Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 01, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | TACTILE SYSTEMS TECHNOLOGY INC | |
Entity Central Index Key | 1,027,838 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 18,472,551 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 23,136 | $ 23,968 |
Marketable securities | 22,800 | 19,944 |
Accounts receivable, net | 20,179 | 17,623 |
Inventories | 14,919 | 11,040 |
Income taxes receivable | 5,798 | 2,119 |
Prepaid expenses and other current assets | 2,370 | 2,178 |
Total current assets | 89,202 | 76,872 |
Property and equipment, net | 4,063 | 3,776 |
Other assets | ||
Intangible assets, net | 3,035 | 2,218 |
Medicare accounts receivable, long-term | 1,011 | 2,718 |
Deferred income taxes | 4,057 | 2,662 |
Other non-current assets | 367 | 201 |
Total other assets | 8,470 | 7,799 |
Total assets | 101,735 | 88,447 |
Current liabilities | ||
Accounts payable | 3,929 | 4,253 |
Accrued payroll and related taxes | 8,292 | 6,706 |
Accrued expenses | 2,290 | 2,598 |
Future product royalties | 6 | 17 |
Income taxes | 1,801 | 212 |
Other current liabilities | 439 | 733 |
Total current liabilities | 16,757 | 14,519 |
Long-term liabilities | ||
Accrued warranty reserve, long-term | 1,560 | 1,141 |
Total liabilities | 18,317 | 15,660 |
Commitments and Contingencies (see Note 9) | ||
Stockholders’ equity | ||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2018 and December 31, 2017 | ||
Common stock, $0.001 par value, 300,000,000 shares authorized; 18,415,699 shares issued and outstanding as of September 30, 2018; 17,872,465 shares issued and 17,846,379 shares outstanding as of December 31, 2017 | 18 | 18 |
Additional paid-in capital | 76,081 | 70,224 |
Retained earnings | 7,350 | 3,082 |
Accumulated other comprehensive loss | (31) | (44) |
Less: treasury stock, at cost — none as of September 30, 2018 and 26,086 shares as of December 31, 2017 | (493) | |
Total stockholders’ equity | 83,418 | 72,787 |
Total liabilities and stockholders’ equity | $ 101,735 | $ 88,447 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2018 | Dec. 31, 2017 |
Condensed Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common shares authorized | 300,000,000 | 300,000,000 |
Common Stock, Shares, Issued | 18,415,699 | 17,872,465 |
Common Stock, Shares, Outstanding | 18,415,699 | 17,846,379 |
Treasury stock (in shares) | 0 | 26,086 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Condensed Consolidated Statements of Operations | ||||
Revenues, net | $ 36,322 | $ 28,283 | $ 97,303 | $ 74,397 |
Cost of goods sold | 10,141 | 7,528 | 27,060 | 20,186 |
Gross profit | 26,181 | 20,755 | 70,243 | 54,211 |
Operating expenses | ||||
Sales and marketing | 15,632 | 10,915 | 42,641 | 31,726 |
Research and development | 1,223 | 1,116 | 3,949 | 3,699 |
Reimbursement, general and administrative | 7,956 | 7,551 | 22,799 | 19,815 |
Total operating expenses | 24,811 | 19,582 | 69,389 | 55,240 |
Income (loss) from operations | 1,370 | 1,173 | 854 | (1,029) |
Other income | 128 | 85 | 351 | 204 |
Income (loss) before income taxes | 1,498 | 1,258 | 1,205 | (825) |
Income tax benefit | (248) | (84) | (3,063) | (4,450) |
Net income | $ 1,746 | $ 1,342 | $ 4,268 | $ 3,625 |
Net income per common share | ||||
Basic (in dollars per share) | $ 0.10 | $ 0.08 | $ 0.23 | $ 0.21 |
Diluted (in dollars per share) | $ 0.09 | $ 0.07 | $ 0.22 | $ 0.19 |
Weighted-average common shares used to compute net income per common share | ||||
Basic (in shares) | 18,344,956 | 17,603,293 | 18,166,999 | 17,222,072 |
Diluted (in shares) | 19,525,686 | 19,083,975 | 19,328,947 | 18,818,609 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 1,746 | $ 1,342 | $ 4,268 | $ 3,625 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on marketable securities | 10 | 3 | 29 | (18) |
Income tax related to items of other comprehensive income (loss) | (3) | (1) | (16) | 11 |
Total other comprehensive income (loss) | 7 | 2 | 13 | (7) |
Comprehensive income | $ 1,753 | $ 1,344 | $ 4,281 | $ 3,618 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders’ Equity - USD ($) $ in Thousands | Common Stock | Additional Paid In Capital. | Retained Earnings or (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Treasury Stock | Total |
Balances at the beginning at Dec. 31, 2016 | $ 17 | $ 62,406 | $ (2,773) | $ (11) | $ 59,639 | |
Balances at the beginning (in shares) at Dec. 31, 2016 | 16,833,737 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Stock-based compensation | 3,104 | 3,104 | ||||
Exercise of common stock options and warrants and vesting of restricted stock units | $ 1 | 672 | 673 | |||
Exercise of common stock options and warrants and vesting of restricted stock units (in shares) | 583,360 | |||||
Taxes paid for net share settlement of restricted stock units | (278) | (278) | ||||
Common shares issued for employee stock purchase plan | 2,210 | 2,210 | ||||
Common shares issued for employee stock purchase plan (in shares) | 259,981 | |||||
Shares repurchased to cover taxes from restricted stock award vesting | $ (493) | (493) | ||||
Shares repurchased to cover taxes from restricted stock award vesting (in shares) | (26,086) | |||||
Comprehensive income for the period | 3,625 | (7) | 3,618 | |||
Balances at the end at Sep. 30, 2017 | $ 18 | 68,114 | 852 | (18) | (493) | 68,473 |
Balances at the end (in shares) at Sep. 30, 2017 | 17,650,992 | |||||
Balances at the beginning at Dec. 31, 2017 | $ 18 | 70,224 | 3,082 | (44) | (493) | 72,787 |
Balances at the beginning (in shares) at Dec. 31, 2017 | 17,846,379 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Stock-based compensation | 5,638 | 5,638 | ||||
Exercise of common stock options and warrants and vesting of restricted stock units | 1,218 | 1,218 | ||||
Exercise of common stock options and warrants and vesting of restricted stock units (in shares) | 479,656 | |||||
Taxes paid for net share settlement of restricted stock units | (1,922) | (1,922) | ||||
Treasury stock issued for option exercises | (493) | $ 493 | ||||
Treasury stock issued for option exercises | 26,086 | |||||
Common shares issued for employee stock purchase plan | 1,416 | 1,416 | ||||
Common shares issued for employee stock purchase plan (in shares) | 63,578 | |||||
Comprehensive income for the period | 4,268 | 13 | 4,281 | |||
Balances at the end at Sep. 30, 2018 | $ 18 | $ 76,081 | $ 7,350 | $ (31) | $ 83,418 | |
Balances at the end (in shares) at Sep. 30, 2018 | 18,415,699 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities | ||
Net income | $ 4,268 | $ 3,625 |
Adjustments to reconcile net income to net cash provided by operating activities | ||
Depreciation and amortization | 2,474 | 1,073 |
Deferred income taxes | (1,411) | |
Stock-based compensation expense | 5,638 | 3,104 |
Change in allowance for doubtful accounts | 414 | (36) |
Loss on disposal of equipment | 3 | |
Changes in assets and liabilities: | ||
Accounts receivable | (2,970) | 460 |
Inventories | (3,879) | (3,821) |
Income taxes | (2,090) | (5,373) |
Prepaid expenses and other assets | (1,358) | 130 |
Medicare accounts receivable – long-term | 1,707 | 52 |
Accounts payable | (508) | 87 |
Accrued payroll and related taxes | 1,586 | (812) |
Accrued expenses and other liabilities | (179) | 1,585 |
Future product royalties | (11) | (41) |
Net cash provided by operating activities | 3,684 | 33 |
Cash flows from investing activities | ||
Proceeds from sales and maturities of marketable securities | 13,000 | 1,000 |
Purchases of marketable securities | (14,792) | (12,051) |
Purchases of property and equipment | (2,384) | (1,953) |
Intangible asset costs | (1,052) | (44) |
Other investments | (145) | |
Net cash used in investing activities | (5,228) | (13,193) |
Cash flows from financing activities | ||
Taxes paid for net share settlement of restricted stock units | (1,922) | (278) |
Proceeds from exercise of common stock options and warrants | 1,218 | 673 |
Proceeds from the issuance of common stock from the employee stock purchase plan | 1,416 | 2,210 |
Shares repurchased to cover taxes from restricted stock award vesting | (493) | |
Net cash provided by financing activities | 712 | 2,112 |
Net change in cash and cash equivalents | (832) | (11,048) |
Cash and cash equivalents – beginning of period | 23,968 | 30,701 |
Cash and cash equivalents – end of period | 23,136 | 19,653 |
Supplemental cash flow disclosure | ||
Cash paid for interest | 3 | 1 |
Cash paid for taxes | 448 | 923 |
Capital expenditures incurred but not yet paid | $ 184 | $ 97 |
Nature of Business and Operatio
Nature of Business and Operations | 9 Months Ended |
Sep. 30, 2018 | |
Nature of Business and Operations | |
Nature of Business and Operations | Note 1. Nature of Business and Operations Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch and Entre systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition, and the Actitouch system, a medical device used to treat venous leg ulcers and chronic venous insufficiency. We provide our products for use in the home and sell them through vascular, wound and lymphedema clinics throughout the United States. We do business as “Tactile Medical.” We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in us being reincorporated as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical.” On August 2, 2016 we closed the initial public offering of our common stock, which resulted in the sale of 4,120,000 shares of our common stock at a public offering price of $10.00 per share. We received net proceeds from the initial public offering of approximately $35.4 million, after deducting underwriting discounts and approximately $2.9 million of transaction expenses. In connection with the closing of the initial public offering, all of our outstanding redeemable convertible preferred stock automatically converted to common stock on August 2, 2016. At August 2, 2016, we did not have any redeemable convertible preferred stock issued or outstanding. Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher sales in the third and fourth quarters as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs for our products, and because patients often spend the remaining balances in their healthcare flexible spending accounts at that time. This seasonality applies only to purchases of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid, or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year or do not have plans that include patient deductibles for purchases of our products. |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2018 | |
