Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2021 | Nov. 04, 2021 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-37799 | |
Entity Registrant Name | Tactile Systems Technology, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 41-1801204 | |
Entity Address, Address Line One | 3701 Wayzata Blvd, Suite 300 | |
Entity Address, City or Town | Minneapolis | |
Entity Address, State or Province | MN | |
Entity Address, Postal Zip Code | 55416 | |
City Area Code | 612 | |
Local Phone Number | 355-5100 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | TCMD | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 19,823,022 | |
Entity Central Index Key | 0001027838 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Current assets | ||
Cash and cash equivalents | $ 22,401 | $ 47,855 |
Accounts receivable | 44,257 | 43,849 |
Net investment in leases | 12,385 | 10,708 |
Inventories | 23,830 | 18,563 |
Prepaid expenses and other current assets | 3,701 | 2,638 |
Total current assets | 106,574 | 123,613 |
Non-current assets | ||
Property and equipment, net | 6,458 | 6,957 |
Right of use operating lease assets | 23,919 | 20,132 |
Intangible assets, net | 54,970 | 1,680 |
Goodwill | 31,063 | |
Accounts receivable, non-current | 12,422 | 9,433 |
Deferred income taxes | 11,907 | 10,198 |
Other non-current assets | 2,082 | 2,074 |
Total non-current assets | 142,821 | 50,474 |
Total assets | 249,395 | 174,087 |
Current liabilities | ||
Accounts payable | 6,192 | 4,197 |
Note payable | 2,210 | |
Accrued payroll and related taxes | 10,322 | 11,588 |
Accrued expenses | 5,350 | 4,423 |
Income taxes payable | 1,129 | 2,658 |
Operating lease liabilities | 2,412 | 2,006 |
Other current liabilities | 3,694 | 1,842 |
Total current liabilities | 31,309 | 26,714 |
Non-current liabilities | ||
Revolving line of credit, non-current | 24,844 | |
Note payable, non-current | 27,673 | |
Earn-out, non-current | 6,400 | |
Accrued warranty reserve, non-current | 3,358 | 3,235 |
Income taxes payable, non-current | 348 | |
Operating lease liabilities, non-current | 23,357 | 19,388 |
Total non-current liabilities | 85,980 | 22,623 |
Total liabilities | 117,289 | 49,337 |
Commitments and Contingencies (see Note 11) | ||
Stockholders' equity: | ||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of September 30, 2021 and December 31, 2020 | ||
Common stock, $0.001 par value, 300,000,000 shares authorized; 19,797,723 shares issued and outstanding as of September 30, 2021; 19,492,718 shares issued and outstanding as of December 31, 2020 | 20 | 19 |
Additional paid-in capital | 116,346 | 104,675 |
Retained earnings | 15,740 | 20,056 |
Total stockholders' equity | 132,106 | 124,750 |
Total liabilities and stockholders' equity | $ 249,395 | $ 174,087 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2021 | Dec. 31, 2020 |
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 | 19,797,723 | 19,492,718 |
Common stock, shares, outstanding | 19,797,723 | 19,492,718 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Total revenue | $ 52,497 | $ 49,092 | $ 146,329 | $ 127,887 |
Total cost of revenue | 15,529 | 14,120 | 42,926 | 36,930 |
Gross profit | 36,968 | 34,972 | 103,403 | 90,957 |
Operating expenses | ||||
Sales and marketing | 22,231 | 19,488 | 61,949 | 59,856 |
Research and development | 1,409 | 1,102 | 3,885 | 3,891 |
Reimbursement, general and administrative | 14,500 | 12,539 | 42,802 | 37,682 |
Intangible asset amortization | 195 | 49 | 294 | 148 |
Total operating expenses | 38,335 | 33,178 | 108,930 | 101,577 |
(Loss) income from operations | (1,367) | 1,794 | (5,527) | (10,620) |
Other (expense) income | (120) | (121) | (154) | 181 |
(Loss) income before income taxes | (1,487) | 1,673 | (5,681) | (10,439) |
Income tax expense (benefit) | 1,868 | (751) | (1,365) | 2,294 |
Net (loss) income | $ (3,355) | $ 2,424 | $ (4,316) | $ (12,733) |
Net (loss) income per common share | ||||
Basic (in dollars per share) | $ (0.17) | $ 0.12 | $ (0.22) | $ (0.66) |
Diluted (in dollars per share) | $ (0.17) | $ 0.12 | $ (0.22) | $ (0.66) |
Weighted-average common shares used to compute net (loss) income per common share | ||||
Basic (in shares) | 19,790,838 | 19,415,640 | 19,676,749 | 19,309,344 |
Diluted (in shares) | 19,790,838 | 19,747,365 | 19,676,749 | 19,309,344 |
Sales revenue | ||||
Total revenue | $ 44,460 | $ 42,573 | $ 124,215 | $ 109,714 |
Total cost of revenue | 13,096 | 11,558 | 36,425 | 30,868 |
Gross profit | 31,364 | 31,015 | 87,790 | 78,846 |
Rental revenue | ||||
Total revenue | 8,037 | 6,519 | 22,114 | 18,173 |
Total cost of revenue | 2,433 | 2,562 | 6,501 | 6,062 |
Gross profit | $ 5,604 | $ 3,957 | $ 15,613 | $ 12,111 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Condensed Consolidated Statements of Comprehensive (Loss) Income | ||||
Net (loss) income | $ (3,355) | $ 2,424 | $ (4,316) | $ (12,733) |
Other comprehensive loss | ||||
Unrealized loss on marketable securities | (14) | (21) | ||
Income tax related to items of other comprehensive loss | (15) | (5) | ||
Total other comprehensive loss | (29) | (26) | ||
Comprehensive (loss) income | $ (3,355) | $ 2,395 | $ (4,316) | $ (12,759) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Total |
Balances at the beginning at Dec. 31, 2019 | $ 19 | $ 91,874 | $ 20,676 | $ 26 | $ 112,595 |
Balances at the beginning (in shares) at Dec. 31, 2019 | 19,152,715 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Stock-based compensation | 8,288 | 8,288 | |||
Exercise of common stock options and vesting of performance and restricted stock units | 762 | 762 | |||
Exercise of common stock options and vesting of performance and restricted stock units (in shares) | 259,406 | ||||
Taxes paid for net share settlement of performance and restricted stock units | (1,592) | (1,592) | |||
Taxes paid for net share settlement of performance and restricted stock units (in shares) | (31,095) | ||||
Common shares issued for employee stock purchase plan | 1,825 | 1,825 | |||
Common shares issued for employee stock purchase plan (in shares) | 43,653 | ||||
Comprehensive income (loss) for the period | (12,733) | (26) | (12,759) | ||
Balances at the end at Sep. 30, 2020 | $ 19 | 101,157 | 7,943 | 109,119 | |
Balances at the end (in shares) at Sep. 30, 2020 | 19,424,679 | ||||
Balances at the beginning at Jun. 30, 2020 | $ 19 | 97,818 | 5,519 | 29 | 103,385 |
Balances at the beginning (in shares) at Jun. 30, 2020 | 19,411,404 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Stock-based compensation | 3,164 | 3,164 | |||
Exercise of common stock options and vesting of performance and restricted stock units | 214 | 214 | |||
Exercise of common stock options and vesting of performance and restricted stock units (in shares) | 14,322 | ||||
Taxes paid for net share settlement of performance and restricted stock units | (39) | (39) | |||
Taxes paid for net share settlement of performance and restricted stock units (in shares) | (1,047) | ||||
Comprehensive income (loss) for the period | 2,424 | $ (29) | 2,395 | ||
Balances at the end at Sep. 30, 2020 | $ 19 | 101,157 | 7,943 | 109,119 | |
Balances at the end (in shares) at Sep. 30, 2020 | 19,424,679 | ||||
Balances at the beginning at Dec. 31, 2020 | $ 19 | 104,675 | 20,056 | 124,750 | |
Balances at the beginning (in shares) at Dec. 31, 2020 | 19,492,718 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Stock-based compensation | 7,703 | 7,703 | |||
Exercise of common stock options and vesting of performance and restricted stock units | $ 1 | 3,583 | 3,584 | ||
Exercise of common stock options and vesting of performance and restricted stock units (in shares) | 284,829 | ||||
Taxes paid for net share settlement of performance and restricted stock units | (1,157) | (1,157) | |||
Taxes paid for net share settlement of performance and restricted stock units (in shares) | (21,918) | ||||
Common shares issued for employee stock purchase plan | 1,542 | 1,542 | |||
Common shares issued for employee stock purchase plan (in shares) | 42,094 | ||||
Comprehensive income (loss) for the period | (4,316) | (4,316) | |||
Balances at the end at Sep. 30, 2021 | $ 20 | 116,346 | 15,740 | 132,106 | |
Balances at the end (in shares) at Sep. 30, 2021 | 19,797,723 | ||||
Balances at the beginning at Jun. 30, 2021 | $ 20 | 113,601 | 19,095 | 132,716 | |
Balances at the beginning (in shares) at Jun. 30, 2021 | 19,782,295 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Stock-based compensation | 2,588 | 2,588 | |||
Exercise of common stock options and vesting of performance and restricted stock units | 199 | 199 | |||
Exercise of common stock options and vesting of performance and restricted stock units (in shares) | 16,366 | ||||
Taxes paid for net share settlement of performance and restricted stock units | (42) | (42) | |||
Taxes paid for net share settlement of performance and restricted stock units (in shares) | (938) | ||||
Comprehensive income (loss) for the period | (3,355) | (3,355) | |||
Balances at the end at Sep. 30, 2021 | $ 20 | $ 116,346 | $ 15,740 | $ 132,106 | |
Balances at the end (in shares) at Sep. 30, 2021 | 19,797,723 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021 | Sep. 30, 2020 | |
Cash flows from operating activities | ||
Net loss | $ (4,316) | $ (12,733) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,150 | 2,102 |
Net amortization of premiums and discounts on securities available-for-sale | (91) | |
Deferred income taxes | (1,709) | 3,934 |
Stock-based compensation expense | 7,703 | 8,288 |
Gain on other investments and maturities of marketable securities | 10 | |
Impairment losses | 4,025 | |
Loss on disposal of property and equipment | 7 | |
Changes in assets and liabilities, net of acquisition: | ||
Accounts receivable | (408) | (2,589) |
Net investment in leases | (1,677) | (1,304) |
Inventories | (3,641) | (3,538) |
Income taxes | (1,181) | 773 |
Prepaid expenses and other assets | (1,133) | (1,553) |
Right of use operating lease assets | 588 | 509 |
Medicare accounts receivable, non-current | (2,989) | (2,916) |
Accounts payable | 1,995 | 938 |
Accrued payroll and related taxes | (1,266) | 766 |
Accrued expenses and other liabilities | 2,902 | 1,134 |
Net cash used in operating activities | (2,975) | (2,245) |
Cash flows from investing activities | ||
Proceeds from maturities of securities available-for-sale | 22,500 | |
Payments related to acquisition | (79,829) | |
Purchases of property and equipment | (1,221) | (1,623) |
Intangible assets costs | (187) | (163) |
Other investments | (30) | |
Net cash (used in) provided by investing activities | (81,237) | 20,684 |
Cash flows from financing activities | ||
Proceeds from issuance of note payable | 30,000 | |
Proceeds from revolving line of credit | 25,000 | |
Payment of deferred debt issuance costs | (211) | |
Taxes paid for net share settlement of performance and restricted stock units | (1,157) | (1,592) |
Proceeds from exercise of common stock options | 3,584 | 762 |
Proceeds from the issuance of common stock from the employee stock purchase plan | 1,542 | 1,825 |
Net cash provided by financing activities | 58,758 | 995 |
Net (decrease) increase in cash and cash equivalents | (25,454) | 19,434 |
Cash and cash equivalents - beginning of period | 47,855 | 22,770 |
Cash and cash equivalents - end of period | 22,401 | 42,204 |
Supplemental cash flow disclosure | ||
Cash paid for taxes | $ 1,541 | 475 |
Capital expenditures incurred but not yet paid | $ 41 |
Nature of Business and Operatio
Nature of Business and Operations | 9 Months Ended |
Sep. 30, 2021 | |
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. We provide these products through our direct sales force for use in the home and sell or rent them through vascular, wound and lymphedema clinics throughout the United States. On September 8, 2021, we acquired the assets of the AffloVest respiratory therapy business (“AffloVest Acquisition”) from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactures AffloVest. AffloVest is a portable, wearable vest that treats patients with chronic respiratory conditions. The device is sold through home medical equipment and durable medical equipment providers throughout the United States. 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 our reincorporation 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. 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 revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals 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 and/or do not have plans that include patient deductibles for purchases or rentals of our products. Further, seasonality trends in 2021 may be significantly different than in prior years as a result of the COVID-19 pandemic and related impacts . |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2021 | |
