Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q2 2022 Earnings Conference Call August 1, 2022 5:00 PM ET Company Participants Dan Reuvers - President and CEO Brent Moen - CFO Conference Call Participants Ryan Zimmerman - BTIG Simran Kaur - Piper Sandler Margaret Kaczor - William Blair Suraj Kalia - Oppenheimer & Company Operator Welcome ladies and gentlemen to the Second Quarter of Fiscal Year 2022 Earnings Conference Call for Tactile Medical. At this time, all participants have been placed in a listen-o ...

[PART I—FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's financial statements, management's analysis, market risk disclosures, and internal controls [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company reported a 15% revenue increase to **$107.6 million** for H1 2022, driven by an acquisition, but incurred a net loss of **$20.2 million** due to higher operating expenses [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in cash and total assets, alongside an increase in total liabilities and a decrease in stockholders' equity | Indicator | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $23,350 | $28,229 | | Total current assets | $107,269 | $113,547 | | Total assets | $237,303 | $244,270 | | **Liabilities & Equity** | | | | Total current liabilities | $46,546 | $34,461 | | Total liabilities | $123,187 | $116,043 | | Total stockholders' equity | $114,116 | $128,227 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of **$20.2 million** for the six months ended June 30, 2022, despite a **15%** increase in total revenue | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | **Total revenue** | $59,645 | $51,060 | $107,623 | $93,832 | | **Gross profit** | $43,223 | $36,205 | $77,085 | $66,435 | | **Loss from operations** | ($4,087) | ($76) | ($18,988) | ($4,160) | | **Net (loss) income** | ($4,640) | $1,305 | ($20,208) | ($961) | | **Diluted EPS** | ($0.23) | $0.07 | ($1.01) | ($0.05) | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased from **$128.2 million** at the end of 2021 to **$114.1 million** as of June 30, 2022, primarily due to a net loss of **$20.2 million**, partially offset by **$5.1 million** in stock-based compensation[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The company experienced a net decrease in cash of **$4.9 million** for the six months ended June 30, 2022, driven by operating and financing activities | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($900) | ($1,917) | | Net cash used in investing activities | ($416) | ($743) | | Net cash (used in) provided by financing activities | ($3,563) | $3,812 | | **Net (decrease) increase in cash** | **($4,879)** | **$1,152** | | Cash and cash equivalents – end of period | $23,350 | $49,007 | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's business, product lines, acquisition impacts, debt structure, and ongoing legal proceedings - The company manufactures and distributes medical devices for lymphedema (Flexitouch®, Entre™) and chronic respiratory conditions (AffloVest), with the AffloVest business acquired on September 8, 2021[20](index=20&type=chunk)[21](index=21&type=chunk) - Business is seasonal, with substantially reduced demand in the first quarter due to insurance deductibles resetting, and higher revenue in the third and fourth quarters[23](index=23&type=chunk) - The COVID-19 pandemic has negatively affected business through reduced patient numbers at clinics and staffing challenges, with the long-term impact remaining difficult to estimate[27](index=27&type=chunk) - The AffloVest acquisition involved an **$80.0 million** upfront payment and up to **$20.0 million** in potential earn-out payments based on revenue targets, adding **$31.1 million** in goodwill[32](index=32&type=chunk)[36](index=36&type=chunk)[40](index=40&type=chunk) - As of June 30, 2022, the company had outstanding debt of **$25.5 million** from a term loan and **$25.0 million** from a revolving credit facility, with no further availability under the Credit Agreement[50](index=50&type=chunk) - The company is involved in a securities class action lawsuit and a stockholder derivative lawsuit, both alleging materially false or misleading public statements[66](index=66&type=chunk)[67](index=67&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q2 2022 revenue growth to the AffloVest acquisition, while increased operating expenses led to a net loss and decreased liquidity [Overview](index=39&type=section&id=Overview) The company provides medical devices for chronic diseases, expanding its product portfolio and field staff - The company develops and provides medical devices for underserved chronic diseases, focusing on vascular disease (lymphedema), oncology-related lymphedema, and chronic respiratory conditions[106](index=106&type=chunk) - The company's product portfolio includes the Flexitouch and Entre systems for lymphedema and the AffloVest for airway clearance, with lymphedema products accounting for **86%** of revenue in the first six months of 2022 and AffloVest accounting for the remaining **14%**[107](index=107&type=chunk)[110](index=110&type=chunk) - The company expanded its field staff from **234** as of June 30, 2021, to **286** as of June 30, 2022, to support its direct-to-patient and provider model[111](index=111&type=chunk) - In July 2022, the company launched Kylee™, a free mobile app for patients to track treatments and symptoms[116](index=116&type=chunk) [Results of Operations](index=43&type=section&id=Results%20of%20Operations) Revenue growth was driven by airway clearance products, while increased operating expenses impacted profitability Revenue by Product Line (Q2) | Product Line | Q2 2022 Revenue (in thousands) | Q2 2021 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Lymphedema products | $51,634 | $51,060 | 1% | | Airway clearance products | $8,011 | $— | N.M. | | **Total** | **$59,645** | **$51,060** | **17%** | Revenue by Product Line (Six Months) | Product Line | H1 2022 Revenue (in thousands) | H1 2021 Revenue (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Lymphedema products | $92,288 | $93,832 | (2)% | | Airway clearance products | $15,335 | $— | N.M. | | **Total** | **$107,623** | **$93,832** | **15%** | - Gross margin improved to **73%** in Q2 2022 from **71%** in Q2 2021[128](index=128&type=chunk) - Sales and marketing expenses increased by **38%** in Q2 2022 compared to Q2 2021, primarily due to a **$4.8 million** increase in personnel-related compensation from higher headcount and a **$1.3 million** increase in travel expenses[129](index=129&type=chunk) - Intangible asset amortization and earn-out expense increased significantly to **$1.7 million** in Q2 2022, mainly due to an increase in the estimated fair value of the AffloVest acquisition earn-out liability[134](index=134&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity relies on cash and receivables, with management confident in meeting future obligations despite debt - Principal sources of liquidity as of June 30, 2022, were **$23.4 million** in cash and cash equivalents and **$64.5 million** in net accounts receivable[140](index=140&type=chunk) Cash Flow Summary (Six Months Ended June 30) | (In thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(900) | $(1,917) | | Net cash used in investing activities | $(416) | $(743) | | Net cash (used in) provided by financing activities | $(3,563) | $3,812 | | **Net (decrease) increase in cash** | **$(4,879)** | **$1,152** | - Net cash used in financing activities of **$3.6 million** in H1 2022 was primarily due to **$4.5 million** in payments on the term loan[145](index=145&type=chunk) - As of June 30, 2022, the company had an outstanding balance of **$25.5 million** on its term loan and **$25.0 million** on its revolving credit facility, with no remaining availability, and was in compliance with all financial covenants[151](index=151&type=chunk)[153](index=153&type=chunk) - Management believes existing cash and cash flows from operations will be sufficient to meet working capital, capital expenditure, and debt repayment requirements for at least the next twelve months[156](index=156&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states there have been no material changes in its market risks from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes to the company's market risk disclosures since the year-end 2021 report[160](index=160&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2022, and concluded they were effective at a reasonable assurance level, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective at the reasonable assurance level[161](index=161&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[162](index=162&type=chunk) [PART II—OTHER INFORMATION](index=56&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and exhibits filed with the quarterly report [Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in legal proceedings as detailed in Note 10 of the financial statements, including a securities class action lawsuit and a stockholder derivative lawsuit, both arising from similar subject matter concerning alleged false or misleading statements - The company is defending a securities class action lawsuit (Mart v. Tactile Systems) alleging false or misleading public statements between May 2018 and June 2020[66](index=66&type=chunk)[163](index=163&type=chunk) - A stockholder derivative lawsuit (Weaver v. Moen, et al.) was filed in May 2022, arising from the same subject matter as the Mart lawsuit, against certain officers and directors[67](index=67&type=chunk)[163](index=163&type=chunk) [Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have occurred in the company's risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[164](index=164&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of preferred or common stock during the reporting period[165](index=165&type=chunk) [Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - The Exhibit Index lists all documents filed as part of the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer[169](index=169&type=chunk)[172](index=172&type=chunk)

