Pneumatic compression devices (PCDs), including Tactile Medical's products, are covered for lymphedema or chronic venous insufficiency with venous stasis ulcers under the current NCD[152](index=152&type=chunk) - Medicare revenue constituted **24% in 2023** and **19% in 2022**; a reduction in Medicare coverage could lead commercial payers to follow suit, adversely affecting the business[152](index=152&type=chunk)[157](index=157&type=chunk) [Intellectual Property](index=47&type=section&id=Intellectual%20Property) Tactile Medical protects its technologies through 171 global patents, 24 pending applications, copyrights, trademarks, and trade secrets, including Flexitouch and AffloVest - Intellectual property protection relies on patents, copyrights, trademarks, trade secrets, and confidentiality provisions[158](index=158&type=chunk) - As of December 31, 2023, the company owned **171 issued patents globally** (**63 U.S.**) and **24 pending patent applications globally** (**9 U.S.**)[159](index=159&type=chunk) - U.S. patents covering various aspects of the Flexitouch system expired in 2017[159](index=159&type=chunk) - Registered trademarks include Tactile Medical, Flexitouch, Flexitouch Plus, ComfortEase, Entre, AffloVest, AffloVest Pro, and Kylee[160](index=160&type=chunk) [Seasonality](index=48&type=section&id=Seasonality) The business experiences seasonality, with lower Q1 demand due to deductibles and higher Q3/Q4 revenue, primarily affecting commercial insurance patients - The business is affected by seasonality, with reduced demand in Q1 due to new insurance year deductibles[161](index=161&type=chunk)[209](index=209&type=chunk) - Higher revenue is typically experienced in Q3 and Q4 as patients meet annual insurance deductibles or exhaust flexible spending accounts[161](index=161&type=chunk)[209](index=209&type=chunk) - Seasonality primarily impacts commercial insurance patients and is not relevant to Medicare, Medicaid, or Veterans Administration payers[161](index=161&type=chunk)[209](index=209&type=chunk) [Human Capital Resources](index=48&type=section&id=Human%20Capital%20Resources) As of December 31, 2023, Tactile Medical had 992 employees, focusing on attracting and retaining diverse talent through competitive rewards, DEI, and development programs - As of December 31, 2023, Tactile Medical had **992 employees**, with 592 located throughout the U.S. and 400 primarily in Minneapolis[161](index=161&type=chunk) - Human capital management pillars include Total Rewards (competitive salary/benefits, retirement, ESPP, health insurance, paid leave), Diversity, Equity, and Inclusion (awareness programs, enhancing inclusiveness), Fair Labor Practices (Human Rights Policy, Supplier Code of Conduct), Health and Safety, and Talent and Retention (recruitment, training, internal communication, learning/development)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) [Available Information](index=49&type=section&id=Available%20Information) Tactile Medical files annual, quarterly, and current reports with the SEC, accessible on sec.gov and the company's corporate website - The company files reports with the SEC, available on sec.gov and its corporate website, www.tactilemedical.com[167](index=167&type=chunk)[168](index=168&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) Tactile Medical faces risks from economic downturns, reimbursement challenges, supply chain dependencies, cybersecurity threats, and regulatory compliance, impacting its financial condition [Risks Related to Our Business, Operations and Strategy](index=49&type=section&id=Risks%20Related%20to%20Our%20Business%2C%20Operations%20and%20Strategy) Business risks include economic conditions, reimbursement issues, supply chain reliance, product dependence, cybersecurity, healthcare consolidation, and challenges in sales expansion - Current or worsening economic conditions (inflation, rising interest rates, recession) could adversely affect demand for products and exacerbate other business risks[170](index=170&type=chunk) - Inability to achieve and maintain adequate levels of coverage or reimbursement for products would adversely affect business and results of operations[171](index=171&type=chunk)[173](index=173&type=chunk) - Reliance on third-party, single-source suppliers for some components creates risk of supply disruption if suppliers fail to deliver or arrangements are canceled[177](index=177&type=chunk)[179](index=179&type=chunk) - High dependence on lymphedema products (**88% of 2023 revenue**) means failure to achieve wide market acceptance for these