Tactile Systems Technology(TCMD) - 2023 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements Q1 2023 revenue grew 23% to $58.8 million, net loss significantly narrowed, and cash increased to $55.0 million Condensed Consolidated Balance Sheets Total assets reached $275.5 million by March 31, 2023, driven by cash, while liabilities decreased, boosting equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $55,011 | $21,929 | | Total current assets | $145,433 | $119,763 | | Total assets | $275,501 | $254,996 | | Liabilities & Equity | | | | Total current liabilities | $51,404 | $64,330 | | Total liabilities | $119,339 | $133,596 | | Total stockholders' equity | $156,162 | $121,400 | Condensed Consolidated Statements of Operations Q1 2023 revenue grew 23% to $58.8 million, significantly narrowing net loss to $1.9 million due to higher revenue and lower expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenue | $58,846 | $47,978 | | Gross profit | $41,468 | $33,862 | | Loss from operations | $(3,806) | $(14,901) | | Net loss | $(1,886) | $(15,568) | | Net loss per share (Basic & Diluted) | $(0.09) | $(0.78) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity rose to $156.2 million by March 31, 2023, primarily from $34.6 million net proceeds of a public stock offering - A follow-on public offering of 2,875,000 shares of common stock resulted in net proceeds of $34.6 million, significantly boosting stockholders' equity[18] Condensed Consolidated Statements of Cash Flows Q1 2023 cash and equivalents increased by $33.1 million, primarily from $33.9 million in financing activities, improving operating cash flow Summary of Cash Flows (in thousands) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(502) | $(3,206) | | Net cash used in investing activities | $(291) | $(175) | | Net cash provided by (used in) financing activities | $33,875 | $(3,698) | | Net increase (decrease) in cash | $33,082 | $(7,079) | Notes to the Condensed Consolidated Financial Statements Notes detail business operations, product lines, seasonality, debt, revenue, and legal proceedings, including a class action settlement - The company manufactures and distributes medical devices for chronic diseases, including the Flexitouch® and Entre™ systems for lymphedema and the AffloVest® for chronic respiratory conditions[23][24] - In February 2023, the company closed a public offering of 2,875,000 shares of common stock, receiving net proceeds of $34.6 million[27] - The company's 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[28] - A securities class action lawsuit (Mart Lawsuit) has been settled for $5 million, subject to final court approval. The company does not expect to fund any portion of the cash payment[69] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported Q1 2023 revenue growth of 23% to $58.8 million, significantly narrowing net loss, with strong liquidity Overview The company develops medical devices for chronic diseases, utilizing direct-to-patient and DME provider models for its product lines - The company's therapeutic focus is on vascular disease, oncology, and chronic respiratory conditions, with a mission to improve at-home care for patients[101] - As of March 31, 2023, the company's field staff grew to 289 employees, up from 271 in the prior year, to support its commercial infrastructure[104] Results of Operations Q1 2023 revenue grew 23% to $58.8 million, driven by product lines, with stable gross margin and reduced operating loss Revenue by Product Line (in thousands) | Product Line | Q1 2023 | Q1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Lymphedema products | $49,752 | $40,654 | $9,098 | 22% | | Airway clearance products | $9,094 | $7,324 | $1,770 | 24% | | Total | $58,846 | $47,978 | $10,868 | 23% | - Gross margin remained consistent year-over-year at 70.5% in Q1 2023 compared to 70.6% in Q1 2022[118] - Intangible asset amortization and earn-out expense decreased by $5.8 million (82%) year-over-year, primarily due to a smaller fair value adjustment to the earn-out liability in the current period[123] Liquidity and Capital Resources Liquidity improved in Q1 2023, with cash and equivalents reaching $55.0 million, primarily from a public stock offering - Net cash provided by financing activities was $33.9 million, primarily from a $34.6 million public stock offering, which significantly improved the company's cash position[131] - As of March 31, 2023, the company had outstanding borrowings of $48.3 million, consisting of a $23.3 million term loan and $25.0 million under its revolving credit facility[138] - The company is obligated to pay the remaining $5.0 million of the initial AffloVest earn-out, plus $250,000 in interest, on or before May 26, 2023[141] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes in market risks were reported since the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes in market risk since the end of the previous fiscal year[148] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2023[149] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[150] PART II—OTHER INFORMATION Item 1. Legal Proceedings Legal proceedings information is incorporated by reference from Note 10 – 'Commitments and Contingencies' in the financial statements - Details on legal proceedings are provided in Note 10 of the condensed consolidated financial statements[151] Item 1A. Risk Factors No material changes to risk factors were reported from those disclosed in the Annual Report on Form 10-K for 2022 - No material changes in risk factors were reported from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[152] Other Items (Items 2, 3, 4, 5, 6) The company reported no unregistered equity sales, no defaults on senior securities, and no mine safety or other material disclosures - The company reported no activity for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[153][154][155][156]