Basis of Presentation | |
Basis of Presentation | Note 2. Basis of Presentation Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. We have reclassified certain prior year amounts to conform to the current year’s presentation. The results for the nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2018, or for any other interim period or for any future year. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017. Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Comprehensive Income Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on available-for-sale marketable securities. JOBS Act Accounting Election As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we currently are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. However, as of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we will no longer qualify as an emerging growth company as of December 31, 2018. Therefore, after that date, we will no longer be able to take advantage of the extended transition period for adopting new or revised accounting standards. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Significant Accounting Policies During the nine months ended September 30, 2018 there were no material changes in our significant accounting policies. See Note 3 - “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 for information regarding our significant accounting policies. Inventories Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value. Inventories consisted of 45% finished goods and 55% component parts and work-in-process as of September 30, 2018 and 39% finished goods and 61% component parts and work-in-process as of December 31, 2017. Recent Accounting Pronouncements We currently are an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In accordance with the JOBS Act, we elected to participate in the exemption and, as a result, our financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable. However, as of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we will no longer qualify as an emerging growth company as of December 31, 2018 and will no longer be able to take advantage of the extended transition period. Therefore, as of December 31, 2018, we will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue from Contracts with Customers. ” The new section replaces Section 605, “ Revenue Recognition ,” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The section is intended to conform revenue accounting principles with concurrently issued International Financial Reporting Standards to reconcile previously differing treatment between U.S. practices and those of the rest of the world and to enhance disclosures related to disaggregated revenue information. The updated guidance will be effective for us for our annual reporting periods ending on December 31, 2018 and interim reporting periods thereafter due to the recent determination of our upcoming change in filing status. As a result, we commenced project planning for our implementation, which included engaging an accounting firm to assist us. Based on our qualitative assessment to date we have defined the contracts, determined the performance obligations, and assessed the use of the portfolio practical expedient under this standard. We will apply the portfolio approach in determining the transaction price as we have a large volume of contracts with similar characteristics. We are in the process of determining whether this standard will have a material impact on our financial statements. Should we determine an adjustment is required, we will apply the modified retrospective approach as our transition method, which involves recognizing the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings as of January 1, 2018. In February 2016, the FASB issued ASU No. 2016-02, “ Leases ” (Topic 842), which supersedes the existing guidance for lease accounting, “ Leases ” (Topic 840). ASU No. 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. The amendments in this ASU will be effective for us for interim and annual periods beginning after December 15, 2018. ASU No. 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial adoption, with an option to elect to use certain transition relief. Due to the recent determination of our upcoming change in filing status, which has accelerated our required implementation date of this standard, we have commenced project planning for our implementation, which has included engaging an accounting firm to assist us. We are currently evaluating whether this standard will have a material impact on our financial statements. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments — Credit Losses ,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for us for interim and annual periods beginning after December 15, 2019. Therefore, we plan to further evaluate the anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments ,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows. The ASU will be effective for us for interim and annual periods beginning after December 15, 2018. We do not anticipate any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU. In January 2017, the FASB issued ASU No. 2017-01 “ Business Combinations (Topic 805) — Clarifying the Definition of a Business ,” to revise the definition of a business and provide new guidance to assist in the evaluation of transactions as either asset acquisitions (disposals) or business acquisitions (disposals). We currently are an “emerging growth company” as defined by the JOBS Act and this ASU will become effective for us on December 31, 2018 when we no longer qualify for that status. We have elected early adoption for interim transactions that have not previously been included in issued financial statements, which is permitted under this standard. The adoption of this standard did not have a material impact on our consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-07 “ Improvements to Non-employee Share-Based Payment Accounting ,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The ASU will be effective for us for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We do not anticipate any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU. |
Asset Acquisitions
Asset Acquisitions | 9 Months Ended |
Sep. 30, 2018 | |
Asset Acquisitions | |
Asset Acquisitions | Note 4. Asset Acquisition On May 22, 2018, we acquired certain assets and the intellectual property of Wright Therapy Products, Inc. (“WTP”) for total consideration of approximately $875,000 plus a potential earn-out to be amortized on a straight-line basis over the life of the related asset. The earn-out is based on certain revenue metrics over the seven-month period beginning June 30, 2018 and is capitalized to intangible assets. The assets include the rights to a portfolio of thirty-one issued and pending patents that includes intellectual property related to WTP’s pneumatic compression therapy devices and five related trademarks, as well as certain customer accounts. Due to the nature of these patents and related trademarks, as well as our planned use, they have been classified as defensive intangible assets on the balance sheet. The acquisition was recorded as an asset acquisition, and an allocation of the purchase price, based on relative fair value, has been completed as reflected below: Gross Weighted-Average (Dollars in thousands) Carrying Amount Amortization Period Defensive intangible assets $ 788 7 years Customer accounts 87 5 years Total $ 875 |
Marketable Securities
Marketable Securities | 9 Months Ended |
Sep. 30, 2018 | |
Marketable Securities | |
Marketable Securities | Note 5. Marketable Securities Our investments in marketable securities, all of which have original contractual maturities of six to twenty-four months, are classified as available-for-sale and consist of the following: As of September 30, 2018 Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 18,849 $ — $ 37 $ 18,812 Corporate debt securities and certificates of deposit 3,992 — 4 3,988 Marketable securities $ 22,841 $ — $ 41 $ 22,800 As of December 31, 2017 Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 11,997 $ — $ 56 $ 11,941 Corporate debt securities and certificates of deposit 8,017 — 14 8,003 Marketable securities $ 20,014 $ — $ 70 $ 19,944 Unrealized losses and fair value of marketable securities aggregated by investment category and the length of time the securities were in a continuous loss position were as follows: As of September 30, 2018 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 12,828 $ 21 $ 5,984 $ 16 $ 18,812 $ 37 Corporate debt securities and certificates of deposit 1,493 1 997 4 2,490 5 Marketable securities $ 14,321 $ 22 $ 6,981 $ 20 $ 21,302 $ 42 As of December 31, 2017 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 5,974 $ 25 $ 5,967 $ 31 $ 11,941 $ 56 Corporate debt securities and certificates of deposit 7,005 13 998 1 8,003 14 Marketable securities $ 12,979 $ 38 $ 6,965 $ 32 $ 19,944 $ 70 |
Intangible Assets
Intangible Assets | 9 Months Ended |
Sep. 30, 2018 | |
Intangible Assets | |