products could adversely affect the business[181](index=181&type=chunk) - Increasing dependence on sophisticated information technology and third-party vendors makes the company vulnerable to cyber-attacks and data breaches, which could disrupt operations, lead to data loss, and incur expenses[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk) - Consolidation in the healthcare industry may lead to demands for price concessions, impacting the ability to sell products at necessary prices[187](index=187&type=chunk) - Long-term growth depends on increasing awareness and adoption of products, which requires educating clinicians and consumers, and demonstrating consistent reimbursement[188](index=188&type=chunk) - Inability to expand, manage, and maintain direct sales and marketing organizations, or relationships with distributors, could hinder revenue generation[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk) - Additional clinical studies may be required by physicians and payers, and if results are not positive or consistent with existing data, product adoption could be adversely affected[193](index=193&type=chunk)[194](index=194&type=chunk) - U.S. patent protection for various aspects of the Flexitouch system expired in 2017, potentially leading to increased competition and reduced revenue opportunities[197](index=197&type=chunk) - Increases in operating costs, particularly labor and related costs, may not be offset by reimbursement rate increases, adversely affecting financial condition[201](index=201&type=chunk)[202](index=202&type=chunk) - Competition from companies with longer operating histories, more established products, or greater resources may harm the business[203](index=203&type=chunk)[205](index=205&type=chunk) - Long-term growth depends on the ability to develop and commercialize additional products, which is expensive, time-consuming, and uncertain[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - Seasonal variations in revenue, particularly reduced demand in Q1 due to patient deductibles, can cause fluctuations in financial results[209](index=209&type=chunk) - Failure by physicians to properly document medical records for patients using products could invalidate claims, impair collections, and lead to liabilities[211](index=211&type=chunk)[212](index=212&type=chunk) - The estimated size of the market for products may be smaller than believed, impacting future growth, especially with changes in underlying causes or risk factors for diseases (e.g., GLP-1 drugs on obesity)[213](index=213&type=chunk) - Inability to manage growth effectively could strain administrative personnel, IT systems, and operational infrastructure, hindering development and commercialization goals[214](index=214&type=chunk)[215](index=215&type=chunk) - Failure to attract, integrate, and retain key executives and highly qualified personnel could significantly delay business objectives[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - Changes in HCPCS reimbursement coding could impair the ability to receive reimbursement for products, potentially leading to lower payment rates[219](index=219&type=chunk) - If product quality does not meet expectations, brand and reputation could suffer, adversely impacting business[220](index=220&type=chunk) - Damage or inoperability of facilities (e.g., natural disasters, cyber-attacks) could disrupt research, development, manufacturing, and commercialization, as the company lacks redundant facilities[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Acquisition activity involves substantial risks, including integration challenges, disruption to ongoing business, and failure to achieve anticipated benefits[224](index=224&type=chunk) - Commercializing products outside the U.S. introduces risks such as foreign regulatory hurdles, intellectual property protection challenges, economic instability, and compliance with international laws[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) [Government Regulation, Compliance and Legal Risks](index=70&type=section&id=Government%20Regulation%2C%20Compliance%20and%20Legal%20Risks) The company faces extensive federal and state regulations, including fraud and abuse laws, FDA device clearances, data privacy, and product liability, with severe penalties for non-compliance - Extensive federal and state regulations govern various aspects of the business, including medical equipment distribution and home health activities, requiring licenses in many states[228](index=228&type=chunk) - Participation in governmental healthcare programs subjects