Basis of Presentation | |
Basis of Presentation | Note 2. Basis of Presentation The 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. The results for the nine months ended September 30, 2021, are not necessarily indicative of results to be expected for the year ending December 31, 2021, 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, 2020. 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. Risks and Uncertainties Coronavirus (COVID-19) The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic. We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, particularly during 2020 and the first quarter of 2021. While we saw some level of recovery in the second quarter of 2021, the third quarter was negatively impacted by the prolonged recovery from COVID-19 and increased Delta variant cases during the period, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. There are no reliable estimates of how long the pandemic will last, whether any recovery will be sustained or will reverse course, the severity of any resurgence of COVID-19 or variant strains of the virus, the effectiveness of vaccines and attitudes towards receiving them, or what ultimate effects the pandemic will have. For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time. Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to the needs of our employees, clinicians and patients . We cannot assure you that these changes to our processes and practices will be successful in mitigating the impact of COVID-19 on our business. We continue to evaluate and, if appropriate, will adopt other measures in the future related to the ongoing safety of our employees, clinicians and patients. In addition, we are closely monitoring mandatory vaccination requirements and related evolving guidance that is or may be applicable to us, including in our capacity as a U.S. government contractor. See See Part II, I tem 1A. “ Risk Factors” in this Form 10-Q for additional information about vaccine mandates and potential risks related thereto. 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 to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Comprehensive (Loss) Income Comprehensive (loss) 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 (loss) income represents net (loss) income adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2021 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Significant Accounting Policies There were no material changes in our significant accounting policies during the nine months ended September 30, 2021, except as set forth below. 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, 2020, for information regarding our significant accounting policies. Business Segments We operate and report in only one operating and reportable segment. Our chief operating decision maker does not use financial information below revenue to allocate resources. Goodwill Goodwill represents the excess of the purchase price paid over the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized, but is tested for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We plan to perform our annual assessment of goodwill for impairment as of July 1st of each fiscal year. See Note 7 – “Goodwill and Intangible Assets” for additional information. Revenue Recognition for AffloVest The AffloVest device is sold through home medical equipment and durable medical equipment providers (collectively, "distributors"). Revenue is recognized when control of the promised goods or services is transferred to the distributors, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the distributor has obtained control of the goods or services, we consider any future performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business. In general, revenue from the sale of the AffloVest product is recognized at shipment, unless circumstances dictate that control has not yet passed to the distributor. Certain of our contracts include volume-based incentives which involve rebates that are negotiated at or prior to the time of sale with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these incentive programs, at the time of sale, we determine the most likely amount of the rebate to be paid based on forecasted sales levels. These forecasts are updated at least quarterly for each customer, and the transaction price is reduced for the anticipated cost of the rebate. If the forecasted sales for a customer change, the accrual for rebates is adjusted to reflect the new rebates expected to be earned by the customer. Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue sold in the accompanying Consolidated Statements of Operations. For a description of our revenue recognition policies related to our Flexitouch and Entre systems, see Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020. Accounting Pronouncement Not Yet Adopted In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848) — Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), addressing the discontinuation of LIBOR, a widely used reference rate for pricing financial products. The ASU is intended to provide optional expedients and exceptions if certain criteria are met when accounting for contracts, hedging relationships and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform. The application and adoption requirements of ASU 2020-04 are optional until December 31, 2022 and vary based on expedients elected. We have not elected any expedients to date and are currently evaluating any potential future impacts on the condensed consolidated financial statements. Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2019-12 as of January 1, 2021, and it did not have an impact on the condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses” (“ASU 2016-13”), which introduced a new model for recognizing credit losses on financial instruments based on an estimate of the current expected credit losses. The new current expected credit losses (“CECL”) model generally calls for the immediate recognition of all expected credit losses and applies to financial instruments and other assets, including accounts receivable and other financial assets measured at amortized cost, debt securities and other financial assets. This guidance replaced the previous incurred loss model for measuring expected credit losses and requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities. We adopted ASU 2016-13 as of January 1, 2020, and it did not have an impact on the consolidated financial statements at that time. In connection with the AffloVest Acquisition, it was determined CECL did not have a material financial impact on the receivables related to the durable medical equipment channel. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2021 | |
Acquisitions | |
Acquisitions | Note 4. Acquisitions On September 8, 2021, we entered into an Asset Purchase Agreement (“AffloVest APA”) to acquire the AffloVest therapy business from International Biophysics Corporation. Under the terms of the AffloVest APA, we agreed to pay IBC a total of up to $100.0 million for the purchase of substantially all of the assets related to its branded high frequency chest wall oscillation vest therapy business, other than specifically identified excluded assets. We acquired AffloVest to further expand our position as a leader in treating patients with underserved chronic conditions in the home. The acquired assets included inventory, tooling, intellectual property, permits and approvals, data and records, and customer and supplier information. At closing, $80.0 million of the purchase price was paid, of which a total of $0.5 million was deposited into an escrow account at closing for purposes of satisfying certain post-closing purchase price adjustments and indemnification claims. Subsequent to closing, $0.2 milion was returned to us as a result of working capital adjustments. The AffloVest acquisition was funded through a combination of cash on hand and proceeds from borrowings. Two earn-out payments of up to $10.0 million each are potentially due to IBC under the AffloVest APA depending on the achievement of specified revenue targets, as follows: ● Initial Earn-Out: Equal to 1.5 times the amount by which the AffloVest business’ U.S. revenues in the period from October 1, 2021 to September 30, 2022 (the “Initial Earn-Out Period”) exceed a specified amount; provided that in no event will the payment exceed $10.0 million; and ● Second Earn-Out: Equal to 1.5 times the amount by which the AffloVest business’ U.S. revenues in the period from October 1, 2022 to September 30, 2023 exceed the revenues recognized during the Initial Earn-Out Period; provided that in no event will the payment exceed $10.0 million. This liability was recorded on the Condensed Consolidated Balance Sheet at September 30, 2021 in the line item Earn-out, non-current, at an acquisition-date fair value of $6.4 million. The fair value of the earn-out, reflecting management’s estimate of the likelihood of achieving these targets, was determined by employing a Monte Carlo Simulation model. This amount will be re-measured at the end of each reporting period until the payment requirement ends, with any adjustments reported in income from operations. On the date of AffloVest Acquisition, we allocated the assets acquired based on an estimate of their fair values. The following table summarizes the purchase price allocation: (In millions) Allocated Fair Value Inventories $ 1.6 Property and equipment (1) — Intangible assets 53.5 Goodwill 31.1 Purchase price $ 86.2 (1) The purchase price included less than $0.1 million of property and equipment. The goodwill reflects expected synergies of combining the acquired products and customer information with our existing operations, and is deductible for tax purposes over 15 years . The following table reflects the allocation of purchase price to the acquired intangible assets and related estimated useful lives: (In millions) Allocated Fair Value Estimated Useful Life Customer relationships $ 31.0 13 years Developed technology 13.0 11 years Tradenames 9.5 Indefinite Total intangible assets $ 53.5 The weighted-average amortization period of the acquired intangible assets was 12.3 years. The fair market valuations associated with the assets acquired fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent operational budgets, long-range strategic plans and other estimates. Transaction costs, such as legal and other costs, related to the acquisition aggregated approximately $0.8 million. These costs have been expensed as incurred and are included in reimbursement, general and administrative expenses in our Condensed Consolidated Statements of Operations. The Condensed Consolidated Statements of Operations reflect the AffloVest operations beginning September 9, 2021. The following unaudited pro forma information for the three and nine months ended September 30, 2021 and the three and nine months ended September 30, 2020 presents the revenues and net income assuming the acquisition of AffloVest had occurred as of January 1, 2020. This information has been prepared for comparative purposes only and is not indicative of what actual results would have been if the acquisition had taken place at the beginning of fiscal 2020, or of future results. Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Total revenue $ 56,249 $ 53,068 $ 157,686 $ 139,130 Net income (loss) $ 628 $ (309) $ 1,369 $ 1,770 These pro forma results include certain adjustments, primarly due to increases in amortization expense due to fair value adjustments of intangible assets, increases in interest expense due to additional borrowings incurred to finance the acquisition and amortization of debt issuance costs incurred to finance the transaction, acquisition related costs including transaction costs such as legal, accounting, valuation and other professional services, and related tax effects. |