Intangible Assets | Note 6. Intangible Assets Our patents and other intangible assets, all of which are subject to amortization, are summarized as follows: As of September 30, 2018 As of December 31, 2017 Weighted-Average Gross Gross Amortization Carrying Accumulated Net Carrying Accumulated Net (Dollars in thousands) Period Amount Amortization Amount Amount Amortization Amount Patents 8 years $ 3,554 $ 1,504 $ 2,050 $ 3,536 $ 1,318 $ 2,218 Defensive intangible assets 6 years 930 42 888 — — — Customer accounts 5 years 103 6 97 — — — Total $ 4,587 $ 1,552 $ 3,035 $ 3,536 $ 1,318 $ 2,218 Amortization expense was $0.1 million for each of the three months ended September 30, 2018 and 2017, and $0.2 million for each of the nine months ended September 30, 2018 and 2017. Future amortization expenses are expected as follows: (In thousands) 2018 (October 1 - December 31) $ 104 2019 417 2020 417 2021 417 2022 417 Thereafter 1,263 Total $ 3,035 |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2018 | |
Accrued Expenses | |
Accrued Expenses | Note 7. Accrued Expenses Accrued expenses consisted of the following: (In thousands) As of September 30, 2018 As of December 31, 2017 Warranty $ 726 $ 531 Travel and business 553 453 Legal and consulting 481 317 Deferred rent 159 173 Accrued taxes 84 1,070 Clinical studies 70 15 Other 217 39 Total $ 2,290 $ 2,598 |
Credit Agreement
Credit Agreement | 9 Months Ended |
Sep. 30, 2018 | |
Credit Agreement | |
Credit Agreement | Note 8. Credit Agreement On August 3, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association. The Credit Agreement provides for a new $10,000,000 revolving credit facility. The revolving credit facility expires on August 3, 2021. Subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed an incremental $25,000,000 in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $35,000,000. Amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) LIBOR for an interest period of one month plus 1% (the “Base Rate”) plus an applicable margin or (b) LIBOR plus the applicable margin. The applicable margin is 0.40% to 1.15% on loans bearing interest at the Base Rate and 1.40% to 2.15% on loans bearing interest at LIBOR, in each case depending on our consolidated total leverage ratio. Undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.200% to 0.275%, depending on our consolidated total leverage ratio. As of September 30, 2018 and the date on which we filed this report, we did not have any outstanding borrowings under the Credit Agreement. Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets and are also guaranteed by our subsidiaries. The Credit Agreement limits our ability to make capital expenditures during a fiscal year in excess of the amounts set forth in the Credit Agreement, and requires that we (i) not permit, as of the last day of each fiscal quarter, our consolidated total leverage ratio to exceed 3.00 to 1.00 and (ii) maintain minimum cash and cash equivalents, measured on the last day of each fiscal quarter, of not less than $7,500,000 (subject to a temporary reduction to $5,000,000 for the two fiscal quarters immediately following a permitted acquisition). As of September 30, 2018, we were in compliance with all financial covenants under the Credit Agreement. The Credit Agreement also contains certain other restrictions and covenants, which, among other things, restrict our ability to acquire or merge with another entity, dispose of our assets, make investments, loans or guarantees, incur additional indebtedness, create liens or other encumbrances, or pay dividends or make other distributions. Amounts due under the Credit Agreement may be accelerated upon an Event of Default (as defined in the Credit Agreement), such as breach of a representation, covenant or agreement of ours, defaults with respect to certain of our other material indebtedness or the occurrence of bankruptcy if not otherwise waived or cured. We may use the proceeds from advances under the revolving credit facility (i) to finance capital expenditures, (ii) to pay fees, commissions and expenses in connection with the Credit Agreement and (iii) for working capital and general corporate purposes. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 9. Commitments and Contingencies Lease Obligations In March 2008, we entered into a non-cancelable operating lease agreement for building space for our corporate headquarters that provides for monthly rent, real estate taxes and operating expenses. This lease was subsequently extended to July 31, 2021. In July 2016, we entered into a non-cancelable operating lease agreement for building space to accommodate the relocation of our manufacturing, quality, engineering and research and development functions. This lease agreement extends through November 2023 and provides for monthly rent, real estate taxes and operating expenses. Rent expense was $0.4 million for the each of three months ended September 30, 2018 and 2017, and $1.2 million and $1.1 million for the nine months ended September 30, 2018 and 2017, respectively. In July 2016, we entered into a fleet vehicle lease program for certain members of our field sales organization. We also have operating lease agreements for certain computer and office equipment that expire in 2021. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. Future base minimum lease payments for all lease obligations are expected to be as follows for the years ending December 31: Computer/Office Fleet Vehicle (In thousands) Buildings Equipment Program Total 2018 (October 1 - December 31) $ 227 $ 14 $ 55 $ 296 2019 948 51 85 1,084 2020 954 34 — 988 2021 701 3 — 704 2022 352 — — 352 Thereafter 268 — — 268 Total $ 3,450 $ 102 $ 140 $ 3,692 Major Vendors We had purchases from two major vendors that accounted for 45% and 41% of our total purchases for the three and nine months ended September 30, 2018, respectively. We had purchases from three major vendors that accounted for 47% and 39% of our total purchases for the three and nine months ended September 30, 2017, respectively. Purchase Commitments We issued purchase orders in 2017 totaling $1.7 million for items that we expect to receive between October and December of 2018. We issued purchase orders in the nine months ended September 30, 2018 totaling $15.0 million for items that we expect to receive in 2019. Retirement Plan We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation. We may also make discretionary contributions to the 401(k) plan. We made contributions of $63,000 and $42,000 for the three months ended September 30, 2018 and 2017, respectively, and $174,000 and $135,000 for the nine months ended September 30, 2018 and 2017, respectively. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | Note 10. Stockholders' Equity We completed an initial public offering of our common stock on August 2, 2016, in which we sold 4,120,000 shares of our common stock at a public offering price of $10.00 per share. Immediately prior to the completion of the initial public offering, all then-outstanding shares of our Series A and Series B preferred stock were converted into 5,924,453 shares of our common stock. Our Series A preferred stock converted to Stock-Based Compensation Our 2016 Equity Incentive Plan (the “2016 Plan”) authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors. There were up to 4,800,000 shares of our common stock initially reserved for issuance pursuant to the 2016 Plan. The 2016 Plan provides that the number of shares reserved and available for issuance under the 2016 Plan will automatically increase annually on January 1 of each calendar year, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the lesser of: (a) 5% of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares; provided, however, that our Board of Directors may determine that any annual increase be a lesser number. In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expire, are cancelled, are settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Effective January 1, 2017, 841,686 shares were added to the 2016 Plan, as available for issuance thereunder, pursuant to the automatic increase feature of the 2016 Plan. Effective January 1, 2018, 892,318 shares were added to the 2016 Plan, as available for issuance thereunder, pursuant to the automatic increase feature of the 2016 Plan. As of September 30, 2018, 5,226,592 shares were available for future grant pursuant to the 2016 Plan. Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms. We recorded stock-based compensation expense of $2.4 million and $1.0 million for the three months ended September 30, 2018 and 2017, respectively, and $5.6 million and $3.1 million for the nine months ended September 30, 2018 and 2017, respectively. This expense was allocated as follows: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2018 2017 2018 2017 Cost of goods sold $ 69 $ 4 $ 178 $ 102 Sales and marketing expenses 834 361 2,272 1,030 Research and development expenses 52 29 146 73 Reimbursement, general and administrative expenses 1,425 573 3,042 1,899 Total stock-based compensation expense $ 2,380 $ 967 $ 5,638 $ 3,104 The stock-based compensation expense includes a modification of share-based awards held by a former executive resulting in a charge of $0.6 million for the three and nine months ended September 30, 2018. At September 30, 2018, there was approximately $0.7 million of estimated unrecognized pre-tax compensation expense that is expected to be recognized on a straight-line basis over 0.4 years. Stock Options Stock options issued to participants other than non-employees vest over three or four years and typically have a contractual term of seven or ten years. Annually, stock options are granted to our non-employee directors on the date of the annual meeting of stockholders and vest in full on the earlier of one year after the date of grant or on the date of the next year’s annual meeting of stockholders. These options have a contractual term of seven years. Stock-based compensation expense included in our Condensed Consolidated Statements of Operations for stock options was $0.8 million and $0.3 million for the three months ended September 30, 2018 and 2017, respectively, and $1.8 million