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q1 2022 Earnings Conference Call May 2, 2022 5:00 PM ET Company Participants Dan Reuvers - President and CEO Brent Moen - CFO Conference Call Participants Ryan Zimmerman - BTIG Adam Mandel - Piper Sandler Suraj Kalia - Oppenheimer Maggie Boeye - William Blair Operator Welcome ladies and gentlemen to the First Quarter of Fiscal Year 2022 Earnings Conference call for Tactile Medical. At this time, all participants have been placed in a listen-only mode. At the en ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Tactile Systems Technology, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) 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, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ...

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, 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) Delaware (State or o ...

Tactile System Technology, Inc. (NASDAQ:TCMD) Q4 2021 Earnings Conference Call February 22, 2022 5:00 PM ET Company Participants Dan Reuvers – President and Chief Executive Officer Brent Moen – Chief Financial Officer Conference Call Participants Phil Ryan – BTIG Margaret Kaczor – William Blair Suraj Kalia – Oppenheimer Operator Please standby. Good evening, ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2021 Earnings Conference call for Tactile Medical. At this time, all participan ...

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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: September 30, 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 juris ...

Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q2 2021 Earnings Conference Call August 2, 2021 5:00 PM ET Company Participants Dan Reuvers - President and Chief Executive Officer Brent Moen - Chief Financial Officer Conference Call Participants Chris Pasquale - Guggenheim Margaret Kaczor - William Blair Suraj Kalia - Oppenheimer Operator Good evening, ladies and gentlemen, and welcome to the Second Quarter of 2021 Earnings Conference Call for Tactile Medical. [Operator Instructions] Please note that thi ...

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: June 30, 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 jurisdicti ...