Marketable Securities
Marketable Securities | 9 Months Ended |
Sep. 30, 2021 | |
Marketable Securities | |
Marketable Securities | Note 5. Marketable Securities There were no investments in marketable securities at September 30, 2021 and December 31, 2020. There were no net pre-tax unrealized gains for marketable securities at September 30, 2021. There were no sales of marketable securities during the nine months ended September 30, 2021. There were no marketable securities in an unrealized loss position at September 30, 2021 and December 31, 2020. |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2021 | |
Inventories | |
Inventories | Note 6. Inventories Inventories consisted of the following: (In thousands) At September 30, 2021 At December 31, 2020 Finished goods $ 9,607 $ 7,129 Component parts and work-in-process 14,223 11,434 Total inventories $ 23,830 $ 18,563 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 9 Months Ended |
Sep. 30, 2021 | |
Intangible Assets | |
Goodwill and Intangible Assets | Note 7. Goodwill and Intangible Assets Goodwill In the third quarter of fiscal 2021, we completed the AffloVest Acqusition. The purchase price of the AffloVest business exceeded the net acquisition-date estimated fair value amounts of the identifiable assets acquired and the liabilities assumed by $31.1 million, which was assigned to goodwill. Intangible Assets Our patents and other intangible assets are summarized as follows: Weighted- At September 30, 2021 Average Gross Amortization Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Definite-lived intangible assets: Patents 12 years $ 537 $ 97 $ 440 Defensive intangible assets 3 years 1,125 550 575 Customer accounts 2 years 125 82 43 Customer relationships 13 years 31,000 146 30,854 Developed technology 11 years 13,000 72 12,928 Subtotal 45,787 947 44,840 Unamortized intangible assets: Tradenames 9,500 — 9,500 Patents pending 630 — 630 Total intangible assets $ 55,917 $ 947 $ 54,970 Weighted- At December 31, 2020 Average Gross Amortization Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Definite-lived intangible assets: Patents 11 years $ 413 $ 65 $ 348 Defensive intangible assets 4 years 1,125 421 704 Customer accounts 2 years 125 63 62 Subtotal 1,663 549 1,114 Unamortized intangible assets: Patents pending 566 — 566 Total intangible assets $ 2,229 $ 549 $ 1,680 Amortization expense was $0.3 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $0.4 million and $0.3 million for the nine months ended September 30, 2021 and 2020, respectively. Future amortization expenses are expected as follows: (In thousands) 2021 (October 1 - December 31) $ 953 2022 3,811 2023 3,781 2024 3,759 2025 3,669 Thereafter 28,867 Total $ 44,840 |
Accrued Expenses
Accrued Expenses | 9 Months Ended |
Sep. 30, 2021 | |
Accrued Expenses | |
Accrued Expenses | Note 8. Accrued Expenses Accrued expenses consisted of the following: (In thousands) At September 30, 2021 At December 31, 2020 Warranty $ 1,779 $ 1,606 In-transit inventory 1,341 634 Legal and consulting 985 882 Travel 552 545 Clinical studies 135 67 Sales and use tax 109 193 Other 449 496 Total $ 5,350 $ 4,423 |
Warranty Reserves
Warranty Reserves | 9 Months Ended |
Sep. 30, 2021 | |
Warranty Reserves | |
Warranty Reserves | Note 9. Warranty Reserves The activity in the warranty reserve during and as of the end of the reporting periods presented was as follows: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Beginning balance $ 5,117 $ 4,208 $ 4,841 $ 3,759 Warranty provision 624 820 2,080 2,097 Processed warranty claims (604) (514) (1,784) (1,342) Ending balance $ 5,137 $ 4,514 $ 5,137 $ 4,514 Accrued warranty reserve, current $ 1,779 $ 1,443 $ 1,779 $ 1,443 Accrued warranty reserve, non-current 3,358 3,071 3,358 3,071 Total accrued warranty reserve $ 5,137 $ 4,514 $ 5,137 $ 4,514 |
Credit Agreement
Credit Agreement | 9 Months Ended |
Sep. 30, 2021 | |
Credit Agreement | |
Credit Agreement | Note 10. Credit Agreement On August 3, 2018, we entered into a credit agreement with Wells Fargo Bank, National Association, which was amended by a First Amendment dated February 12, 2019, a Waiver and Second Amendment dated March 25, 2019, and a Third Amendment dated August 2, 2019 (collectively, the “2018 Credit Agreement”). On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent. The Restated Credit Agreement amended and restated in its entirety the 2018 Credit Agreement. On September 8, 2021, we entered into a First Amendment Agreement (the “Amendment”), which amends the Restated Credit Agreement (as amended by the Amendment, the “Credit Agreement”) with the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment, among other things, adds a $30.0 million incremental term loan to the $25.0 million revolving credit facility provided by the Restated Credit Agreement. The term loan is reflected on our condensed consolidated financial statements as a note payable. The term loan and the revolving credit facility mature on September 8, 2024. The Credit Agreement provides that, 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 $25.0 million 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 $80.0 million. On September 8, 2021, in connection with the closing of the AffloVest Acquisition, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price. The principal of the term loan is required to be repaid in quarterly installments of $750,000 commencing January 7, 2022, through July 8, 2024, with the remaining outstanding balance due on September 8, 2024 . The term loan and 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 for an interest period of one, three or six months, at our option, plus the applicable margin. The applicable margin is 0.75% to 2.25% on loans bearing interest at the Base Rate and 1.75% to 3.25% on loans bearing interest at LIBOR, in each case depending on our consolidated total leverage ratio. At September 30, 2021, all outstanding borrowings were subject to interest at a rate calculated at LIBOR plus an applicable margin equaling 2.8% . Undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.300% to 0.375% , depending on our consolidated total leverage ratio. Maturities of the term loan for the next three years as of September 30, 2021, are as follows: (In thousands) Amount 2021 (October 1 - December 31) $ — 2022 3,000 2023 3,000 2024 24,000 Total $ 30,000 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 contains a number of restrictions and covenants, including that we maintain compliance with a maximum leverage ratio, minimum fixed charge coverage ratio and a minimum consolidated EBITDA covenant. As of September 30, 2021, we were in compliance with all financial covenants under the Credit Agreement. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 11. Commitments and Contingencies Lease Obligations We lease property and equipment under operating leases, typically with terms greater than 12 months , and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (“ROU”) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options are at our discretion and are included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and nonlease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Condensed Consolidated Balance Sheet. None of our lease agreements contain material restrictive covenants or residual value guarantees. Buildings We lease certain office and warehouse space at various locations in the United States where we provide services. These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheet, with rent expense to be recognized on a straight-line basis over the term of the lease. The remaining lease terms vary from approximately one to nine years as of September 30, 2021. We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota. In December 2018, we amended the initial lease to add approximately 29,000 square feet of additional office space, which is accounted for as a separate lease (“second lease”) in accordance with ASU No. 2016-02, “Leases” (Topic 842) (“ASC 842”). In December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842. The portion of the space covered under the initial lease was placed in service in September 2019. This portion was recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets. The portion of the space covered under the second lease commenced in September 2020. Finally, the portion of the space covered under the third lease commenced in September 2021. Vehicles We lease vehicles for certain members of our field sales organization under a vehicle fleet program whereby the initial, noncancelable lease is for a term of 367 days , thus more than one year. Subsequent to the initial term, the lease becomes a month-to-month, cancelable lease. As of September 30, 2021, we had approximately 45 vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities. In addition to monthly rental fees specific to the vehicle, there are fixed monthly nonlease components that have been included in the ROU operating lease assets and operating lease liabilities. The nonlease components are not significant. Computer and Office Equipment We also have operating lease agreements for certain computer and office equipment. The remaining lease terms as of September 30, 2021, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. The leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned. Lease Position, Undiscounted Cash Flow and Supplemental Information The table below presents information related to our ROU operating lease assets and operating lease liabilities that we have recorded: (In thousands) At September 30, 2021 At December 31, 2020 Right of use operating lease assets $ 23,919 $ 20,132 Operating lease liabilities: Current $ 2,412 $ 2,006 Non-current 23,357 19,388 Total $ 25,769 $ 21,394 Operating leases: Weighted average remaining lease term 8.9 years 9.4 years Weighted average discount rate 4.2% 4.4% Nine Months Ended September 30, 2021 2020 Supplemental cash flow information for our operating leases: Cash paid for operating lease liabilities $ 2,411 $ 1,849 Non-cash right of use assets obtained in exchange for new operating lease obligations $ 6,146 $ 6,664 The table below reconciles the undiscounted cash flows under the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented: (In thousands) 2021 (October 1 - December 31) $ 908 2022 3,345 2023 3,274 2024 3,260 2025 3,359 Thereafter 16,653 Total minimum lease payments 30,799 Less: Amount of lease payments representing interest (5,030) Present value of future minimum lease payments 25,769 Less: Current obligations under operating lease liabilities (2,412) Non-current obligations under operating lease liabilities $ 23,357 As of September 30, 2021, we have additional lease commitments of $0.8 million related to amendments to existing building leases that have not yet commenced. As the lessee we are involved in providing guidance to the lessor for related improvements, however these improvements are managed and owned by the lessor. Operating lease costs were $0.9 million and $0.8 million for the three months ended September 30, 2021 and 2020, respectively. Operating lease costs were $2.6 million and $2.1 million for the nine months ended September 30, 2021 and 2020, respectively. Major Vendors We had purchases from two vendors that accounted for 36% of our total purchases for the three months ended September 30, 2021. We had purchases from one vendor that accounted for 24% of our total purchases for the nine months ended September 30, 2021. We had purchases from two vendors that accounted for 31% and 33% of our total purchases for the three and nine months ended September 30, 2020, respectively. Purchase Commitments We issued purchase orders prior to September 30, 2021, totaling $28.4 million for goods that we expect to receive within the next year. 