and $0.8 million for the nine months ended September 30, 2018 and 2017, respectively. At September 30, 2018, there was approximately $5.0 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.7 years. Stock option activity for the nine months ended September 30, 2018 is summarized as follows: Weighted- Weighted- Average Average Aggregate Options Exercise Price Remaining Intrinsic (In thousands except share, per share and years data) Outstanding Per Share (1) Contractual Life Value (2) Balance at December 31, 2017 1,487,720 $ 8.41 6.2 years $ 29,611 Granted 136,224 $ 39.46 Exercised (388,261) $ 3.14 $ 16,826 Cancelled (28,824) $ 20.50 Balance at September 30, 2018 1,206,859 $ 13.32 6.3 years $ 69,667 Options exercisable at September 30, 2018 706,423 $ 3.80 4.8 years $ 47,505 (1) The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant. (2) The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise. The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period. Options exercisable of 1,098,882 as of September 30, 2017 had a weighted-average exercise price of $2.12 per share. Time-Based Restricted Stock Units We have granted time-based restricted stock units to certain participants under the 2016 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2016 Plan vest over one to three years. Stock-based compensation expense included in our Condensed Consolidated Statements of Operations for time-based restricted stock units was $1.3 million and $0.6 million for the three months ended September 30, 2018 and 2017, respectively, and $2.9 million and $1.8 million for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, there was approximately $5.4 million of total unrecognized pre-tax compensation expense related to outstanding time-based restricted stock units that is expected to be recognized over a weighted-average period of 1.8 years. Our time-based restricted stock unit activity for the nine months ended September 30, 2018 was as follows: Weighted- Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2017 441,507 $ 16.38 $ 12,795 Granted 92,109 $ 35.27 Vested (175,164) $ 14.75 Cancelled (27,229) $ 21.00 Balance at September 30, 2018 331,223 $ 22.11 $ 23,533 Deferred and unissued at September 30, 2018 (2) 3,427 $ 31.28 $ 243 (1) The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period. (2) For the nine months ended September 30, 2018, there were 1,214 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the directors’ termination of service as a director of ours or the occurrence of a change of control of us. These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant. As of September 30, 2018, there were 3,427 outstanding restricted stock units that have been granted to non-employee directors in lieu of their quarterly director retainer payments. These restricted stock units are not included in the “Balance at September 30, 2018” line in the table above because they are fully vested. Performance-Based Restricted Stock Units In February 2018, we granted 67,982 performance-based restricted stock units (“PSUs”), which represents the target number of PSUs under these awards, to certain participants under the 2016 Plan. These PSUs have both performance-based and time-based vesting features. The PSUs will be earned if and to the extent performance goals based on revenue and adjusted EBITDA are achieved in 2019. The number of PSUs earned will depend on the level at which the performance targets are achieved, and can range from 50% of target if threshold performance is achieved and up to 150% of target if maximum performance is achieved. One third of the earned PSUs will vest on the date the Compensation and Organization Committee certifies the number of PSUs earned, and the remaining two thirds of the earned PSUs will vest on the first anniversary of that certification date. All earned and vested PSUs will be settled in shares of common stock. Stock-based compensation expense included in our Condensed Consolidated Statements of Operations for PSUs was $0.2 million and $0.5 million for the three and nine months ended September 30, 2018, respectively, and $0 for the same periods in 2017. As of September 30, 2018, there was approximately $1.6 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 2.4 years. Our performance-based restricted stock unit activity for the nine-months ended September 30, 2018 was as follows: Performance- Weighted- Based Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2017 — $ — $ — Granted 67,982 $ 32.36 Vested — $ — Cancelled (5,253) $ 32.36 Balance at September 30, 2018 62,729 $ 32.36 $ 4,457 (1) The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period. Employee Stock Purchase Plan Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016 and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The plan is available to all our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. The plan provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year. A total of 1.6 million shares of common stock was initially reserved for issuance under the ESPP, and this share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (1) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (2) 500,000 shares or (3) such lesser amount as our Board of Directors may determine. Effective January 1, 2018, 178,463 shares were added to the ESPP, as available for issuance thereunder, pursuant to the automatic increase feature of the plan. On May 15, 2018, 63,578 shares were purchased under the ESPP, utilizing $1.4 million of employee contributions. As of September 30, 2018, 1,576,090 shares were available for future issuance under the ESPP. We recognized stock-based compensation expense associated with the ESPP of $ 0.1 million for each of the three-month periods ended September 30, 2018 and 2017, and $ 0.5 million for each of the nine-month periods ended September 30, 2018 and 2017. |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2018 | |
Income Taxes | |
Income Taxes | Note 11. Income Taxes We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjusting for discrete tax items recorded in the period. Deferred income taxes result from temporary differences between the reporting of amounts for financial statement purposes and income tax purposes. These differences relate primarily to different methods used for income tax reporting purposes, including for depreciation and amortization, warranty and certain employee compensation related accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves. Our provision for income taxes included current federal and state income tax expense, as well as deferred federal and state income tax expense. The effective tax rate for the three months ended September 30, 2018 was a benefit of 16.5%, compared to a benefit of 6.7% for the three months ended September 30, 2017. The primary driver of the change in the effective tax rate was an increase in the tax benefits related to share-based compensation proportionate to pre-tax book income as compared to the same prior year period. We recorded an income tax benefit of $0.2 million and $0.1 million for the three months ended September 30, 2018 and 2017, respectively. The effective tax rate for the nine months ended September 30, 2018 was a benefit of 254.3%, compared to a benefit of 539.1% for the nine months ended September 30, 2017. The primary driver of the change in our effective tax rate was a significant increase in tax benefits related to share-based compensation proportionate to pre-tax book income as compared to the same prior year period. We recorded an income tax benefit of $3.1 million and an income tax benefit of $4.5 million for the nine months ended September 30, 2018 and 2017, respectively. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority is more likely than not to sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. As of September 30, 2018 we had an unrecognized tax benefit of approximately $1.8 million. Included in the balance of unrecognized tax benefits as of September 30, 2018 was $0.4 million of tax benefits that, if recognized, would impact the effective tax rate. Also included in the balance of unrecognized tax benefits as of September 30, 2018 was $1.4 million of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. We are currently under examination for our 2016 federal tax return. We are not currently under exam for income taxes by any other taxing jurisdictions. In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense on our statement of operations. |
Net Income Per Share
Net Income Per Share | 9 Months Ended |
Sep. 30, 2018 | |
Net Income Per Share | |
Net Income Per Share | Note 12. Net Income Per Share The following table sets forth the computation of our basic and diluted net income per share: Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except share and per share data) 2018 2017 2018 2017 Net income $ 1,746 $ 1,342 $ 4,268 $ 3,625 Weighted-average shares outstanding 18,344,956 17,603,293 18,166,999 17,222,072 Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares 1,180,730 1,480,682 1,161,948 1,596,537 Weighted-average shares used to compute diluted net income per share 19,525,686 19,083,975 19,328,947 18,818,609 Net income per share - Basic $ 0.10 $ 0.08 $ 0.23 $ 0.21 Net income per share - Diluted $ 0.09 $ 0.07 $ 0.22 $ 0.19 The following common stock equivalents were excluded from the computation of diluted net income per share for the periods presented because including them would have been anti-dilutive: Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Restricted stock units — — 5,413 1,184 Common stock options 25,703 23,311 47,981 63,066 Common stock warrants — — — — Employee stock purchase plan — — 28,996 — Total 25,703 23,311 82,390 64,250 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | Note 13. Fair Value Measurements We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our cash equivalents and marketable securities as of September 30, 2018 and December 31, 2017 according to the three-level fair value hierarchy: As of September 30, 2018 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 5,260 $ — $ — $ 5,260 U.S. government and agency obligations 11,833 6,979 — 18,812 Corporate debt securities — 3,988 — 3,988 Total $ 17,093 $ 10,967 $ — $ 28,060 As of December 31, 2017 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 9,212 $ — $ — $ 9,212 U.S. government and agency obligations 1,000 10,941 — 11,941 Corporate debt securities — 8,003 — 8,003 Total $ 10,212 $ 18,944 $ — $ 29,156 During the nine months ended September 30, 2018, there were no transfers within the three-level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed, which merits a transfer between the disclosed levels of the valuation hierarchy. The fair values for our money market mutual funds, U.S. government and agency obligations and corporate debt securities are determined based on valuations provided by external investment managers who obtain them from a variety of industry standard data providers. The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these items. Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. We had no re-measurements of non-financial assets to fair value in the nine months ended September 30, 2018. |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2018 | |