the company to complex fraud and abuse laws (Anti-Kickback Statute, Stark Law, False Claims Act, Civil Monetary Penalties Law), with violations leading to severe criminal, civil, and administrative penalties, including exclusion from Medicare/Medicaid[229](index=229&type=chunk)[230](index=230&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk)[248](index=248&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[276](index=276&type=chunk) - FDA regulations require marketing authorization (510(k) clearance or premarket approval) for medical devices, and any significant modifications to cleared devices may require new clearances[232](index=232&type=chunk)[236](index=236&type=chunk)[255](index=255&type=chunk) - Failure to comply with FDA requirements (e.g., QSR, MDR, promotional restrictions) can result in enforcement actions such as warning letters, fines, product recalls, and delays in new product introductions[122](index=122&type=chunk)[123](index=123&type=chunk)[240](index=240&type=chunk)[242](index=242&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[264](index=264&type=chunk) - Misuse or off-label promotion of products can harm reputation, lead to product liability suits, and result in costly investigations or sanctions[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Failure to maintain necessary licenses and accreditations (e.g., Durable Medical Equipment certification) would adversely affect the direct-to-patient and -provider model[253](index=253&type=chunk) - Non-compliance with privacy and data security laws (HIPAA, HITECH Act, state laws) governing patient-identifiable health information could result in significant penalties and adverse effects on financial condition[280](index=280&type=chunk)[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk)[290](index=290&type=chunk)[293](index=293&type=chunk) - The company is exposed to product liability claims inherent in medical device manufacturing and marketing, which can be expensive, divert management attention, and harm reputation[294](index=294&type=chunk)[297](index=297&type=chunk) [Financial Condition, Credit and Tax Risks](index=96&type=section&id=Financial%20Condition%2C%20Credit%20and%20Tax%20Risks) Financial risks include internal control failures, credit facility indebtedness, need for additional funding, state tax liabilities, and challenges in collecting Medicare receivables - Failure to maintain proper and effective internal control over financial reporting could impair the ability to produce accurate and timely financial statements, harming operating results and investor confidence[301](index=301&type=chunk)[302](index=302&type=chunk) - The level of indebtedness under the credit facility could require a large portion of cash flow for debt servicing, limit additional financing, restrict business flexibility, and place the company at a competitive disadvantage[303](index=303&type=chunk)[305](index=305&type=chunk) - The credit facility contains covenants (e.g., maximum leverage ratio, minimum fixed charge coverage ratio, minimum EBITDA) that restrict business and financing activities, with potential for default and foreclosure on assets if not met[307](index=307&type=chunk)[308](index=308&type=chunk) - Substantial additional funding may be needed, and inability to raise capital when required could force delays or reductions in commercialization efforts or product development programs[309](index=309&type=chunk)[310](index=310&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) - Potential liabilities related to state income, sales, and use taxes could adversely affect financial condition and results of operations, and decrease demand for products[316](index=316&type=chunk) - Inability to collect all Medicare accounts receivable, particularly due to lengthy appeals processes for initially denied claims, could adversely affect results of operations[317](index=317&type=chunk) [Risks Related to Our Intellectual Property](index=101&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) IP risks include inability to protect patents globally, patent expiration, infringement claims, and changes in patent law, potentially diminishing IP value - Inability to protect intellectual property rights globally, as foreign laws may offer less protection and enforcement can be costly and unsuccessful[318](index=318&type=chunk)[319](index=319&type=chunk) - Patent protection for products may expire before maximizing commercial value (e.g., Flexitouch U.S. patents expired in 2017), leading to increased competition[320](index=320&type=chunk) - Difficulty