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 recorded an expense related to our discretionary contributions to the 401(k) plan of $0.3 million and $0.1 million for the three months ended September 30, 2021 and 2020, respectively, and $0.9 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively. Legal Proceedings From time to time, we are subject to various claims and legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. On February 13, 2019, we were served with a sealed amended complaint venued in the United States District Court for the Southern District of Texas, Houston Division, captioned United States ex rel Veterans First Medical Supply, LLC vs. Tactile Medical Systems Technology, Inc., Case No. 18-2871, which had been filed on January 23, 2019. The complaint is a qui tam action on behalf of the United States brought by one of our competitors. The United States has declined to intervene in this action. The complaint alleges that we violated the Federal Anti-Kickback Statute and the Federal False Claims Act, claiming that we submitted false claims and made false statements in connection with the Medicare and Medicaid programs, and that we engaged in unlawful retaliation in violation of the Federal False Claims Act. The complaint seeks damages, statutory penalties, attorneys’ fees, treble damages and costs. We filed a motion to dismiss on April 5, 2019. This motion was denied on February 21, 2020. On March 6, 2020, we filed our answer to the complaint and asserted counterclaims. On May 7, 2020, the plaintiff filed a motion to dismiss our counterclaims. On September 8, 2020, we filed a motion for Partial Summary Judgment. On January 2, 2021, the plaintiff filed a motion for Partial Summary Judgment. These motions were decided on March 29, 2021, wherein the court denied plaintiff’s motion to dismiss our counterclaims; granted our motion for Partial Summary Judgment and dismissed Counts I (standalone/direct violation of the Federal Anti-Kickback Statute) and III (violation of the retaliation provision of the Federal False Claims Act) of the complaint; and denied plaintiff’s motion for Partial Summary Judgment. As a result, the remaining allegations consist of those in Count II (violations of the Federal False Claims Act) of the complaint. On August 13, 2021, we filed a motion for summary judgement on the remaining Count II. Plaintiff filed a motion for summary judgement on the counterclaims. These motions are currently pending. We believe the plaintiff’s remaining allegations are without merit and we intend to continue to vigorously defend against the lawsuit. We and certain of our present or former officers were sued in a purported securities class action lawsuit that was filed in the United States District Court for the District of Minnesota on September 29, 2020, and that is pending under the caption Brian Mart v. Tactile Systems Technology, Inc., et al., File No. 0:20-cv-02074-NEB-BRT. On April 19, 2021, the plaintiff filed an Amended Complaint against us and eight of our present and former officers and directors. Plaintiff seeks to represent a class consisting of investors who purchased our common stock in the market during the time period from May 7, 2018 through June 8, 2020 (“alleged class period”). The Amended Complaint alleges the following claims under the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (1) that we and certain officer defendants made materially false or misleading public statements about our business, operational and compliance policies, and results during the alleged class period in violation of Section 10(b) of the Exchange Act; (2) that we and the individual defendants engaged in a scheme to defraud investors in order to allow the individual defendants to sell our stock in violation of Section 10(b) of the Exchange Act; (3) that the individual defendants engaged in improper insider trading of our stock in violation of Section 20A of the Exchange Act; and (4) that we and the individual defendants are liable under Section 20(a) of the Exchange Act because each defendant is a controlling person. On June 18, 2021, we and the individual defendants filed a motion to dismiss the Amended Complaint. The motion has not been decided yet. |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2021 | |
Stockholders' Equity | |
Stockholders' Equity | Note 12. Stockholders' Equity 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, expired, cancelled, settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Pursuant to the automatic increase feature of the 2016 Plan, 972,591 and 952,697 shares were added as available for issuance thereunder on January 1, 2021 and 2020, respectively. As of September 30, 2021, 6,366,806 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. In the second fiscal quarter of 2020, our Board of Directors appointed a new President and Chief Executive Officer (“CEO”), effective June 8, 2020. In conjunction with the acceptance of the written offer, our CEO received both restricted stock units and stock option awards under our 2016 Plan during the third fiscal quarter of 2020 and the stock options have a seven year term. A portion of the awards vested on June 30, 2021, with the remaining portion of the awards vesting over a period of three years from the date of grant. Further, the stock options were valued at the date of grant using the Monte Carlo Simulation model due to a market condition that required that our stock price exceed $40.15 for 20 consecutive trading days during the term of the option in order to vest. This condition was satisfied in the first quarter of 2021 We recorded stock-based compensation expense of $2.6 million and $3.2 million for the three months ended September 30, 2021 and 2020, respectively, and $7.7 million and $8.3 million for the nine months ended September 30, 2021 and 2020, respectively. This expense was allocated as follows: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Cost of revenue $ 171 $ 171 $ 455 $ 358 Sales and marketing expenses 1,081 1,436 2,979 3,915 Research and development expenses 68 87 224 269 Reimbursement, general and administrative expenses 1,268 1,470 4,045 3,746 Total stock-based compensation expense $ 2,588 $ 3,164 $ 7,703 $ 8,288 Stock Options Stock options issued to participants other than non-employees typically vest over three or four years and typically have a contractual term of seven or ten years . Stock-based compensation expense included in the Condensed Consolidated Statements of Operations for stock options was $1.0 million and $1.1 million for the three months ended September 30, 2021 and 2020, respectively, and $3.3 million and $3.0 million for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, there was approximately $6.4 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 1.9 years. Our stock option activity for the nine months ended September 30, 2021, was as follows: Weighted- Weighted- Average Average Aggregate Options Exercise Price Remaining Intrinsic (In thousands except options and per share data) Outstanding Per Share (1) Contractual Life Value (2) Balance at December 31, 2020 1,039,709 $ 36.43 5.6 years $ 13,381 Granted 174,755 $ 50.88 Exercised (138,586) $ 25.85 $ 3,863 Forfeited (68,797) $ 48.64 Cancelled/Expired (30,005) $ 61.13 Balance at September 30, 2021 977,076 $ 38.90 5.2 years $ 10,208 Options exercisable at September 30, 2021 508,184 $ 30.45 4.4 years $ 9,229 (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 461,138 as of September 30, 2020, had a weighted-average exercise price of $23.35 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 the Condensed Consolidated Statements of Operations for time-based restricted stock units was $1.2 million and $1.4 million for the three months ended September 30, 2021 and 2020, respectively, and $3.7 million and $4.0 million for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, there was approximately $6.6 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 1.9 years. Our time-based restricted stock unit activity for the nine months ended September 30, 2021, 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, 2020 211,469 $ 48.29 $ 9,503 Granted 91,001 $ 51.56 Vested (94,517) $ 47.99 Cancelled (24,161) $ 51.29 Balance at September 30, 2021 183,792 $ 49.66 $ 8,170 Deferred and unissued at September 30, 2021 (2) 6,469 $ 38.94 $ 288 (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, 2021, there were no restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. As of September 30, 2021, there were 6,469 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly cash retainer payments. Performance-Based Restricted Stock Units We have granted performance-based restricted stock units (“PSUs”) to certain participants under the 2016 Plan. These PSUs have both performance-based and time-based vesting features. The PSUs granted in 2018 were earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2019. The PSUs granted in 2019 would have been earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2020, but none were so earned. The PSUs granted in 2020 will be earned if and to the extent performance goals based on revenue and adjusted EBITDA are achieved in 2021. The PSUs granted in 2021 will be earned if and to the extent performance goals based on revenue and adjusted EBITDA are achieved in 2022. 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 the minimum performance threshold 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 recognized for PSUs was an expense of $0.2 million and $0.4 million for the three months ended September 30, 2021 and 2020, respectively, and less than $0.1 million and $0.5 million for the nine months ended September 30, 2021 and 2020, respectively. The stock-based compensation expense for the nine months ended September 30, 2021 reflected a $0.5 million benefit due to a change in the estimated payout associated with PSUs granted in 2020 being below the minimum performance target threshold level, as defined, partially offset by an expense of $0.5 million related to the PSUs granted in 2018 and 2021. At September 30, 2021, there was approximately $1.5 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, 2021, 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, 2020 79,303 $ 47.83 $ 3,564 Granted 39,419 $ 51.82 Vested (34,159) $ 33.98 Cancelled (23,936) $ 65.43 Balance at September 30, 2021 60,627 $ 51.28 $ 2,695 (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 ESPP is available to all of 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 ESPP provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year. A total of 1,600,000 shares of common stock was initially reserved for issuance under the ESPP. 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 (a) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine. Pursuant to the automatic increase feature of the ESPP, 194,518 and 190,539 shares were added as available for issuance thereunder on January 1, 2021 and 2020, respectively. As of September 30, 2021, 1,740,328 shares were available for future issuance under the ESPP. We recognized stock-based compensation expense associated with the ESPP of $ 0.2 million and $0.3 million for the three months ended September 30, 2021 and 2020, respectively, and $0.6 million and $0.8 million for the nine months ended September 30, 2021 and 2020, respectively. |
Revenue
Revenue | 9 Months Ended |
Sep. 30, 2021 | |
Revenue | |