Subsequent Events | |
Subsequent Events | Note 14. Subsequent Events On October 15, 2018, we entered into a license agreement (the “License Agreement”) with Sun Scientific, Inc. (“Sun Scientific”) pursuant to which we licensed certain intellectual property of Sun Scientific, including related to its Aero-Wrap product, in the United States and Canada, for use in all medical applications, including but not limited to swelling/edema and ulcers (including lymphedema and chronic venous insufficiency conditions), but excluding the use of the intellectual property in the field of prophylaxis for deep vein thrombosis. Pursuant to the License Agreement, we paid Sun Scientific an The License Agreement will continue until the date of expiration of the last to expire or be invalidated of the licensed patents, subject to earlier termination under certain circumstances, including by either party upon a material breach, by us at any time upon six months’ prior written notice or by Sun Scientific if specified events related to sales, use and commercialization occur. On October 26, 2018, we entered into a non-cancelable office lease agreement for approximately 80,745 square feet for new corporate headquarters space in Minneapolis, Minnesota. The initial lease term is ten years and six months, with an option to renew for two periods of five years each. The base rent increases yearly during the initial term, commencing at approximately $106,000 per month during the first year of the initial term and increasing to approximately $134,300 per month during the last six months of the initial term, and we are also obligated for certain taxes and operating expenses. We expect to begin incurring rent expense related to this lease in the first quarter of 2019. We are looking to sub-lease our existing building space for the remainder of our lease obligation, which ends July 31, 2021. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. We have reclassified certain prior year amounts to conform to the current year’s presentation. The results for the nine months ended September 30, 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2018, or for any other interim period or for any future year. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017. |
Principles of Consolidation | Principles of Consolidation The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Comprehensive Income | Comprehensive Income Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on available-for-sale marketable securities. |
JOBS Act Accounting Election | JOBS Act Accounting Election As an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), we currently are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. However, as of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we will no longer qualify as an emerging growth company as of December 31, 2018. Therefore, after that date, we will no longer be able to take advantage of the extended transition period for adopting new or revised accounting standards. |
Inventories | Inventories Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value. Inventories consisted of 45% finished goods and 55% component parts and work-in-process as of September 30, 2018 and 39% finished goods and 61% component parts and work-in-process as of December 31, 2017. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements We currently are an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In accordance with the JOBS Act, we elected to participate in the exemption and, as a result, our financial statements may not be comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. Section 107 of the JOBS Act provides that we can elect to opt out of the extended transition period at any time, which election is irrevocable. However, as of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we will no longer qualify as an emerging growth company as of December 31, 2018 and will no longer be able to take advantage of the extended transition period. Therefore, as of December 31, 2018, we will be required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue from Contracts with Customers. ” The new section replaces Section 605, “ Revenue Recognition ,” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The section is intended to conform revenue accounting principles with concurrently issued International Financial Reporting Standards to reconcile previously differing treatment between U.S. practices and those of the rest of the world and to enhance disclosures related to disaggregated revenue information. The updated guidance will be effective for us for our annual reporting periods ending on December 31, 2018 and interim reporting periods thereafter due to the recent determination of our upcoming change in filing status. As a result, we commenced project planning for our implementation, which included engaging an accounting firm to assist us. Based on our qualitative assessment to date we have defined the contracts, determined the performance obligations, and assessed the use of the portfolio practical expedient under this standard. We will apply the portfolio approach in determining the transaction price as we have a large volume of contracts with similar characteristics. We are in the process of determining whether this standard will have a material impact on our financial statements. Should we determine an adjustment is required, we will apply the modified retrospective approach as our transition method, which involves recognizing the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings as of January 1, 2018. In February 2016, the FASB issued ASU No. 2016-02, “ Leases ” (Topic 842), which supersedes the existing guidance for lease accounting, “ Leases ” (Topic 840). ASU No. 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. The amendments in this ASU will be effective for us for interim and annual periods beginning after December 15, 2018. ASU No. 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after, the date of initial adoption, with an option to elect to use certain transition relief. Due to the recent determination of our upcoming change in filing status, which has accelerated our required implementation date of this standard, we have commenced project planning for our implementation, which has included engaging an accounting firm to assist us. We are currently evaluating whether this standard will have a material impact on our financial statements. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments — Credit Losses ,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for us for interim and annual periods beginning after December 15, 2019. Therefore, we plan to further evaluate the anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments ,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows. The ASU will be effective for us for interim and annual periods beginning after December 15, 2018. We do not anticipate any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU. In January 2017, the FASB issued ASU No. 2017-01 “ Business Combinations (Topic 805) — Clarifying the Definition of a Business ,” to revise the definition of a business and provide new guidance to assist in the evaluation of transactions as either asset acquisitions (disposals) or business acquisitions (disposals). We currently are an “emerging growth company” as defined by the JOBS Act and this ASU will become effective for us on December 31, 2018 when we no longer qualify for that status. We have elected early adoption for interim transactions that have not previously been included in issued financial statements, which is permitted under this standard. The adoption of this standard did not have a material impact on our consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-07 “ Improvements to Non-employee Share-Based Payment Accounting ,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The ASU will be effective for us for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. We do not anticipate any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU. |
Asset Acquisition (Tables)
Asset Acquisition (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Asset Acquisitions | |
Schedule of allocation of the purchase price at acquisition date fair value | Gross Weighted-Average (Dollars in thousands) Carrying Amount Amortization Period Defensive intangible assets $ 788 7 years Customer accounts 87 5 years Total $ 875 |
Marketable Securities (Tables)
Marketable Securities (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Marketable Securities | |