in identifying relevant patents or incorrectly interpreting their relevance, scope, or expiration can adversely affect product development and marketing[321](index=321&type=chunk)[322](index=322&type=chunk)[324](index=324&type=chunk) - Failure to comply with procedural, documentary, and fee payment requirements of governmental patent agencies can result in loss of patent rights[325](index=325&type=chunk) - Involvement in lawsuits to protect patents or defend against infringement claims can be expensive, time-consuming, and potentially unsuccessful, diverting management attention[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)[330](index=330&type=chunk)[333](index=333&type=chunk) - Changes in U.S. patent law (legislation, judicial rulings) could diminish the value of patents, weakening the ability to obtain or enforce IP[335](index=335&type=chunk)[336](index=336&type=chunk) - Confidentiality agreements may not adequately prevent disclosure of trade secrets by current or former employees, consultants, or contractors[340](index=340&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk) - Reliance on third parties for R&D and manufacturing requires sharing trade secrets, increasing the risk of discovery or misappropriation by competitors[347](index=347&type=chunk)[348](index=348&type=chunk) - Inadequate protection of trademarks and trade names could hinder brand recognition and competitive positioning[349](index=349&type=chunk)[350](index=350&type=chunk) [Risks Related to Ownership of Our Common Stock](index=111&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Common stock price volatility, anti-takeover provisions, and unfavorable analyst research pose risks to stockholders and market value - The trading price of common stock has been and could continue to be highly volatile, influenced by factors such as financial results, regulatory developments, competition, and market conditions[351](index=351&type=chunk)[352](index=352&type=chunk) - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult, potentially preventing stockholders from receiving a premium for their shares or replacing current management[355](index=355&type=chunk)[356](index=356&type=chunk) - If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about the business, the price of common stock and trading volume could decline[357](index=357&type=chunk) - Claims for indemnification by directors and officers may reduce available funds to satisfy third-party claims and reduce money available to the company[358](index=358&type=chunk)[359](index=359&type=chunk) [Item 1B. Unresolved Staff Comments.](index=115&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) There are no unresolved staff comments to report - No unresolved staff comments to report[371](index=371&type=chunk) [Item 1C. Cybersecurity.](index=115&type=section&id=Item%201C.%20Cybersecurity.) Tactile Medical maintains a robust cybersecurity program based on NIST, with regular assessments and cloud migration, and no material incidents to date - The cybersecurity program is based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF)[361](index=361&type=chunk) - The company engages third-party consultants for risk and vulnerability assessments, maintains a monthly vulnerability-management program, and conducts annual comprehensive penetration testing[361](index=361&type=chunk) - Cybersecurity risk management is integrated into the technology modernization program, moving core applications to industry-specific healthcare cloud solutions with robust HIPAA-compliant data security[362](index=362&type=chunk) - To date, no cybersecurity incidents have materially affected the business strategy, results of operations, or financial condition[366](index=366&type=chunk) - The Audit Committee of the Board of Directors oversees cybersecurity and risk management programs, receiving quarterly updates[367](index=367&type=chunk) - The Director of Information Security, with 24 years of technology leadership and 18 years in healthcare device manufacturing cybersecurity, is responsible for the program and reports to the Audit Committee[368](index=368&type=chunk) [Item 2. Properties](index=117&type=section&id=Item%202.