Revenue | Note 13. Revenue We derive our revenue from the sale and rental of our products to our customers in the United States. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product categories: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Revenue Flexitouch system $ 44,014 $ 42,908 $ 126,544 $ 112,621 Entre system 7,622 6,184 18,924 15,266 AffloVest 861 — 861 — Total $ 52,497 $ 49,092 $ 146,329 $ 127,887 Percentage of total revenue Flexitouch system 84% 87% 86% 88% Entre system 14% 13% 13% 12% AffloVest 2% — % 1% — % Total 100% 100% 100% 100% Our revenue by channel, inclusive of sales and rental revenue, for the three and nine months ended September 30, 2021 and 2020, are summarized in the following table: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Private insurers and other payers $ 36,034 $ 34,554 $ 99,665 $ 90,459 Veterans Administration 6,737 6,788 19,905 18,168 Medicare 8,865 7,750 25,898 19,260 Durable medical equipment distributors 861 — 861 — Total $ 52,497 $ 49,092 $ 146,329 $ 127,887 Our rental revenue is derived from rent-to-purchase arrangements that typically range from three to ten months. As title transfers to the patient, with whom we have the contract, upon the termination of the lease term and because collectability is probable, under ASC 842, these are recognized as sales-type leases. Each rental agreement contains two components, the controller and related garments, both of which are interdependent and recognized as one lease component. The revenue and associated cost of revenue of sales-type leases are recognized on the lease commencement date and a net investment in leases is recorded on the Condensed Consolidated Balance Sheet. We bill the patients’ insurance payers monthly over the duration of the rental term. We record the net investment in leases and recognize revenue upon commencement of the lease in the amount of the expected consideration to be received through the monthly payments. Similar to our sales revenue, the transaction price is impacted by multiple factors, including the terms and conditions contracted by third party payers. As the rental contract resides with the patients, we have elected the portfolio approach, at the payer level, to determine the expected consideration, which considers the impact of early terminations. While the contract is with the patient, in certain circumstances, the third party payer elects an initial rental period with an option to extend. We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably certain to be exercised. As the lease is short-term in nature, we anticipate collection of substantially all of the net investment within the first year of the lease agreement. Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable. Rental revenue for the three and nine months ended September 30, 2021 and 2020, was primarily from private insurers. Sales-type lease revenue and the associated cost of revenue for the three and nine months ended September 30, 2021 and 2020, was: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Sales-type lease revenue $ 8,037 $ 6,519 $ 22,114 $ 18,173 Cost of sales-type lease revenue 2,433 2,562 6,501 6,062 Gross profit $ 5,604 $ 3,957 $ 15,613 $ 12,111 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2021 | |
Income Taxes | |
Income Taxes | Note 14. 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 vacation 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, 2021, was an expense of 126% , compared to a benefit of 55% for the three months ended September 30, 2020. The primary driver of the change in our effective tax rate is primarily attributable to a change in projected taxable income. We recorded an income tax expense of $1.9 million and a benefit of $0.8 million for the three months ended September 30, 2021 and 2020, respectively. The effective tax rate for the nine months ended September 30, 2021, was a benefit of 24% , compared to an expense of 17% for the nine months ended September 30, 2020. The primary driver of the change in our effective tax rate is attributable to recording a benefit in the nine months ended September 30, 2021, to recognize a tax credit for a research and development credit study conducted for tax years 2017-2020 as well as a change in deductibility of business meals to 100% in 2021 compared to 50% in 2020. We recorded an income tax benefit of $1.4 million and an expense of $2.3 million for the nine months ended September 30, 2021 and 2020, 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, 2021, tax contingencies related to federal and state credits recorded within the Condensed Consolidated Balance Sheets were $0.5 million. Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact our tax contingencies. The timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. We are currently under examination by the New York Department of Taxation and Finance for tax years 2017, 2018, and 2019. The examination may lead to proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods. 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 (Loss) Income Per Share
Net (Loss) Income Per Share | 9 Months Ended |
Sep. 30, 2021 | |
Net (Loss) Income Per Share | |
Net Income (Loss) Per Share | Note 15. Net (Loss) Income Per Share The following table sets forth the computation of our basic and diluted net (loss) income per share: Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except share and per share data) 2021 2020 2021 2020 Net (loss) income $ (3,355) $ 2,424 $ (4,316) $ (12,733) Weighted-average shares outstanding 19,790,838 19,415,640 19,676,749 19,309,344 Dilutive effect of stock-based awards — 331,725 — — Weighted-average shares used to compute diluted net (loss) income per share 19,790,838 19,747,365 19,676,749 19,309,344 Net (loss) income per share - Basic $ (0.17) $ 0.12 $ (0.22) $ (0.66) Net (loss) income per share - Diluted $ (0.17) $ 0.12 $ (0.22) $ (0.66) The following common stock equivalents were excluded from the computation of diluted net (loss) 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, 2021 2020 2021 2020 Restricted stock units 190,261 104,786 190,261 223,776 Common stock options 977,076 594,117 977,076 982,182 Performance stock units 60,627 38,666 60,627 113,646 Employee stock purchase plan 38,325 60,196 33,931 48,360 Total 1,266,289 797,765 1,261,895 1,367,964 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Measurements | |
Fair Value Measurements | Note 16. 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). As of September 30, 2021, we no longer had any money market mutal funds. The following provides information regarding fair value measurements for our cash equivalents as of December 31, 2020, according to the three-level fair value hierarchy: At December 31, 2020 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 $ 16,188 $ — $ — $ 16,188 Total $ 16,188 $ — $ — $ 16,188 During the three and nine months ended September 30, 2021, 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 value of our money market mutual funds is 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. As of June 30, 2020, we re-measured the value of our intangible assets related to the Airwear wrap product line to their fair value, which was deemed to be $0 . We have obligations to pay up to $20.0 million in earn-out payments in cash if certain future financial results of the AffloVest business are met. The earn-out liability was valued using Level 3 inputs. The fair value of the earn-out was determined by employing a Monte Carlo Simulation model in a risk-neutral framework. The underlying simulated variable includes recognized revenue. The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies. The model includes other assumptions including the market price of risk, which was calculated as the weighted average cost of capital less the long-term risk free rate. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2021 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | The 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. The results for the nine months ended September 30, 2021, are not necessarily indicative of results to be expected for the year ending December 31, 2021, 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, 2020. |
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. |
Risks and Uncertainties | Risks and Uncertainties Coronavirus (COVID-19) The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic. We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, particularly during 2020 and the first quarter of 2021. While we saw some level of recovery in the second quarter of 2021, the third quarter was negatively impacted by the prolonged recovery from COVID-19 and increased Delta variant cases during the period, which resulted in restricted access to clinics and hospitals and disrupted the recovery in patient visits versus the pre-COVID environment. There are no reliable estimates of how long the pandemic will last, whether any recovery will be sustained or will reverse course, the severity of any resurgence of COVID-19 or variant strains of the virus, the effectiveness of vaccines and attitudes towards receiving them, or what ultimate effects the pandemic will have. For that reason, we are unable to reasonably estimate the long-term impact of the pandemic on our business at this time. Since the onset of COVID-19, we have remained proactive to ensure we continue to adapt to the needs of our employees, clinicians and patients . We cannot assure you that these changes to our processes and practices will be successful in mitigating the impact of COVID-19 on our business. We continue to evaluate and, if appropriate, will adopt other measures in the future related to the ongoing safety of our employees, clinicians and patients. In addition, we are closely monitoring mandatory vaccination requirements and related evolving guidance that is or may be applicable to us, including in our capacity as a U.S. government contractor. See See Part II, I tem 1A. “ Risk Factors” in this Form 10-Q for additional information about vaccine mandates and potential risks related thereto. |
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 to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
Comprehensive (Loss) Income | Comprehensive (Loss) Income Comprehensive (loss) 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 (loss) income represents net (loss) income adjusted for unrealized gains and losses on available-for-sale marketable securities and the related taxes. |
Business Segments | Business Segments We operate and report in only one operating and reportable segment. Our chief operating decision maker does not use financial information below revenue to allocate resources. |
Goodwill | Goodwill Goodwill represents the excess of the purchase price paid over the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized, but is tested for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We plan to perform our annual assessment of goodwill for impairment as of July 1st of each fiscal year. See Note 7 – “Goodwill and Intangible Assets” for additional information. |
Revenue Recognition for AffloVest | Revenue Recognition for AffloVest The AffloVest device is sold through home medical equipment and durable medical equipment providers (collectively, "distributors"). Revenue is recognized when control of the promised goods or services is transferred to the distributors, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the distributor has obtained control of the goods or services, we consider any future performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business. In general, revenue from the sale of the AffloVest product is recognized at shipment, unless circumstances dictate that control has not yet passed to the distributor. Certain of our contracts include volume-based incentives which involve rebates that are negotiated at or prior to the time of sale with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these incentive programs, at the time of sale, we determine the most likely amount of the rebate to be paid based on forecasted sales levels. These forecasts are updated at least quarterly for each customer, and the transaction price is reduced for the anticipated cost of the rebate. If the forecasted sales for a customer change, the accrual for rebates is adjusted to reflect the new rebates expected to be earned by the customer. Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue sold in the accompanying Consolidated Statements of Operations. For a description of our revenue recognition policies related to our Flexitouch and Entre systems, see Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020. |