Schedule of marketable securities | As of September 30, 2018 Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 18,849 $ — $ 37 $ 18,812 Corporate debt securities and certificates of deposit 3,992 — 4 3,988 Marketable securities $ 22,841 $ — $ 41 $ 22,800 As of December 31, 2017 Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 11,997 $ — $ 56 $ 11,941 Corporate debt securities and certificates of deposit 8,017 — 14 8,003 Marketable securities $ 20,014 $ — $ 70 $ 19,944 |
Schedule of unrealized losses on investment | As of September 30, 2018 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 12,828 $ 21 $ 5,984 $ 16 $ 18,812 $ 37 Corporate debt securities and certificates of deposit 1,493 1 997 4 2,490 5 Marketable securities $ 14,321 $ 22 $ 6,981 $ 20 $ 21,302 $ 42 As of December 31, 2017 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 5,974 $ 25 $ 5,967 $ 31 $ 11,941 $ 56 Corporate debt securities and certificates of deposit 7,005 13 998 1 8,003 14 Marketable securities $ 12,979 $ 38 $ 6,965 $ 32 $ 19,944 $ 70 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Intangible Assets | |
Schedule of finite lived intangible assets | As of September 30, 2018 As of December 31, 2017 Weighted-Average Gross Gross Amortization Carrying Accumulated Net Carrying Accumulated Net (Dollars in thousands) Period Amount Amortization Amount Amount Amortization Amount Patents 8 years $ 3,554 $ 1,504 $ 2,050 $ 3,536 $ 1,318 $ 2,218 Defensive intangible assets 6 years 930 42 888 — — — Customer accounts 5 years 103 6 97 — — — Total $ 4,587 $ 1,552 $ 3,035 $ 3,536 $ 1,318 $ 2,218 |
Schedule of future amortization expense | (In thousands) 2018 (October 1 - December 31) $ 104 2019 417 2020 417 2021 417 2022 417 Thereafter 1,263 Total $ 3,035 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Accrued Expenses | |
Schedule of Accrued Expenses | (In thousands) As of September 30, 2018 As of December 31, 2017 Warranty $ 726 $ 531 Travel and business 553 453 Legal and consulting 481 317 Deferred rent 159 173 Accrued taxes 84 1,070 Clinical studies 70 15 Other 217 39 Total $ 2,290 $ 2,598 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies | |
Schedule of future minimum lease payments | Computer/Office Fleet Vehicle (In thousands) Buildings Equipment Program Total 2018 (October 1 - December 31) $ 227 $ 14 $ 55 $ 296 2019 948 51 85 1,084 2020 954 34 — 988 2021 701 3 — 704 2022 352 — — 352 Thereafter 268 — — 268 Total $ 3,450 $ 102 $ 140 $ 3,692 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Schedule of allocation of stock-based compensation expense | Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2018 2017 2018 2017 Cost of goods sold $ 69 $ 4 $ 178 $ 102 Sales and marketing expenses 834 361 2,272 1,030 Research and development expenses 52 29 146 73 Reimbursement, general and administrative expenses 1,425 573 3,042 1,899 Total stock-based compensation expense $ 2,380 $ 967 $ 5,638 $ 3,104 |
Schedule of stock option activity | Weighted- Weighted- Average Average Aggregate Options Exercise Price Remaining Intrinsic (In thousands except share, per share and years data) Outstanding Per Share (1) Contractual Life Value (2) Balance at December 31, 2017 1,487,720 $ 8.41 6.2 years $ 29,611 Granted 136,224 $ 39.46 Exercised (388,261) $ 3.14 $ 16,826 Cancelled (28,824) $ 20.50 Balance at September 30, 2018 1,206,859 $ 13.32 6.3 years $ 69,667 Options exercisable at September 30, 2018 706,423 $ 3.80 4.8 years $ 47,505 (1) The exercise price of each option granted during the period shown was equal to the market price of the underlying stock on the date of grant. (2) The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise. The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period. |
Time-Based Restricted Stock Units | |
Schedule of stock-settled restricted stock unit activity | Weighted- Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2017 441,507 $ 16.38 $ 12,795 Granted 92,109 $ 35.27 Vested (175,164) $ 14.75 Cancelled (27,229) $ 21.00 Balance at September 30, 2018 331,223 $ 22.11 $ 23,533 Deferred and unissued at September 30, 2018 (2) 3,427 $ 31.28 $ 243 (1) The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period. (2) For the nine months ended September 30, 2018, there were 1,214 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the directors’ termination of service as a director of ours or the occurrence of a change of control of us. These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant. As of September 30, 2018, there were 3,427 outstanding restricted stock units that have been granted to non-employee directors in lieu of their quarterly director retainer payments. These restricted stock units are not included in the “Balance at September 30, 2018” line in the table above because they are fully vested. |
Performance-based stock-settled restricted stock units | |
Schedule of stock-settled restricted stock unit activity | Performance- Weighted- Based Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2017 — $ — $ — Granted 67,982 $ 32.36 Vested — $ — Cancelled (5,253) $ 32.36 Balance at September 30, 2018 62,729 $ 32.36 $ 4,457 (1) The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period. |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Net Income Per Share | |
Schedule of computation of the basic and diluted net income (loss) per share | Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except share and per share data) 2018 2017 2018 2017 Net income $ 1,746 $ 1,342 $ 4,268 $ 3,625 Weighted-average shares outstanding 18,344,956 17,603,293 18,166,999 17,222,072 Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares 1,180,730 1,480,682 1,161,948 1,596,537 Weighted-average shares used to compute diluted net income per share 19,525,686 19,083,975 19,328,947 18,818,609 Net income per share - Basic $ 0.10 $ 0.08 $ 0.23 $ 0.21 Net income per share - Diluted $ 0.09 $ 0.07 $ 0.22 $ 0.19 |
Schedule of potentially dilutive securities outstanding | Three Months Ended Nine Months Ended September 30, September 30, 2018 2017 2018 2017 Restricted stock units — — 5,413 1,184 Common stock options 25,703 23,311 47,981 63,066 Common stock warrants — — — — Employee stock purchase plan — — 28,996 — Total 25,703 23,311 82,390 64,250 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Fair Value Measurements | |
Schedule of fair value measurements for marketable securities | As of September 30, 2018 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 5,260 $ — $ — $ 5,260 U.S. government and agency obligations 11,833 6,979 — 18,812 Corporate debt securities — 3,988 — 3,988 Total $ 17,093 $ 10,967 $ — $ 28,060 As of December 31, 2017 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 9,212 $ — $ — $ 9,212 U.S. government and agency obligations 1,000 10,941 — 11,941 Corporate debt securities — 8,003 — 8,003 Total $ 10,212 $ 18,944 $ — $ 29,156 |
Nature of Business and Operat_2
Nature of Business and Operations (Details) - IPO $ / shares in Units, $ in Millions | Aug. 02, 2016USD ($)$ / sharesshares |
Subsidiary, Sale of Stock | |
Number of shares of common stock sold | shares | 4,120,000 |
IPO price per share (in dollars per share) | $ / shares | $ 10 |
Proceeds from IPO | $ 35.4 |
Expense Relating To Initial Public Offering | $ 2.9 |
Basis of presentation (Details)
Basis of presentation (Details) $ in Millions | 3 Months Ended |
Jun. 30, 2018USD ($) | |
Basis of Presentation | |
Minimum market value of common stock that was held by non-affiliates | $ 700 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions | 3 Months Ended | ||
Jun. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | |
Summary of Significant Accounting Policies | |||
Finished Goods | 45.00% | 39.00% | |
Work in Process | 55.00% | 61.00% | |
Minimum market value of common stock that was held by non-affiliates | $ 700 |
Asset Acquisitions (Details)
Asset Acquisitions (Details) - Certain Assets and Intellectual Property of WTP | May 22, 2018USD ($)item |
Asset Acquisition | |
Total consideration | $ | $ 875,000 |
Number of issued and pending patents in the acquired portfolio | 31 |
Number of trademarks in the acquired portfolio | 5 |
Asset Acquisition (Allocation o
Asset Acquisition (Allocation of purchase price) (Details) | May 22, 2018USD ($) |
Certain Assets and Intellectual Property of WTP | |
Asset Acquisition | |
Gross Carrying Amount | $ 875,000 |
Defensive intangible assets | |
Asset Acquisition | |
Weighted average amortization period | 7 years |
Defensive intangible assets | Certain Assets and Intellectual Property of WTP | |
Asset Acquisition | |
Gross Carrying Amount | $ 788,000 |
Customer accounts | |
Asset Acquisition | |
Weighted average amortization period | 5 years |
Customer accounts | Certain Assets and Intellectual Property of WTP | |
Asset Acquisition | |
Gross Carrying Amount | $ 87,000 |
Marketable Securities (Details)
Marketable Securities (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Dec. 31, 2017 | |
Marketable Securities | ||
Cost | $ 22,841 | $ 20,014 |
Unrealized Losses | 41 | 70 |
Fair Value | 22,800 | 19,944 |
Fair value less than 12 months | 14,321 | 12,979 |
Unrealized losses, less than 12 months | 22 | 38 |
Fair value, 12 months or more | 6,981 | 6,965 |
Unrealized losses, 12 months or more | 20 | 32 |
Fair value, Total | 21,302 | 19,944 |
Unrealized loss, Total | $ 42 | 70 |
Minimum | ||
Marketable Securities | ||
Contractual maturities of marketable securities | 6 months | |
Maximum | ||
Marketable Securities | ||
Contractual maturities of marketable securities | 24 months | |
U.S. government and agency obligations | ||
Marketable Securities | ||
Cost | $ 18,849 | 11,997 |
Unrealized Losses | 37 | 56 |
Fair Value | 18,812 | 11,941 |
Fair value less than 12 months | 12,828 | 5,974 |
Unrealized losses, less than 12 months | 21 | 25 |
Fair value, 12 months or more | 5,984 | 5,967 |
Unrealized losses, 12 months or more | 16 | 31 |
Fair value, Total | 18,812 | 11,941 |
Unrealized loss, Total | 37 | 56 |
Corporate debt securities | ||