%20Properties) Tactile Medical leases approximately 213,000 square feet across two Minneapolis facilities for headquarters, office, assembly, and warehouse space - The company leases approximately **150,000 square feet** for its corporate headquarters in Minneapolis, Minnesota, with a lease expiring in February 2031[369](index=369&type=chunk) - An additional **63,000 square feet** of office, assembly, and warehouse space is leased in Minneapolis, with that lease expiring in March 2027[370](index=370&type=chunk) [Item 3. Legal Proceedings](index=117&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 12 – 'Commitments and Contingencies' to the consolidated financial statements - Legal proceedings information is incorporated by reference from Note 12 – 'Commitments and Contingencies' in the consolidated financial statements[371](index=371&type=chunk) [Item 4. Mine Safety Disclosures](index=117&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Tactile Medical PART II [Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.](index=119&type=section&id=Item%205.%20Market%20For%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) Tactile Medical's common stock (TCMD) is listed on Nasdaq, with no cash dividends expected, and no recent unregistered sales or issuer purchases - Common stock (TCMD) has been listed on The Nasdaq Stock Market LLC since July 28, 2016[375](index=375&type=chunk) - As of February 16, 2024, there were approximately **26 holders of record** of common stock[376](index=376&type=chunk) - The company has not declared or paid cash dividends and does not expect to in the foreseeable future, intending to retain future earnings for business operations and expansion[377](index=377&type=chunk) - No recent sales of unregistered securities or issuer purchases of equity securities were reported[378](index=378&type=chunk)[379](index=379&type=chunk) Stock Performance Graph (Cumulative Total Stockholder Return) | Index | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | 12/31/2022 | 12/31/2023 | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Tactile Systems Technology, Inc. | $100 | $148 | $99 | $42 | $25 | $31 | | Nasdaq Composite Index | $100 | $135 | $194 | $236 | $158 | $226 | | Russell 2000 Index | $100 | $124 | $146 | $166 | $131 | $150 | | S&P Healthcare Equipment Select Industry Index | $100 | $122 | $163 | $168 | $128 | $121 | [Item 6. [Reserved.]](index=121&type=section&id=Item%206.%20%5BReserved.%5D) This item is reserved and contains no information [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.](index=121&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section analyzes Tactile Medical's financial condition and results, highlighting 2023 revenue and net income growth, critical accounting estimates, and liquidity [Overview](index=121&type=section&id=Overview_MD%26A) Tactile Medical, a medical technology company, reported $274.4 million revenue and $28.5 million net income in 2023, driven by lymphedema products - Tactile Medical develops and provides innovative medical devices for underserved chronic diseases, focusing on at-home care to improve patient outcomes and control healthcare costs[386](index=386&type=chunk) - Lymphedema products (Flexitouch Plus, Entre Plus) accounted for **88% of revenue in 2023**, while AffloVest (airway clearance) accounted for **12%**[387](index=387&type=chunk)[388](index=388&type=chunk) - The company invests in its commercial infrastructure, including a direct sales force (**254 for lymphedema, 16 for airway clearance in 2023**), training, reimbursement capabilities, and clinical expertise[389](index=389&type=chunk)[390](index=390&type=chunk)[391](index=391&type=chunk)[392](index=392&type=chunk) Financial Performance (Millions) | Metric | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :----- | :-------------- | :-------------- | :-------------- | | Revenue | $274.4 | $246.8 | $208.1 | | Net Income (Loss) | $28.5 | -$17.9 | -$11.8 | [Current Economic Conditions](index=123&type=section&id=Current%20Economic%20Conditions) Global economic downturns, including inflation and rising interest rates, may negatively impact product demand and exacerbate business risks - Macroeconomic trends like inflation, rising interest rates, and economic slowdowns could negatively affect demand for products and worsen business risks[397](index=397&type=chunk) [Components of our Results of Operations](index=123&type=section&id=Components%20of%20our%20Results%20of%20Operations) This section details key financial components like revenue, cost of revenue, operating expenses, and income tax, influenced by product mix and strategic investments [Revenue](index=123&type=section&id=Revenue_Components) Revenue from lymphedema and airway clearance products is driven by awareness and sales force expansion, but fluctuates due to seasonality and payer mix - Revenue is derived from sales and rentals of Flexitouch Plus and Entre Plus systems and sales of AffloVest