Accounting Pronouncement Not Yet Adopted | Accounting Pronouncement Not Yet Adopted In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848) — Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2020-04”), addressing the discontinuation of LIBOR, a widely used reference rate for pricing financial products. The ASU is intended to provide optional expedients and exceptions if certain criteria are met when accounting for contracts, hedging relationships and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform. The application and adoption requirements of ASU 2020-04 are optional until December 31, 2022 and vary based on expedients elected. We have not elected any expedients to date and are currently evaluating any potential future impacts on the condensed consolidated financial statements. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740) — Simplifying the Accounting for Income Taxes” (“ASU 2019-12”), which is intended to simplify various aspects of the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. We adopted ASU 2019-12 as of January 1, 2021, and it did not have an impact on the condensed consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments — Credit Losses” (“ASU 2016-13”), which introduced a new model for recognizing credit losses on financial instruments based on an estimate of the current expected credit losses. The new current expected credit losses (“CECL”) model generally calls for the immediate recognition of all expected credit losses and applies to financial instruments and other assets, including accounts receivable and other financial assets measured at amortized cost, debt securities and other financial assets. This guidance replaced the previous incurred loss model for measuring expected credit losses and requires expected losses on available-for-sale debt securities to be recognized through an allowance for credit losses rather than as reductions in the amortized cost of the securities. We adopted ASU 2016-13 as of January 1, 2020, and it did not have an impact on the consolidated financial statements at that time. In connection with the AffloVest Acquisition, it was determined CECL did not have a material financial impact on the receivables related to the durable medical equipment channel. |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Acquisitions | |
Summary of purchase price allocation | The following table summarizes the purchase price allocation: (In millions) Allocated Fair Value Inventories $ 1.6 Property and equipment (1) — Intangible assets 53.5 Goodwill 31.1 Purchase price $ 86.2 (1) The purchase price included less than $0.1 million of property and equipment. |
Schedule of allocation of purchase price | The following table reflects the allocation of purchase price to the acquired intangible assets and related estimated useful lives: (In millions) Allocated Fair Value Estimated Useful Life Customer relationships $ 31.0 13 years Developed technology 13.0 11 years Tradenames 9.5 Indefinite Total intangible assets $ 53.5 |
Schedule of condensed consolidated statements of operations reflect AffoVest operations | Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Total revenue $ 56,249 $ 53,068 $ 157,686 $ 139,130 Net income (loss) $ 628 $ (309) $ 1,369 $ 1,770 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Inventories | |
Schedule of inventories | (In thousands) At September 30, 2021 At December 31, 2020 Finished goods $ 9,607 $ 7,129 Component parts and work-in-process 14,223 11,434 Total inventories $ 23,830 $ 18,563 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Intangible Assets | |
Schedule of finite lived intangible assets | Weighted- At September 30, 2021 Average Gross Amortization Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Definite-lived intangible assets: Patents 12 years $ 537 $ 97 $ 440 Defensive intangible assets 3 years 1,125 550 575 Customer accounts 2 years 125 82 43 Customer relationships 13 years 31,000 146 30,854 Developed technology 11 years 13,000 72 12,928 Subtotal 45,787 947 44,840 Unamortized intangible assets: Tradenames 9,500 — 9,500 Patents pending 630 — 630 Total intangible assets $ 55,917 $ 947 $ 54,970 Weighted- At December 31, 2020 Average Gross Amortization Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Definite-lived intangible assets: Patents 11 years $ 413 $ 65 $ 348 Defensive intangible assets 4 years 1,125 421 704 Customer accounts 2 years 125 63 62 Subtotal 1,663 549 1,114 Unamortized intangible assets: Patents pending 566 — 566 Total intangible assets $ 2,229 $ 549 $ 1,680 |
Schedule of future amortization expense | (In thousands) 2021 (October 1 - December 31) $ 953 2022 3,811 2023 3,781 2024 3,759 2025 3,669 Thereafter 28,867 Total $ 44,840 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Accrued Expenses | |
Schedule of Accrued Expenses | (In thousands) At September 30, 2021 At December 31, 2020 Warranty $ 1,779 $ 1,606 In-transit inventory 1,341 634 Legal and consulting 985 882 Travel 552 545 Clinical studies 135 67 Sales and use tax 109 193 Other 449 496 Total $ 5,350 $ 4,423 |
Warranty Reserves (Tables)
Warranty Reserves (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Warranty Reserves | |
Schedule of warranty reserves | Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Beginning balance $ 5,117 $ 4,208 $ 4,841 $ 3,759 Warranty provision 624 820 2,080 2,097 Processed warranty claims (604) (514) (1,784) (1,342) Ending balance $ 5,137 $ 4,514 $ 5,137 $ 4,514 Accrued warranty reserve, current $ 1,779 $ 1,443 $ 1,779 $ 1,443 Accrued warranty reserve, non-current 3,358 3,071 3,358 3,071 Total accrued warranty reserve $ 5,137 $ 4,514 $ 5,137 $ 4,514 |
Credit Agreement (Tables)
Credit Agreement (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Credit Agreement | |
Schedule of maturities of the term note payable | (In thousands) Amount 2021 (October 1 - December 31) $ — 2022 3,000 2023 3,000 2024 24,000 Total $ 30,000 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Commitments and Contingencies | |
Summary of lease-related assets and liabilities | (In thousands) At September 30, 2021 At December 31, 2020 Right of use operating lease assets $ 23,919 $ 20,132 Operating lease liabilities: Current $ 2,412 $ 2,006 Non-current 23,357 19,388 Total $ 25,769 $ 21,394 Operating leases: Weighted average remaining lease term 8.9 years 9.4 years Weighted average discount rate 4.2% 4.4% Nine Months Ended September 30, 2021 2020 Supplemental cash flow information for our operating leases: Cash paid for operating lease liabilities $ 2,411 $ 1,849 Non-cash right of use assets obtained in exchange for new operating lease obligations $ 6,146 $ 6,664 |
Summary of undiscounted cash flows | (In thousands) 2021 (October 1 - December 31) $ 908 2022 3,345 2023 3,274 2024 3,260 2025 3,359 Thereafter 16,653 Total minimum lease payments 30,799 Less: Amount of lease payments representing interest (5,030) Present value of future minimum lease payments 25,769 Less: Current obligations under operating lease liabilities (2,412) Non-current obligations under operating lease liabilities $ 23,357 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Schedule of allocation of total stock-based compensation expense | Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Cost of revenue $ 171 $ 171 $ 455 $ 358 Sales and marketing expenses 1,081 1,436 2,979 3,915 Research and development expenses 68 87 224 269 Reimbursement, general and administrative expenses 1,268 1,470 4,045 3,746 Total stock-based compensation expense $ 2,588 $ 3,164 $ 7,703 $ 8,288 |
Schedule of stock option activity | Weighted- Weighted- Average Average Aggregate Options Exercise Price Remaining Intrinsic (In thousands except options and per share data) Outstanding Per Share (1) Contractual Life Value (2) Balance at December 31, 2020 1,039,709 $ 36.43 5.6 years $ 13,381 Granted 174,755 $ 50.88 Exercised (138,586) $ 25.85 $ 3,863 Forfeited (68,797) $ 48.64 Cancelled/Expired (30,005) $ 61.13 Balance at September 30, 2021 977,076 $ 38.90 5.2 years $ 10,208 Options exercisable at September 30, 2021 508,184 $ 30.45 4.4 years $ 9,229 (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, 2020 211,469 $ 48.29 $ 9,503 Granted 91,001 $ 51.56 Vested (94,517) $ 47.99 Cancelled (24,161) $ 51.29 Balance at September 30, 2021 183,792 $ 49.66 $ 8,170 Deferred and unissued at September 30, 2021 (2) 6,469 $ 38.94 $ 288 (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, 2021, there were no restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. As of September 30, 2021, there were 6,469 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly cash retainer payments. |
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, 2020 79,303 $ 47.83 $ 3,564 Granted 39,419 $ 51.82 Vested (34,159) $ 33.98 Cancelled (23,936) $ 65.43 Balance at September 30, 2021 60,627 $ 51.28 $ 2,695 (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. |
Revenue (Tables)
Revenue (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Revenue | |
Summary of revenue disaggregated by product | Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Revenue Flexitouch system $ 44,014 $ 42,908 $ 126,544 $ 112,621 Entre system 7,622 6,184 18,924 15,266 AffloVest 861 — 861 — Total $ 52,497 $ 49,092 $ 146,329 $ 127,887 Percentage of total revenue Flexitouch system 84% 87% 86% 88% Entre system 14% 13% 13% 12% AffloVest 2% — % 1% — % Total 100% 100% 100% 100% |
Summary of revenue by channel | Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2021 2020 2021 2020 Private insurers and other payers $ 36,034 $ 34,554 $ 99,665 $ 90,459 Veterans Administration 6,737 6,788 19,905 18,168 Medicare 8,865 7,750 25,898 19,260 Durable medical equipment distributors 861 — 861 — Total $ 52,497 $ 49,092 $ 146,329 $ 127,887 |
Sales-type lease revenue and the associated cost of goods sold | Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Sales-type lease revenue $ 8,037 $ 6,519 $ 22,114 $ 18,173 Cost of sales-type lease revenue 2,433 2,562 6,501 6,062 Gross profit $ 5,604 $ 3,957 $ 15,613 $ 12,111 |
Net (Loss) Income Per Share (Ta
Net (Loss) Income Per Share (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Net (Loss) Income Per Share | |
Schedule of computation of the basic and diluted net (loss) income per share | Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except share and per share data) 2021 2020 2021 2020 Net (loss) income $ (3,355) $ 2,424 $ (4,316) $ (12,733) Weighted-average shares outstanding 19,790,838 19,415,640 19,676,749 19,309,344 Dilutive effect of stock-based awards — 331,725 — — Weighted-average shares used to compute diluted net (loss) income per share 19,790,838 19,747,365 19,676,749 19,309,344 Net (loss) income per share - Basic $ (0.17) $ 0.12 $ (0.22) $ (0.66) Net (loss) income per share - Diluted $ (0.17) $ 0.12 $ (0.22) $ (0.66) |
Schedule of potentially dilutive securities outstanding | Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Restricted stock units 190,261 104,786 190,261 223,776 Common stock options 977,076 594,117 977,076 982,182 Performance stock units 60,627 38,666 60,627 113,646 Employee stock purchase plan 38,325 60,196 33,931 48,360 Total 1,266,289 797,765 1,261,895 1,367,964 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2021 | |
Fair Value Measurements | |
Schedule of fair value measurements for our cash equivalents and marketable securities | At December 31, 2020 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 $ 16,188 $ — $ — $ 16,188 Total $ 16,188 $ — $ — $ 16,188 |
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 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) | 9 Months Ended |
Sep. 30, 2021segment | |
Summary of Significant Accounting Policies | |
Number of operating segment | 1 |
Number of reportable segment | 1 |
Acquisitions (Details)
Acquisitions (Details) $ in Thousands | Sep. 08, 2021USD ($)payment | Sep. 30, 2021USD ($) | Dec. 31, 2020USD ($) |
Acquisitions | |||
Earn-out liability fair value | $ 20,000 | ||
Property, plant and equipment | $ 6,458 | $ 6,957 | |
Reimbursement, general and administrative | |||
Acquisitions | |||
Transaction costs | $ 800 | ||
AffloVest APA | |||
Acquisitions | |||
Purchase price | 80,000 | ||
Escrow account | 500 | ||
Working capital adjustments | $ 200 | ||
Number of earnout payments | payment | 2 | ||
Threshold earnout payments | $ 10,000 | ||
Earn-out liability fair value | 6,400 | ||
AffloVest APA | Earn-out period exceed Base Revenues from October 1, 2021 to September 30, 2022 | |||
Acquisitions | |||
Threshold earnout payments | $ 10,000 | ||
Business revenue to exceed base revenue, Multiplier | 1.5 | ||
AffloVest APA | Earn-out period exceed Base Revenues from October 1, 2022 to September 30, 2023 | |||
Acquisitions | |||
Threshold earnout payments | $ 10,000 | ||
Business revenue to exceed base revenue, Multiplier | 1.5 | ||
AffloVest APA | Maximum | |||
Acquisitions | |||
Total consideration transferred | $ 100,000 | ||
Property, plant and equipment | $ 100 |
Acquisitions - Purchase Price A
Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Thousands | Sep. 08, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Purchase price allocation | |||
Inventories | $ 23,830 | $ 18,563 | |
Property, plant and equipment | 6,458 | 6,957 | |
Intangible assets | $ 53,500 | 54,970 | 1,680 |
Goodwill | 31,063 | ||
Property and equipment, net | 6,458 | $ 6,957 | |
Amortization period for tax purposes | 15 years | ||
AffloVest APA | |||
