Tactile Systems Technology(TCMD) - 2023 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for Q3 2023 show significant financial performance improvement year-over-year Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $66,036 | $21,929 | | Total current assets | $151,690 | $119,763 | | Total assets | $293,307 | $254,996 | | Liabilities & Equity | | | | Total current liabilities | $45,618 | $64,330 | | Total liabilities | $110,477 | $133,596 | | Total stockholders' equity | $182,830 | $121,400 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $69,586 | $65,262 | $196,771 | $172,885 | | Gross profit | $49,359 | $46,794 | $139,126 | $123,879 | | Income (loss) from operations | $7,989 | $(1,620) | $6,241 | $(20,608) | | Net income (loss) | $22,299 | $(2,279) | $20,313 | $(22,487) | | Diluted EPS | $0.94 | $(0.11) | $0.88 | $(1.12) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,503 | $1,354 | | Net cash used in investing activities | $(1,541) | $(1,844) | | Net cash provided by (used in) financing activities | $28,145 | $(4,313) | | Net increase (decrease) in cash | $44,107 | $(4,803) | - In February 2023, the company closed a public offering of 2,875,000 shares of common stock, receiving net proceeds of $34.6 million[26] - A significant income tax benefit of $14.7 million was recorded in Q3 2023, primarily due to the release of a valuation allowance on deferred tax assets, as management now believes these assets are more likely than not to be realized[90][92] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q3 2023's 7% revenue growth to lymphedema product increases, offsetting airway clearance product declines Revenue by Product Line (in thousands) | Product Line | Q3 2023 Revenue | Q3 2022 Revenue | % Change | 9M 2023 Revenue | 9M 2022 Revenue | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lymphedema products | $62,506 | $54,214 | 15% | $172,257 | $146,502 | 18% | | Airway clearance products | $7,080 | $11,048 | (36)% | $24,514 | $26,383 | (7)% | | Total | $69,586 | $65,262 | 7% | $196,771 | $172,885 | 14% | - The increase in lymphedema product revenue was attributed to the increasing productivity of the field sales team and the introduction of new products[120] - The decrease in airway clearance product revenue was due to one large DME provider experiencing slowed placements of the AffloVest system following the expiration of the COVID-19 Public Health Emergency waiver[120] - Intangible asset amortization and earn-out expense shifted from a $4.0 million expense in Q3 2022 to a $3.1 million benefit in Q3 2023, primarily due to a decrease in the fair value of the AffloVest earn-out liability[132] - The company's credit agreement was amended in August 2023, extending the maturity date to August 2026 and providing an additional term loan of $8.25 million[149] - As of September 30, 2023, total borrowings were $46.8 million[150] - Management believes that cash, cash equivalents, 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[153] Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to market risk disclosures since its 2022 Annual Report on Form 10-K - There have been no material changes in the company's market risks since the disclosures made in the Annual Report on Form 10-K for the year ended December 31, 2022[156] Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls during the quarter - Management concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at a reasonable assurance level[157] - No changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls[158] PART II—OTHER INFORMATION Legal Proceedings The "Mart Lawsuit," a securities class action, was settled and received final court approval in August 2023, with no company funding expected - The securities class action lawsuit (Mart v. Tactile Systems) was settled, and on August 25, 2023, the court entered an order granting final approval, bringing the matter to a close[67][159] - The company does not expect to fund the $5 million settlement amount[67][159] - A stockholder derivative lawsuit (Weaver v. Moen) has reached a non-binding settlement-in-principle as of July 31, 2023, with parties working to finalize the agreement[70] Risk Factors No material changes to risk factors have occurred since those disclosed in the company's 2022 Annual Report on Form 10-K - There have been no material changes in risk factors from those disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022[160]