products[398](index=398&type=chunk)[401](index=401&type=chunk) - Revenue growth is driven by increased clinician, patient, and payer awareness, and expansion of the direct sales force and DME partners[398](index=398&type=chunk)[403](index=403&type=chunk) - Revenue is expected to fluctuate quarterly due to seasonality (lower in Q1, higher in Q3/Q4), product/payer mix, and contract pricing[402](index=402&type=chunk) Revenue by Payer Type (Share of Total Revenue) | Payer Type | 2023 Share | 2022 Share | | :----------- | :--------- | :--------- | | Veterans Administration | ~10% | ~10% | | Medicare | ~24% | ~19% | [Cost of Revenue and Gross Margin](index=125&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin_Components) Cost of revenue includes component costs, labor, and warranties, with gross margin influenced by product/payer mix and production volumes - Cost of revenue primarily includes component costs, direct labor, overhead, product warranties, inventory provisions, delivery costs, and intangible asset amortization[404](index=404&type=chunk) - Gross margin is affected by product and payer mix, production volumes, manufacturing costs, and cost-reduction strategies[406](index=406&type=chunk) - The company provides a warranty for products (1-5 years) and records a liability for future claims at the time of sale[405](index=405&type=chunk) [Sales and Marketing Expenses](index=125&type=section&id=Sales%20and%20Marketing%20Expenses_Components) Sales and marketing expenses, primarily personnel costs, are expected to increase in absolute dollars but decrease as a percentage of revenue over time - Sales and marketing expenses primarily comprise personnel-related expenses (salaries, bonuses, commissions) and costs for patient training, advertising, promotional activities, and travel[407](index=407&type=chunk) - These expenses are expected to increase in absolute dollars with commercial infrastructure expansion but decrease as a percentage of revenue over time[407](index=407&type=chunk) [Research and Development Expenses](index=127&type=section&id=Research%20and%20Development%20Expenses_Components) R&D expenses, including personnel and clinical research, are expected to increase with continued product development and clinical trial expansion - R&D expenses include personnel, third-party product development, laboratory supplies, consulting, clinical research, regulatory affairs, patent amortization, and legal fees[408](index=408&type=chunk) - R&D expenses are expected to increase in the foreseeable future due to continued product development, enhancement, and clinical trial expansion[408](index=408&type=chunk) [Intangible Asset Amortization and Earn-Out](index=127&type=section&id=Intangible%20Asset%20Amortization%20and%20Earn-Out_Components) This category includes amortization of definite-lived intangible assets and quarterly revaluation of the AffloVest earn-out liability - Amortization of definite-lived intangible assets includes patents, customer relationships, customer accounts, developed technology, and defensive intangible assets[409](index=409&type=chunk) - The fair value of the AffloVest earn-out liability was revalued quarterly until September 30, 2023, with gains or losses recorded in the income statement[410](index=410&type=chunk) [Reimbursement, General and Administrative Expenses](index=127&type=section&id=Reimbursement%2C%20General%20and%20Administrative%20Expenses_Components) These expenses cover patient services, billing, payer relations, corporate functions, professional services, and stock-based compensation - Expenses include compensation for patient services, billing, case management, payer relations, and corporate functions, as well as professional services, stock-based compensation, and acquisition costs[411](index=411&type=chunk) [Other Income (Expense), Net](index=127&type=section&id=Other%20Income%20%28Expense%29%2C%20Net_Components) Other income (expense), net primarily reflects interest income from investments and interest expense from debt obligations - Primarily consists of interest income from investments and interest expense from debt obligations[412](index=412&type=chunk) [Income Tax Expense (Benefit)](index=127&type=section&id=Income%20Tax%20Expense%20%28Benefit%29_Components) Income tax expense (benefit) is driven by permanent differences from share-based compensation and deferred income taxes from temporary differences - Consists primarily of permanent differences related to share-based compensation and deferred income taxes from temporary differences[413](index=413&type=chunk) [Critical