Purchase price allocation | |||
Inventories | $ 1,600 | ||
Intangible assets | 53,500 | ||
Goodwill | 31,100 | $ 31,100 | |
Purchase price | 86,200 | ||
AffloVest APA | Maximum | |||
Purchase price allocation | |||
Property, plant and equipment | 100 | ||
Property and equipment, net | $ 100 |
Acquisitions - Allocation of Pu
Acquisitions - Allocation of Purchase Price (Details) - USD ($) $ in Thousands | Sep. 08, 2021 | Sep. 30, 2021 | Dec. 31, 2020 |
Acquisitions | |||
Finite lived intangible assets, Allocated Fair Value | $ 44,840 | $ 1,114 | |
Indefinite lived intangible assets excluding goodwill, Allocated fair value | 55,917 | 2,229 | |
Total intangible assets (Net) | $ 53,500 | 54,970 | $ 1,680 |
Weighted average amortization period | 12 years 3 months 18 days | ||
AffloVest APA | |||
Acquisitions | |||
Total intangible assets (Net) | $ 53,500 | ||
Customer relationships | |||
Acquisitions | |||
Finite lived intangible assets, Allocated Fair Value | $ 31,000 | 30,854 | |
Estimated Useful Life | 13 years | ||
Developed technology | |||
Acquisitions | |||
Finite lived intangible assets, Allocated Fair Value | $ 13,000 | $ 12,928 | |
Estimated Useful Life | 11 years | ||
Tradenames | |||
Acquisitions | |||
Indefinite lived intangible assets excluding goodwill, Allocated fair value | $ 9,500 |
Acquisitions - Condensed Consol
Acquisitions - Condensed Consolidated Statements of Operations Reflect AffloVest Operations (Details) - AffloVest APA - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Asset Acquisition [Line Items] | ||||
Total revenue | $ 56,249 | $ 53,068 | $ 157,686 | $ 139,130 |
Net income (loss) | $ 628 | $ (309) | $ 1,369 | $ 1,770 |
Marketable Securities (Details)
Marketable Securities (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2021USD ($)item | Dec. 31, 2020USD ($)item | |
Marketable Securities | ||
Marketable securities | $ 0 | $ 0 |
Net pre-tax unrealized gains for marketable securities | 0 | |
Marketable securities sold | $ 0 | |
Number of marketable securities in an unrealized loss position | item | 0 | 0 |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Inventories | ||
Finished goods | $ 9,607 | $ 7,129 |
Component parts and work-in-process | 14,223 | 11,434 |
Total inventories | $ 23,830 | $ 18,563 |
Goodwill And Intangible Asset_2
Goodwill And Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | Sep. 08, 2021 | |
Patents and Intangibles | ||||||
Goodwill | $ 31,063 | $ 31,063 | ||||
Definite-lived intangible assets: | ||||||
Gross Carrying Amount | 45,787 | 45,787 | $ 1,663 | |||
Accumulated Amortization | 947 | 947 | 549 | |||
Total | 44,840 | 44,840 | 1,114 | |||
Unamortized intangible assets: | ||||||
Total intangible assets (Gross) | 55,917 | 55,917 | 2,229 | |||
Total intangible assets (Net) | 54,970 | 54,970 | 1,680 | $ 53,500 | ||
Amortization expense | 300 | $ 100 | 400 | $ 300 | ||
Future Amortization | ||||||
2021 (October 1 - December 31) | 953 | 953 | ||||
2022 | 3,811 | 3,811 | ||||
2023 | 3,781 | 3,781 | ||||
2024 | 3,759 | 3,759 | ||||
2025 | 3,669 | 3,669 | ||||
Thereafter | 28,867 | 28,867 | ||||
Total | 44,840 | 44,840 | 1,114 | |||
Tradenames | ||||||
Unamortized intangible assets: | ||||||
Gross Carrying Amount, Indefinite | 9,500 | 9,500 | ||||
Patents | ||||||
Unamortized intangible assets: | ||||||
Gross Carrying Amount, Indefinite | 630 | $ 630 | $ 566 | |||
Patents | ||||||
Definite-lived intangible assets: | ||||||
Weighted Average Amortization Period | 12 years | 11 years | ||||
Gross Carrying Amount | 537 | $ 537 | $ 413 | |||
Accumulated Amortization | 97 | 97 | 65 | |||
Total | 440 | 440 | 348 | |||
Future Amortization | ||||||
Total | 440 | $ 440 | $ 348 | |||
Defensive intangible assets | ||||||
Definite-lived intangible assets: | ||||||
Weighted Average Amortization Period | 3 years | 4 years | ||||
Gross Carrying Amount | 1,125 | $ 1,125 | $ 1,125 | |||
Accumulated Amortization | 550 | 550 | 421 | |||
Total | 575 | 575 | 704 | |||
Future Amortization | ||||||
Total | 575 | $ 575 | $ 704 | |||
Customer accounts | ||||||
Definite-lived intangible assets: | ||||||
Weighted Average Amortization Period | 2 years | 2 years | ||||
Gross Carrying Amount | 125 | $ 125 | $ 125 | |||
Accumulated Amortization | 82 | 82 | 63 | |||
Total | 43 | 43 | 62 | |||
Future Amortization | ||||||
Total | 43 | $ 43 | $ 62 | |||
Customer relationships | ||||||
Definite-lived intangible assets: | ||||||
Weighted Average Amortization Period | 13 years | |||||
Gross Carrying Amount | 31,000 | $ 31,000 | ||||
Accumulated Amortization | 146 | 146 | ||||
Total | 30,854 | 30,854 | 31,000 | |||
Future Amortization | ||||||
Total | 30,854 | $ 30,854 | 31,000 | |||
Developed technology | ||||||
Definite-lived intangible assets: | ||||||
Weighted Average Amortization Period | 11 years | |||||
Gross Carrying Amount | 13,000 | $ 13,000 | ||||
Accumulated Amortization | 72 | 72 | ||||
Total | 12,928 | 12,928 | 13,000 | |||
Future Amortization | ||||||
Total | 12,928 | 12,928 | 13,000 | |||
AffloVest APA | ||||||
Patents and Intangibles | ||||||
Goodwill | $ 31,100 | $ 31,100 | 31,100 | |||
Unamortized intangible assets: | ||||||
Total intangible assets (Net) | $ 53,500 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 | Sep. 30, 2020 |
Accrued Expenses | |||
Warranty | $ 1,779 | $ 1,606 | $ 1,443 |
In-transit inventory | 985 | 882 | |
Legal and consulting | 1,341 | 634 | |
Travel | 552 | 545 | |
Clinical studies | 109 | 193 | |
Sales and use tax | 135 | 67 | |
Other | 449 | 496 | |
Total | $ 5,350 | $ 4,423 |
Warranty Reserves (Details)
Warranty Reserves (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | |||||
Beginning balance | $ 5,117 | $ 4,208 | $ 4,841 | $ 3,759 | |
Warranty provision | 624 | 820 | 2,080 | 2,097 | |
Processed warranty claims | (604) | (514) | (1,784) | (1,342) | |
Ending balance | 5,137 | 4,514 | 5,137 | 4,514 | |
Accrued warranty reserve, current | 1,779 | 1,443 | 1,779 | 1,443 | $ 1,606 |
Accrued warranty reserve, non-current | 3,358 | 3,071 | 3,358 | 3,071 | $ 3,235 |
Total accrued warranty reserve | $ 5,137 | $ 4,514 | $ 5,137 | $ 4,514 |
Credit Agreement (Details)
Credit Agreement (Details) - USD ($) | Sep. 08, 2021 | Sep. 30, 2021 |
Credit Agreement | ||
Credit facility outstanding amount | $ 25,000,000 | $ 24,844,000 |
Line of credit, threshold contingent increase in borrowing capacity | 25,000,000 | |
Credit agreement, total aggregate principal amount | 80,000,000 | |
Revolving credit facility | ||
Credit Agreement | ||
Line of credit | 25,000,000 | |
Revolving credit facility | Federal Funds | ||
Credit Agreement | ||
Basis spread (as a percent) | 0.50% | |
Revolving credit facility | Base Rate | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.00% | |
Revolving credit facility | LIBOR | ||
Credit Agreement | ||
Basis spread (as a percent) | 2.80% | |
Revolving credit facility | Maximum | ||
Credit Agreement | ||
Unused line fee (as a percent) | 0.375% | |
Revolving credit facility | Maximum | Base Rate | ||
Credit Agreement | ||
Basis spread (as a percent) | 2.25% | |
Revolving credit facility | Maximum | LIBOR | ||
Credit Agreement | ||
Basis spread (as a percent) | 3.25% | |
Revolving credit facility | Minimum | ||
Credit Agreement | ||
Unused line fee (as a percent) | 0.30% | |
Revolving credit facility | Minimum | Base Rate | ||
Credit Agreement | ||
Basis spread (as a percent) | 0.75% | |
Revolving credit facility | Minimum | LIBOR | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.75% | |
Term Loan | ||
Credit Agreement | ||
Debt instrument face amount | 30,000,000 | |
Long-term debt | $ 30,000,000 | $ 30,000,000 |
Debt instrument periodic payment | $ 750,000 | |
Debt instrument frequency of periodic payment | quarterly |
Credit Agreement - Maturities o
Credit Agreement - Maturities of Debt (Details) - Term Loan - USD ($) $ in Thousands | Sep. 30, 2021 | Sep. 08, 2021 |
Maturities of notes payable | ||
2022 | $ 3,000 | |
2023 | 3,000 | |
2024 | 24,000 | |
Total | $ 30,000 | $ 30,000 |
Commitments and Contingencies -
Commitments and Contingencies - Lease Obligations (Details) | 9 Months Ended | |||
Sep. 30, 2021item | Dec. 31, 2019ft² | Dec. 31, 2018ft² | Oct. 31, 2018ft² | |
Minimum | ||||
Commitments and Contingencies | ||||
Remaining lease terms | 12 months | |||
Building | Minimum | ||||
Commitments and Contingencies | ||||
Remaining lease terms | 1 year | |||
Building | Maximum | ||||
Commitments and Contingencies | ||||
Remaining lease terms | 9 years | |||
Vehicles | ||||
Commitments and Contingencies | ||||
Remaining lease terms | 367 days | |||
Number of vehicles with agreements within the initial, noncancelable lease term | item | 45 | |||
Equipment | ||||
Commitments and Contingencies | ||||
Option to renew | true | |||
Equipment | Minimum | ||||
Commitments and Contingencies | ||||
Remaining lease terms | 1 year | |||
Equipment | Maximum | ||||
Commitments and Contingencies | ||||
Remaining lease terms | 4 years | |||
Initial lease | ||||
Commitments and Contingencies | ||||
Area of office space | 80,000 | |||
Second lease | ||||
Commitments and Contingencies | ||||
Area of office space | 29,000 | |||
Additional office space added to the lease | 4,000 | |||
Third lease | ||||
Commitments and Contingencies | ||||
Additional office space added to the lease | 37,000 |
Commitments and Contingencies_2
Commitments and Contingencies - Lease related assets and liabilities (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Lease-related assets and liabilities | |||
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | Right of use operating lease assets | Right of use operating lease assets | |
Right of use operating lease assets | $ 23,919 | $ 20,132 | |
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List] | Operating lease liabilities, Current | Operating lease liabilities, Current | |
Operating lease liabilities, Current | $ 2,412 | $ 2,006 | |
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | Operating lease liabilities, non-current | Operating lease liabilities, non-current | |
Operating lease liabilities, non-current | $ 23,357 | $ 19,388 | |
Present value of future minimum lease payments | $ 25,769 | $ 21,394 | |
Weighted average remaining lease term | 8 years 10 months 24 days | 9 years 4 months 24 days | |
Weighted average discount rate | 4.20% | 4.40% | |
Cash paid for operating lease liabilities | $ 2,411 | $ 1,849 | |
Non-cash right of use assets obtained in exchange for new operating lease obligations | $ 6,146 | $ 6,664 |
Commitments and Contingencies_3
Commitments and Contingencies - Undiscounted cash flows (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Dec. 31, 2020 |
Undiscounted cash flows | ||
2021 (October 1 - December 31) | $ 908 | |
2022 | 3,345 | |
2023 | 3,274 | |
2024 | 3,260 | |
2025 | 3,359 | |
Thereafter | 16,653 | |
Total minimum lease payments | 30,799 | |
Less: Amount of lease payments representing interest | (5,030) | |
Present value of future minimum lease payments | 25,769 | $ 21,394 |
Less: Current obligations under operating lease liabilities | (2,412) | (2,006) |
Non-current obligations under operating lease liabilities | $ 23,357 | $ 19,388 |
Commitments and Contingencies_4
Commitments and Contingencies - Lease commitments and operating lease cost (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Commitments and Contingencies | ||||
Additional lease commitments | $ 0.8 | $ 0.8 | ||
Operating lease cost | $ 0.9 | $ 0.8 | $ 2.6 | $ 2.1 |
Commitments and Contingencies_5
Commitments and Contingencies - Major Vendors (Details) - item | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Vendor One | ||||
Commitments and Contingencies | ||||
Number of vendors | 1 | 1 | ||
Vendor Two | ||||
Commitments and Contingencies | ||||
Number of vendors | 2 | 2 | 2 | 2 |
Purchases | Vendor | Vendor One | ||||
Commitments and Contingencies | ||||
Total purchases (in percentage) | 24.00% | |||
Purchases | Vendor | Vendor Two | ||||
Commitments and Contingencies | ||||
Total purchases (in percentage) | 36.00% | 31.00% | 33.00% |
Commitments and Contingencies_6
Commitments and Contingencies - Purchase Commitments (Details) $ in Millions | Sep. 30, 2021USD ($) |
Purchase commitments | |
Purchase orders issued | $ 28.4 |
Commitments and Contingencies_7
Commitments and Contingencies - Retirement Plan (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