Marketable Securities | ||
Cost | 3,992 | 8,017 |
Unrealized Losses | 4 | 14 |
Fair Value | 3,988 | 8,003 |
Fair value less than 12 months | 1,493 | 7,005 |
Unrealized losses, less than 12 months | 1 | 13 |
Fair value, 12 months or more | 997 | 998 |
Unrealized losses, 12 months or more | 4 | 1 |
Fair value, Total | 2,490 | 8,003 |
Unrealized loss, Total | $ 5 | $ 14 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Patents and Intangibles | |||||
Gross Carrying Amount | $ 4,587 | $ 4,587 | $ 3,536 | ||
Accumulated Amortization | 1,552 | 1,552 | $ 1,318 | ||
Net Amount | 3,035 | 3,035 | |||
Amortization expense | 100 | $ 100 | 200 | $ 200 | |
Future Amortization | |||||
2018 (October 1 - December 31) | 104 | 104 | |||
2,019 | 417 | 417 | |||
2,020 | 417 | 417 | |||
2,021 | 417 | 417 | |||
2,022 | 417 | 417 | |||
Thereafter | 1,263 | $ 1,263 | |||
Patents | |||||
Patents and Intangibles | |||||
Weighted Average Amortization Period | 8 years | 8 years | |||
Gross Carrying Amount | 3,554 | $ 3,554 | $ 3,536 | ||
Accumulated Amortization | 1,504 | 1,504 | 1,318 | ||
Net Amount | 2,050 | $ 2,050 | $ 2,218 | ||
Defensive intangible assets | |||||
Patents and Intangibles | |||||
Weighted Average Amortization Period | 6 years | 6 years | |||
Gross Carrying Amount | 930 | $ 930 | |||
Accumulated Amortization | 42 | 42 | |||
Net Amount | 888 | $ 888 | |||
Customer accounts | |||||
Patents and Intangibles | |||||
Weighted Average Amortization Period | 5 years | 5 years | |||
Gross Carrying Amount | 103 | $ 103 | |||
Accumulated Amortization | 6 | 6 | |||
Net Amount | $ 97 | $ 97 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Accrued Expenses | ||
Warranty | $ 726 | $ 531 |
Travel and business | 553 | 453 |
Legal and consulting | 481 | 317 |
Deferred rent | 159 | 173 |
Accrued taxes | 84 | 1,070 |
Clinical studies | 70 | 15 |
Other | 217 | 39 |
Total | $ 2,290 | $ 2,598 |
Credit Agreement (Details)
Credit Agreement (Details) - Revolving credit facility - USD ($) | Aug. 03, 2018 | Sep. 30, 2018 |
Credit Agreement | ||
Line of credit | $ 10,000,000 | |
Aggregate Borrowings | 25,000,000 | |
Total aggregate principal amount of loans | $ 35,000,000 | |
Credit facility outstanding amount | $ 0 | |
Maximum leverage Ratio | 300.00% | |
Minimum cash and cash equivalents | $ 7,500,000 | |
Cash and cash equivalents, temporary reduction | $ 5,000,000 | |
Maximum | ||
Credit Agreement | ||
Unused line fee (as a percent) | 0.275% | |
Minimum | ||
Credit Agreement | ||
Unused line fee (as a percent) | 0.20% | |
Federal Funds | ||
Credit Agreement | ||
Basis spread (as a percent) | 0.50% | |
Base Rate | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.00% | |
Base Rate | Maximum | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.15% | |
Base Rate | Minimum | ||
Credit Agreement | ||
Basis spread (as a percent) | 0.40% | |
LIBOR | Maximum | ||
Credit Agreement | ||
Basis spread (as a percent) | 2.15% | |
LIBOR | Minimum | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.40% |
Commitments and Contingencies_2
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Operating Leased Assets [Line Items] | ||||
Rent expense | $ 400 | $ 400 | $ 1,200 | $ 1,100 |
2018 (October 1 - December 31) | 296 | 296 | ||
2,019 | 1,084 | 1,084 | ||
2,020 | 988 | 988 | ||
2,021 | 704 | 704 | ||
2,022 | 352 | 352 | ||
Thereafter | 268 | 268 | ||
Total | 3,692 | 3,692 | ||
Building | ||||
Operating Leased Assets [Line Items] | ||||
2018 (October 1 - December 31) | 227 | 227 | ||
2,019 | 948 | 948 | ||
2,020 | 954 | 954 | ||
2,021 | 701 | 701 | ||
2,022 | 352 | 352 | ||
Thereafter | 268 | 268 | ||
Total | 3,450 | 3,450 | ||
Computer/Office Equipment | ||||
Operating Leased Assets [Line Items] | ||||
2018 (October 1 - December 31) | 14 | 14 | ||
2,019 | 51 | 51 | ||
2,020 | 34 | 34 | ||
2,021 | 3 | 3 | ||
Total | 102 | 102 | ||
Fleet Vehicle Program | ||||
Operating Leased Assets [Line Items] | ||||
2018 (October 1 - December 31) | 55 | 55 | ||
2,019 | 85 | 85 | ||
Total | $ 140 | $ 140 |
Commitments and Contingencies -
Commitments and Contingencies - Major Vendors (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018USD ($)item | Sep. 30, 2017item | Sep. 30, 2018USD ($)item | Sep. 30, 2017item | |
Commitments and Contingencies | ||||
Number of vendors | item | 2 | 3 | 2 | 3 |
Purchase commitments | ||||
Purchase commitments expect to receive between October and December of 2018 | $ 1.7 | $ 1.7 | ||
Purchase commitments expect to receive in 2019 | $ 15 | $ 15 | ||
Purchases | Vendor | ||||
Commitments and Contingencies | ||||
Accounts Receivable (in percentage) | 45.00% | 47.00% | 41.00% | 39.00% |
Commitments and Contingencies_3
Commitments and Contingencies - Retirement Plan (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
401(k) | ||||
Retirement Plan | ||||
Discretionary contributions | $ 63,000 | $ 42,000 | $ 174,000 | $ 135,000 |
Stockholders' Equity - Series A
Stockholders' Equity - Series A & B Preferred Stock (Details) $ / shares in Units, $ in Millions | Aug. 02, 2016USD ($)$ / sharesshares |
Preferred stock | |
Conversion of preferred stock to common stock (in shares) | 5,924,453 |
Number of new stock issued relating to the IPO that Series A and Series B preferred stockholders are entitled to receive | 2,354,323 |
IPO | |
Preferred stock | |
Number of shares of common stock sold | 4,120,000 |
Share price (in dollars per share) | $ / shares | $ 10 |
Series B Preferred Stock | |
Preferred stock | |
Preferred stock to common stock conversion ratio | 1 |
Number of new stock issued to pay accrued stock dividends relating to initial offering price | 956,842 |
Series A Preferred Stock | |
Preferred stock | |
Preferred stock to common stock conversion ratio | 0.9708 |
Accrued Cumulative Dividends | $ | $ 8.2 |
Payment of dividends | $ | $ 0.1 |
Stockholders' Equity - Stock-Ba
Stockholders' Equity - Stock-Based Compensation General Information (Details) | Sep. 30, 2018shares |
2016 Plan | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares authorized | 4,800,000 |
Stockholders' Equity - Stock-_2
Stockholders' Equity - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stock-based compensation | ||||||
Compensation expense | $ 2,380 | $ 967 | $ 5,638 | $ 3,104 | ||
Unrecognized stock-based compensation | ||||||
Unrecognized stock-based compensation expense | 700 | $ 700 | ||||
Unrecognized stock-based compensation expense, period for recognition | 4 months 24 days | |||||
Former executive | ||||||
Stock-based compensation | ||||||
Compensation expense | 600 | $ 600 | ||||
Cost of goods sold | ||||||
Stock-based compensation | ||||||
Compensation expense | 69 | 4 | 178 | 102 | ||
Sales and marketing | ||||||
Stock-based compensation | ||||||
Compensation expense | 834 | 361 | 2,272 | 1,030 | ||
Research and development | ||||||
Stock-based compensation | ||||||
Compensation expense | 52 | 29 | 146 | 73 | ||
Reimbursement, general and administrative | ||||||
Stock-based compensation | ||||||
Compensation expense | $ 1,425 | $ 573 | $ 3,042 | $ 1,899 | ||
2016 Plan | ||||||
Stock-based compensation | ||||||
Shares available for future issuance | 5,226,592 | 5,226,592 | ||||
Automatic annual increase to the number of shares reserved and available for issuance as a percentage of outstanding common stock (as a percent) | 5.00% | 5.00% | ||||
Automatic annual increase to the number of shares reserved and available for issuance | 2,500,000 | 2,500,000 | ||||
Increase in number of shares reserved and available for issuance | 892,318 | 841,686 |
Stockholders' Equity - Stock Op
Stockholders' Equity - Stock Options and Restricted Stock (Details) - USD ($) | 1 Months Ended | 2 Months Ended | 3 Months Ended | 6 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Feb. 28, 2018 | Mar. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Sep. 30, 2018 | Dec. 31, 2017 | |
Stock-based compensation, general disclosures | |||||||||||
Stock-based compensation expense | $ 2,380,000 | $ 967,000 | $ 5,638,000 | $ 3,104,000 | |||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 4 months 24 days | ||||||||||
Common stock options | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Term (in years) | 7 years | ||||||||||
Stock-based compensation expense | $ 800,000 | $ 300,000 | $ 1,800,000 | $ 800,000 | |||||||
Total unrecognized pre-tax compensation expense related to nonvested stock option awards | $ 5,000,000 | ||||||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 2 years 8 months 12 days | ||||||||||
Options | |||||||||||
Outstanding at beginning of period | 1,487,720 | ||||||||||
Granted | 136,224 | ||||||||||
Exercised | (388,261) | ||||||||||
Cancelled | (28,824) | ||||||||||
Outstanding at end of period | 1,206,859 | 1,206,859 | 1,206,859 | 1,206,859 | 1,487,720 | ||||||
Weighted Average Exercise Price ($/share) | |||||||||||
Outstanding at beginning of period | $ 8.41 | ||||||||||
Granted | 39.46 | ||||||||||
Exercised | 3.14 | ||||||||||
Forfeited | 20.50 | ||||||||||
Outstanding at end of period | $ 13.32 | $ 13.32 | $ 13.32 | $ 13.32 | $ 8.41 | ||||||
Other information | |||||||||||
Options exercisable Number of Exercisable | 1,098,882 | 1,098,882 | 706,423 | ||||||||
Options exercisable, weighted-average exercise price | $ 2.12 | $ 2.12 | $ 3.80 | ||||||||
Weighted average remaining contractual life (in years) | 6 years 3 months 18 days | 6 years 2 months 12 days | |||||||||
Exercisable options, weighted-average remaining contractual life | 4 years 9 months 18 days | ||||||||||
Options outstanding | $ 69,667,000 | $ 29,611,000 | |||||||||
Options exercisable | $ 47,505,000 | ||||||||||
Exercised | $ 16,826,000 | ||||||||||
Restricted stock unit awards, Average Intrinsic Value | |||||||||||
Number of option outstanding | 1,206,859 | 1,206,859 | 1,206,859 | 1,487,720 | 1,487,720 | 1,206,859 | 1,487,720 | ||||
Weighted average remaining contractual life (in years) | 6 years 3 months 18 days | 6 years 2 months 12 days | |||||||||