Accounting Estimates](index=127&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates, including revenue recognition and stock-based compensation, involve significant judgment and materially impact financial statements [Revenue Recognition](index=129&type=section&id=Revenue%20Recognition_Estimates) Revenue recognition involves estimating expected consideration for product sales and rentals based on historical data and payer agreements, updated quarterly - Expected consideration for Flexitouch Plus and Entre Plus systems is estimated based on historical pricing adjustments and collections from payers and patients[417](index=417&type=chunk) - Expected consideration for AffloVest products is based on agreements with DME providers[417](index=417&type=chunk) - Assessments of collectability are updated quarterly, with adjustments reflected in sales and rental revenue or bad debt expense[417](index=417&type=chunk) [Stock-Based Compensation](index=129&type=section&id=Stock-Based%20Compensation_Estimates) Stock-based compensation expense is estimated using the Black-Scholes model, requiring subjective assumptions for term, volatility, and forfeiture rates - Fair value of stock options is estimated using the Black-Scholes option-pricing model, requiring subjective assumptions for expected term, volatility, risk-free interest rate, and expected dividend yield[419](index=419&type=chunk)[420](index=420&type=chunk) - Expected volatility for grants issued after Q1 2021 is based on the company's average historical volatility; prior grants used comparable public companies[421](index=421&type=chunk) - The forfeiture rate is estimated based on actual forfeitures and employee turnover, with quarterly adjustments impacting recognized compensation expense[423](index=423&type=chunk) [Results of Operations](index=132&type=section&id=Results%20of%20Operations) Tactile Medical's 2023 results show significant improvement with 11% revenue growth and a shift to $28.5 million net income, driven by lymphedema sales [Comparison of the Years Ended December 31, 2023 and 2022](index=132&type=section&id=Comparison%20of%20the%20Years%20Ended%20December%2031%2C%202023%20and%202022) This section compares the company's financial performance for 2023 and 2022, detailing changes in revenue, costs, and profitability Consolidated Statement of Operations Data (in thousands) | Metric | 2023 | % of Revenue | 2022 | % of Revenue | Change ($) | Change (%) | | :-------------------------------------- | :----- | :----------- | :----- | :----------- | :--------- | :--------- | | Total Revenue | $274,423 | 100% | $246,785 | 100% | $27,638 | 11% | | Total Cost of Revenue | $79,290 | 29% | $70,809 | 29% | $8,481 | 12% | | Gross Profit | $195,133 | 71% | $175,976 | 71% | $19,157 | 11% | | Total Operating Expenses | $177,092 | 64% | $188,734 | 76% | $(11,642) | (6)% | | Income (Loss) from Operations | $18,041 | 7% | $(12,758) | (5)% | $30,799 | 241% | | Income (Loss) before Income Taxes | $15,770 | 6% | $(15,473) | (6)% | $31,243 | 202% | | Income Tax (Benefit) Expense | $(12,745) | (5)% | $2,393 | 1% | $(15,138) | N.M. | | Net Income (Loss) | $28,515 | 11% | $(17,866) | (7)% | $46,381 | 260% | [Revenue](index=132&type=section&id=Revenue_Results) Total revenue increased by $27.6 million (11%) in 2023, driven by lymphedema product growth, partially offset by a decrease in airway clearance revenue - Total revenue increased by **$27.6 million**, or **11%**, to **$274.4 million** in 2023 compared to $246.8 million in 2022[426](index=426&type=chunk) - Lymphedema product line revenue increased by **$29.5 million (14%)** due to increased field sales team productivity and new product introductions[426](index=426&type=chunk)[427](index=427&type=chunk) - Airway clearance product line revenue decreased by **$1.8 million (5%)** due to slowed placements by a large DME provider following the expiration of COVID-19 PHE waivers[426](index=426&type=chunk)[427](index=427&type=chunk) Revenue by Product Line (in thousands) | Product Line | 2023 Revenue | 2022 Revenue | Change ($) | Change (%) | | :------------- | :----------- | :----------- | :--------- | :--------- | | Lymphedema products | $241,721 | $212,266 | $29,455 | 14% | | Airway clearance products | $32,702 | $34,519 | $(1,817) | (5)% | | Total | $274,423 | $246,785 | $27,638 | 11% | Revenue by Payer Type (Share of Total Revenue) | Payer Type | 2023 Share | 2022 Share | | :----------- | :--------- | :--------- | | Veterans Administration | 10% | 10% | | Medicare | 24% | 19% | [Cost of Revenue and Gross