401(k) | ||||
Retirement Plan | ||||
Discretionary contributions | $ 0.3 | $ 0.1 | $ 0.9 | $ 0.2 |
Stockholders' Equity - Stock-Ba
Stockholders' Equity - Stock-Based Compensation General Information (Details) | Sep. 30, 2021shares |
2016 Plan | |
Stockholders' Equity | |
Number of shares authorized | 4,800,000 |
Stockholders' Equity - Stock-_2
Stockholders' Equity - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | Jan. 01, 2021 | Jan. 01, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 |
Stock-based compensation | ||||||
Compensation expense | $ 2,588 | $ 3,164 | $ 7,703 | $ 8,288 | ||
Cost of revenue. | ||||||
Stock-based compensation | ||||||
Compensation expense | 171 | 171 | 455 | 358 | ||
Sales and marketing | ||||||
Stock-based compensation | ||||||
Compensation expense | 1,081 | 1,436 | 2,979 | 3,915 | ||
Research and development | ||||||
Stock-based compensation | ||||||
Compensation expense | 68 | 87 | 224 | 269 | ||
Reimbursement, general and administrative | ||||||
Stock-based compensation | ||||||
Compensation expense | $ 1,268 | 1,470 | $ 4,045 | 3,746 | ||
2016 Plan | ||||||
Stock-based compensation | ||||||
Shares available for future issuance | 6,366,806 | 6,366,806 | ||||
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 | 972,591 | 952,697 | ||||
Common stock options | ||||||
Stock-based compensation | ||||||
Compensation expense | $ 1,000 | $ 1,100 | $ 3,300 | $ 3,000 | ||
Unrecognized stock-based compensation | ||||||
Unrecognized stock-based compensation expense, period for recognition | 1 year 10 months 24 days |
Stockholders' Equity - Stock Op
Stockholders' Equity - Stock Options and Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Dec. 31, 2020 | |
Stock-based compensation, general disclosures. | |||||
Stock-based compensation expense | $ 2,588 | $ 3,164 | $ 7,703 | $ 8,288 | |
Common stock options | |||||
Stock-based compensation, general disclosures. | |||||
Stock-based compensation expense | 1,000 | $ 1,100 | 3,300 | $ 3,000 | |
Total unrecognized pre-tax compensation expense related to nonvested stock option awards | $ 6,400 | $ 6,400 | |||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 1 year 10 months 24 days | ||||
Options Outstanding | |||||
Outstanding at beginning of period | 1,039,709 | ||||
Granted | 174,755 | ||||
Exercised | (138,586) | ||||
Forfeited | (68,797) | ||||
Cancelled/Expired | (30,005) | ||||
Outstanding at end of period | 977,076 | 977,076 | 1,039,709 | ||
Weighted Average Exercise Price Per Share | |||||
Outstanding at beginning of period | $ 36.43 | ||||
Granted | 50.88 | ||||
Exercised | 25.85 | ||||
Forfeited | 48.64 | ||||
Cancelled/Expired | 61.13 | ||||
Outstanding at end of period | $ 38.90 | $ 38.90 | $ 36.43 | ||
Other information | |||||
Options exercisable number of shares exercisable | 508,184 | 461,138 | 508,184 | 461,138 | |
Options exercisable, weighted-average exercise price | $ 30.45 | $ 23.35 | $ 30.45 | $ 23.35 | |
Weighted average remaining contractual life (in years) | 5 years 2 months 12 days | 5 years 7 months 6 days | |||
Options exercisable, weighted-average remaining contractual life | 4 years 4 months 24 days | ||||
Aggregate Intrinsic Value, Options outstanding | $ 10,208 | $ 10,208 | $ 13,381 | ||
Aggregate Intrinsic Value, Exercised | 3,863 | ||||
Aggregate Intrinsic Value, Options exercisable | $ 9,229 | $ 9,229 | |||
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 | ||||
Common stock options | Chief Executive Officer [Member] | |||||
Stock-based compensation, general disclosures. | |||||
Share-based payment award, term | 7 years | ||||
Vesting period (in years) | 3 years | ||||
Number of consecutive trading days | 20 days | ||||
Common stock options | Chief Executive Officer [Member] | Minimum | |||||
Stock-based compensation, general disclosures. | |||||
Stock price | $ 40.15 | $ 40.15 | |||
Time-Based Restricted Stock Units | |||||
Stock-based compensation, general disclosures. | |||||
Stock-based compensation expense | $ 3,700 | $ 4,000 | |||
Time-Based Restricted Stock Units | Non-employee Directors | |||||
Units Outstanding | |||||
Granted (in shares) | 0 | ||||
Number of granted and vested restricted stock units | 6,469 | 6,469 | |||
2018 and 2021 PSUs | |||||
Stock-based compensation, general disclosures. | |||||
Stock-based compensation expense | $ 500 | ||||
2016 Plan | Time-Based Restricted Stock Units | |||||
Stock-based compensation, general disclosures. | |||||
Stock-based compensation expense | $ 1,200 | $ 1,400 | |||
Total unrecognized pre-tax compensation expense related to awards | $ 6,600 | $ 6,600 | |||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 1 month 27 days | ||||
Units Outstanding | |||||
Restricted stock unit awards outstanding at the beginning of the period (in shares) | 211,469 | ||||
Granted (in shares) | 91,001 | ||||
Vested (in shares) | 94,517 | ||||
Cancelled (in shares) | (24,161) | ||||
Restricted stock unit awards outstanding at the end of the period (in shares) | 183,792 | 183,792 | 211,469 | ||
Deferred and unissued (in shares) | 6,469 | 6,469 | |||
Weighted Average Grant Date Fair Value Per Unit | |||||
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share) | $ 48.29 | ||||
Granted (in dollars per share) | 51.56 | ||||
Vested (in dollars per share) | 47.99 | ||||
Cancelled (in dollars per share) | 51.29 | ||||
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ 49.66 | 49.66 | $ 48.29 | ||
Deferred and unissued (in dollars per share) | $ 38.94 | $ 38.94 | |||
Aggregate Intrinsic Value | |||||
Restricted stock unit awards, Average Intrinsic Value | $ 8,170 | $ 8,170 | $ 9,503 | ||
Restricted stock unit awards deferred and unissued, Average Intrinsic Value | 288 | $ 288 | |||
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. | |||||
Estimated payout | $ 500 | ||||
Stock-based compensation expense | 200 | $ 400 | $ 500 | ||
Total unrecognized pre-tax compensation expense related to awards | $ 1,500 | $ 1,500 | |||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 2 years 4 months 24 days | ||||
Units Outstanding | |||||
Restricted stock unit awards outstanding at the beginning of the period (in shares) | 79,303 | ||||
Granted (in shares) | 39,419 | ||||
Vested (in shares) | 34,159 | ||||
Cancelled (in shares) | (23,936) | ||||
Restricted stock unit awards outstanding at the end of the period (in shares) | 60,627 | 60,627 | 79,303 | ||
Weighted Average Grant Date Fair Value Per Unit | |||||
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share) | $ 47.83 | ||||
Granted (in dollars per share) | 51.82 | ||||
Vested (in dollars per share) | 33.98 | ||||
Cancelled (in dollars per share) | 65.43 | ||||
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ 51.28 | $ 51.28 | $ 47.83 | ||
Aggregate Intrinsic Value | |||||
Restricted stock unit awards, Average Intrinsic Value | $ 2,695 | $ 2,695 | $ 3,564 | ||
2016 Plan | Performance-based stock-settled restricted stock units | Minimum | |||||
Units Outstanding | |||||
Percentage to earn or vest the performance-based stock-settled restricted stock units | 50.00% | ||||
2016 Plan | Performance-based stock-settled restricted stock units | Maximum | |||||
Stock-based compensation, general disclosures. | |||||
Stock-based compensation expense | $ 100 | ||||
Units Outstanding | |||||
Percentage to earn or vest the performance-based stock-settled restricted stock units | 150.00% | ||||
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 | Jan. 01, 2021 | Jan. 01, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | Apr. 27, 2017 |
Stockholders' Equity | |||||||
Stock-based compensation expense | $ 2,588 | $ 3,164 | $ 7,703 | $ 8,288 | |||
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 reserved | 1,740,328 | 1,740,328 | 1,600,000 | ||||
Incremental share increase (in shares) | 500,000 | ||||||
Incremental share increase (as a percent) | 1.00% | ||||||
Increase in number of shares reserved and available for issuance | 194,518 | 190,539 | |||||
Stock-based compensation expense | $ 200 | $ 300 | $ 600 | $ 800 |
Revenue (Details)
Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Revenue | ||||
Revenue | $ 52,497 | $ 49,092 | $ 146,329 | $ 127,887 |
Percentage of total revenue (in percent) | 100.00% | 100.00% | 100.00% | 100.00% |
Revenue from sale type lease | ||||
Sales-type lease revenue | $ 8,037 | $ 6,519 | $ 22,114 | $ 18,173 |
Cost of sales-type lease revenue | 2,433 | 2,562 | 6,501 | 6,062 |
Gross profit | 5,604 | 3,957 | 15,613 | 12,111 |
Private insurers and other payers | ||||
Revenue | ||||
Revenue | 36,034 | 34,554 | 99,665 | 90,459 |
Veterans Administration | ||||
Revenue | ||||
Revenue | 6,737 | 6,788 | 19,905 | 18,168 |
Medicare | ||||
Revenue | ||||
Revenue | 8,865 | 7,750 | 25,898 | 19,260 |
Durable medical equipment distributors | ||||
Revenue | ||||
Revenue | 861 | 861 | ||
Flexitouch system | ||||
Revenue | ||||
Revenue | $ 44,014 | $ 42,908 | $ 126,544 | $ 112,621 |
Percentage of total revenue (in percent) | 84.00% | 87.00% | 86.00% | 88.00% |
Entre system | ||||
Revenue | ||||
Revenue | $ 7,622 | $ 6,184 | $ 18,924 | $ 15,266 |
Percentage of total revenue (in percent) | 14.00% | 13.00% | 13.00% | 12.00% |
AffloVest | ||||
Revenue | ||||
Revenue | $ 861 | $ 861 | ||
Percentage of total revenue (in percent) | 2.00% | 1.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Income Taxes | ||||
Net effective rate | 126.00% | (55.00%) | (24.00%) | 17.00% |
Income tax expense (benefit) | $ 1,868 | $ (751) | $ (1,365) | $ 2,294 |
Tax contingencies | $ 500 | |||
Change in deductibility of business meals | 100.00% | 50.00% |
Net (Loss) Income Per Share - B
Net (Loss) Income Per Share - Basic and Diluted Net (Loss) Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Net (Loss) Income Per Share | ||||
Net (loss) income | $ (3,355) | $ 2,424 | $ (4,316) | $ (12,733) |
Weighted-average shares outstanding | 19,790,838 | 19,415,640 | 19,676,749 | 19,309,344 |
Dilutive effect of stock-based awards | 331,725 | |||
Weighted-average shares used to compute diluted net (loss) income per share | 19,790,838 | 19,747,365 | 19,676,749 | 19,309,344 |
Net (loss) income per share - Basic | $ (0.17) | $ 0.12 | $ (0.22) | $ (0.66) |
Net (loss) income per share - Diluted | $ (0.17) | $ 0.12 | $ (0.22) | $ (0.66) |
Net (Loss) Income Per Share - A
Net (Loss) Income Per Share - Antidilutive Securities Excluded From Computation of Earnings Per Share (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2021 | Sep. 30, 2020 | Sep. 30, 2021 | Sep. 30, 2020 | |
Net Income (Loss) Per Share | ||||
Antidilutive securities excluded from computation of earnings per share | 1,266,289 | 797,765 | 1,261,895 | 1,367,964 |
Common stock options | ||||
Net Income (Loss) Per Share | ||||
Antidilutive securities excluded from computation of earnings per share | 977,076 | 594,117 | 977,076 | 982,182 |
Performance stock units | ||||
Net Income (Loss) Per Share | ||||
Antidilutive securities excluded from computation of earnings per share | 60,627 | 38,666 | 60,627 | 113,646 |
Restricted Stock Units | ||||
Net Income (Loss) Per Share | ||||
Antidilutive securities excluded from computation of earnings per share | 190,261 | 104,786 | 190,261 | 223,776 |
Employee stock purchase plan | ||||
Net Income (Loss) Per Share | ||||
Antidilutive securities excluded from computation of earnings per share | 38,325 | 60,196 | 33,931 | 48,360 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2021 | Sep. 08, 2021 | Dec. 31, 2020 | Jun. 30, 2020 |
Fair Value Measurements | ||||
Amount of transfers of marketable securities within the three level hierarchy | $ 0 | |||
Intangible assets | 54,970 | $ 53,500 | $ 1,680 | |
Earn-out liability fair value | $ 20,000 | |||
Recurring | ||||
Fair Value Measurements | ||||
Available for sale debt securities | 16,188 | |||
Recurring | Money market mutual funds | ||||
Fair Value Measurements | ||||
Money market mutual funds | 16,188 | |||
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||||
Fair Value Measurements | ||||
Available for sale debt securities | 16,188 | |||
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market mutual funds | ||||
Fair Value Measurements | ||||
Money market mutual funds | $ 16,188 | |||
Non-recurring | Significant Unobservable Inputs (Level 3) | Airwear Product | ||||
Fair Value Measurements | ||||
Intangible assets | $ 0 |