Options Outstanding, weighted average exercise price | $ 13.32 | $ 13.32 | $ 13.32 | $ 8.41 | $ 8.41 | $ 13.32 | $ 8.41 | ||||
Options exercisable Number of Exercisable | 1,098,882 | 1,098,882 | 706,423 | ||||||||
Options exercisable, weighted-average exercise price | $ 2.12 | $ 2.12 | $ 3.80 | ||||||||
Common stock options | Minimum | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Vesting period (in years) | 3 years | ||||||||||
Term (in years) | 7 years | ||||||||||
Common stock options | Maximum | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Vesting period (in years) | 4 years | ||||||||||
Term (in years) | 10 years | ||||||||||
Time-Based Restricted Stock Units | |||||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | |||||||||||
Number of share of common stock that restricted stock unit has the right to convert to | 1 | ||||||||||
Time-Based Restricted Stock Units | Non-employee Directors | |||||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | |||||||||||
Granted (in shares) | 1,214 | ||||||||||
Number of granted and vested restricted stock units | 3,427 | ||||||||||
2016 Plan | Time-Based Restricted Stock Units | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Stock-based compensation expense | $ 1,300,000 | $ 600,000 | $ 2,900,000 | $ 1,800,000 | |||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 1 year 9 months 18 days | ||||||||||
Total unrecognized pre-tax compensation expense related to awards | $ 5,400,000 | ||||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | |||||||||||
Restricted stock unit awards outstanding at the beginning of the period (in shares) | 441,507 | ||||||||||
Granted (in shares) | 92,109 | ||||||||||
Vested (in shares) | (175,164) | ||||||||||
Cancelled (in shares) | (27,229) | ||||||||||
Restricted stock unit awards outstanding at the end of the period (in shares) | 331,223 | 331,223 | 331,223 | 331,223 | 441,507 | ||||||
Deferred and unissued (in shares) | 3,427 | ||||||||||
Weighted Average Grant Date Fair Value Per Share | |||||||||||
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share) | $ 16.38 | ||||||||||
Granted (in dollars per share) | 35.27 | ||||||||||
Vested (in dollars per share) | 14.75 | ||||||||||
Cancelled (in dollars per share) | 21 | ||||||||||
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ 22.11 | $ 22.11 | $ 22.11 | $ 22.11 | $ 16.38 | ||||||
Deferred and unissued (in dollars per share) | $ 31.28 | ||||||||||
Restricted stock unit awards, Average Intrinsic Value | |||||||||||
Restricted stock unit awards, Average Intrinsic Value | $ 23,533,000 | $ 12,795,000 | |||||||||
Restricted stock unit awards deferred and unissued, Average Intrinsic Value | 243,000 | ||||||||||
2016 Plan | Time-Based Restricted Stock Units | Minimum | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Vesting period (in years) | 1 year | ||||||||||
2016 Plan | Time-Based Restricted Stock Units | Maximum | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Vesting period (in years) | 3 years | ||||||||||
2016 Plan | Performance-based stock-settled restricted stock units | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Stock-based compensation expense | $ 200,000 | $ 0 | $ 500,000 | $ 0 | |||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 2 years 4 months 24 days | ||||||||||
Total unrecognized pre-tax compensation expense related to awards | 1,600,000 | ||||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | |||||||||||
Granted (in shares) | 67,982 | 67,982 | |||||||||
Cancelled (in shares) | (5,253) | ||||||||||
Restricted stock unit awards outstanding at the end of the period (in shares) | 62,729 | 62,729 | 62,729 | 62,729 | |||||||
Weighted Average Grant Date Fair Value Per Share | |||||||||||
Granted (in dollars per share) | $ 32.36 | ||||||||||
Cancelled (in dollars per share) | 32.36 | ||||||||||
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ 32.36 | $ 32.36 | $ 32.36 | $ 32.36 | |||||||
Restricted stock unit awards, Average Intrinsic Value | |||||||||||
Restricted stock unit awards, Average Intrinsic Value | $ 4,457,000 | ||||||||||
2016 Plan | Performance-based stock-settled restricted stock units | Minimum | |||||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | |||||||||||
Percentage to earn or vest the performance-based stock-settled restricted stock units | $ 50 | $ 50 | |||||||||
2016 Plan | Performance-based stock-settled restricted stock units | Maximum | |||||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | |||||||||||
Percentage to earn or vest the performance-based stock-settled restricted stock units | $ 150 | ||||||||||
2016 Plan | Tranche one | Performance-based stock-settled restricted stock units | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Compensation arrangement | 33.33% | ||||||||||
2016 Plan | Tranche two | Performance-based stock-settled restricted stock units | |||||||||||
Stock-based compensation, general disclosures | |||||||||||
Compensation arrangement | 66.67% |
Stockholders' Equity - Employee
Stockholders' Equity - Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands | May 15, 2018 | Jan. 01, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Apr. 27, 2017 |
Stockholders' Equity | |||||||
Shares issued | $ 1,416 | $ 2,210 | |||||
Stock-based compensation expense | $ 2,380 | $ 967 | $ 5,638 | 3,104 | |||
Employee Stock Purchase Plan | |||||||
Stockholders' Equity | |||||||
Purchase price of common stock under plan (as a percent) | 85.00% | ||||||
Offering period (in months) | 6 months | ||||||
Shares issued (in shares) | 63,578 | ||||||
Shares issued | $ 1,400 | ||||||
Incremental share increase (as a percent) | 1.00% | ||||||
Incremental share increase (in shares) | 500,000 | ||||||
Increase in number of shares reserved and available for issuance | 178,463 | ||||||
Shares reserved | 1,576,090 | 1,576,090 | 1,600,000 | ||||
Stock-based compensation expense | $ 100 | $ 100 | $ 500 | $ 500 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Taxes | ||||
Effective rate (as percent) | 16.50% | 6.70% | 254.30% | 539.10% |
Income tax benefit | $ 248 | $ 84 | $ 3,063 | $ 4,450 |
Unrecognized tax benefits | 1,800 | 1,800 | ||
Tax benefits that, if recognized, would impact the effective tax rate | 400 | 400 | ||
Tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes | $ 1,400 | $ 1,400 |
Net Income Per Share (Details)
Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Net Income Per Share | ||||
Net income | $ 1,746 | $ 1,342 | $ 4,268 | $ 3,625 |
Weighted-average shares outstanding | 18,344,956 | 17,603,293 | 18,166,999 | 17,222,072 |
Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares | 1,180,730 | 1,480,682 | 1,161,948 | 1,596,537 |
Weighted-average shares used to compute diluted net income per share | 19,525,686 | 19,083,975 | 19,328,947 | 18,818,609 |
Net income per share - Basic | $ 0.10 | $ 0.08 | $ 0.23 | $ 0.21 |
Net income per share - Diluted | $ 0.09 | $ 0.07 | $ 0.22 | $ 0.19 |
Net Income (Loss) Per Share Att
Net Income (Loss) Per Share Attributable to Common Stockholders (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 25,703 | 23,311 | 82,390 | 64,250 |
Restricted Stock Units | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 5,413 | 1,184 | ||
Employee stock purchase plan | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 28,996 | |||
Common stock options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Antidilutive securities excluded from computation of earnings per share | 25,703 | 23,311 | 47,981 | 63,066 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Fair Value Measurements | ||
Available for sale debt securities | $ 22,800 | $ 19,944 |
Amount of transfers of marketable securities within the three level hierarchy | 0 | |
U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 18,812 | 11,941 |
Corporate debt securities | ||
Fair Value Measurements | ||
Available for sale debt securities | 3,988 | 8,003 |
Recurring | ||
Fair Value Measurements | ||
Available for sale debt securities | 28,060 | 29,156 |
Recurring | Money market mutual funds | ||
Fair Value Measurements | ||
Marketable securities | 5,260 | 9,212 |
Recurring | U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 18,812 | 11,941 |
Recurring | Corporate debt securities | ||
Fair Value Measurements | ||
Available for sale debt securities | 3,988 | 8,003 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value Measurements | ||
Available for sale debt securities | 17,093 | 10,212 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market mutual funds | ||
Fair Value Measurements | ||
Marketable securities | 5,260 | 9,212 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 11,833 | 1,000 |
Recurring | Significant Other Observable Inputs (Level 2) | ||
Fair Value Measurements | ||
Available for sale debt securities | 10,967 | 18,944 |
Recurring | Significant Other Observable Inputs (Level 2) | U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 6,979 | 10,941 |
Recurring | Significant Other Observable Inputs (Level 2) | Corporate debt securities | ||
Fair Value Measurements | ||
Available for sale debt securities | $ 3,988 | $ 8,003 |
Subsequent Event (Details)
Subsequent Event (Details) - Subsequent Event | Oct. 26, 2018USD ($)ft²item | Oct. 15, 2018USD ($) | Dec. 31, 2028USD ($) |
Lease Agreements | |||
Subsequent Event | |||
Number of square feet of the rental office | ft² | 80,745 | ||
Lease term | 10 years 6 months | ||
Period of time under agreement condition | 6 months | ||
Renewal term | 5 years | ||
Number of times to renew | item | 2 | ||
Monthly lease fee | $ 106,000 | $ 134,300 | |
License Agreement | Sun Scientific | |||
Subsequent Event | |||
Initiation fee paid upon execution of agreement | $ 4,000,000 | ||
Amount sales exceed within first 7 years of the agreement, contingent liability payment | $ 80,000,000 | ||
Number of days of prior notice required to cancel the agreement | 6 months | ||
Period of time under agreement condition | 7 years |