Margin](index=134&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Margin_Results) Cost of revenue increased by $8.5 million (12%) in 2023 due to higher sales, while gross margin remained consistent at 71% - Cost of revenue increased by **$8.5 million (12%)** to **$79.3 million** in 2023, driven by increased lymphedema product sales and rentals[430](index=430&type=chunk) - Gross margin remained stable at **71%** for both 2023 and 2022[431](index=431&type=chunk) [Sales and Marketing Expenses](index=134&type=section&id=Sales%20and%20Marketing%20Expenses_Results) Sales and marketing expenses increased slightly by $0.7 million (1%) in 2023, driven by IT, new product, and personnel costs - Sales and marketing expenses increased by **$0.7 million (1%)** to **$107.1 million** in 2023[432](index=432&type=chunk) - Key drivers of the increase included a **$0.5 million** increase in IT & service fees, **$0.4 million** for new product introductions, **$0.2 million** in personnel compensation, and **$0.2 million** in educational grants[432](index=432&type=chunk) - These increases were partially offset by decreases in travel and entertainment expenses and sales meetings/tradeshows[432](index=432&type=chunk) [Research and Development Expenses](index=134&type=section&id=Research%20and%20Development%20Expenses_Results) R&D expenses increased by $0.7 million (10%) in 2023, primarily due to higher personnel-related costs - R&D expenses increased by **$0.7 million (10%)** to **$7.8 million** in 2023, mainly due to higher personnel-related expenses[433](index=433&type=chunk) [Reimbursement, General and Administrative Expenses](index=135&type=section&id=Reimbursement%2C%20General%20and%20Administrative%20Expenses_Results) Reimbursement, general and administrative expenses rose by $1.3 million (2%) in 2023, mainly due to personnel and IT expenses - Reimbursement, general and administrative expenses increased by **$1.3 million (2%)** to **$62.1 million** in 2023[435](index=435&type=chunk) - Increases were primarily due to **$1.6 million** in personnel-related compensation, **$0.9 million** in IT expenses, and **$0.2 million** in travel and entertainment[435](index=435&type=chunk) - These increases were partially offset by a **$1.4 million** decrease in occupancy costs, depreciation, and professional fees[435](index=435&type=chunk) [Intangible Asset Amortization and Earn-out](index=135&type=section&id=Intangible%20Asset%20Amortization%20and%20Earn-out_Results) Intangible asset amortization and earn-out expenses significantly decreased by $14.4 million in 2023 due to an AffloVest earn-out revaluation benefit - Intangible asset amortization and earn-out expenses decreased by **$14.4 million** to **$0.1 million** in 2023[436](index=436&type=chunk) - The decrease was driven by a **$2.5 million benefit** from the fair value revaluation of the AffloVest earn-out in 2023, compared to an **$11.9 million expense** in 2022[436](index=436&type=chunk) [Other Expense, Net](index=135&type=section&id=Other%20Expense%2C%20Net_Results) Other expense, net decreased to $2.3 million in 2023, primarily due to an increase in interest income - Other expense, net decreased to **$2.3 million** in 2023 from $2.7 million in 2022, mainly due to increased interest income[437](index=437&type=chunk) [Income Tax Expense](index=135&type=section&id=Income%20Tax%20Expense_Results) The company recorded a $12.7 million income tax benefit in 2023, primarily from releasing a valuation allowance on deferred tax assets - An income tax benefit of **$12.7 million** was recorded in 2023, compared to an expense of $2.4 million in 2022[438](index=438&type=chunk) - The benefit was primarily driven by the release of a **$19.4 million valuation allowance** on deferred tax assets, following the achievement of three years of cumulative pretax income in the U.S. federal tax jurisdiction[438](index=438&type=chunk)[439](index=439&type=chunk) [Seasonality](index=135&type=section&id=Seasonality_MD%26A) The business is seasonal, with lower Q1 demand due to deductibles and higher Q3/Q4 revenue, primarily

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q3 2023 Earnings Call Transcript November 6, 2023 5:00 PM ET Company Participants Daniel Reuvers - President & Chief Executive Officer Elaine Birkemeyer - Chief Financial Officer Conference Call Participants Simran Kaur - Piper Sandler Ryan Zimmerman - BTIG Margaret Kaczor - William Blair & Company Suraj Kalia - Oppenheimer & Co. Inc. Operator Welcome ladies and gentlemen to the Third Quarter of Fiscal Year 2023 Earnings Conference Call for Tactile Medical. At ...