Tactile Systems TechnologyTCMD

The company earned about 34 cents per share last quarter, easily beating the 14 cents analysts expected. Revenue grew 9 percent to about 86 million dollars, which was right in line with expectations. The real strength showed up in the bottom line: net income more than doubled to 7.8 million dollars as gross margins, the profit left after making the devices, rose to 76 percent.

Beyond the numbers, the company launched its next-generation AffloVest, a wearable vest that helps clear mucus from the lungs for people with respiratory conditions. It also signed a deal to distribute a new wearable compression sleeve to veterans and service members. These moves show the company is successfully expanding from its core lymphedema business into new areas, which should help it reach more patients at earlier stages of their illness.

See the full quarter, and how our tracked metrics did

Source: 8-K filing

Key highlights

• Revenue outlook trimmed: Management lowered the high end of its full year revenue forecast to a range of $360 million to $366 million, as some equipment providers are ordering fewer chest vests while they manage inventory during a new product launch. This update brings the expected yearly growth rate to about 9% to 11%, down from the previous top-end target of 12%.
• Core lymphedema growth: The main business, which sells pumps to treat chronic swelling known as lymphedema, grew its sales by 12% to $73.6 million this quarter. This segment now makes up 86% of the company's total sales, up from 84% last year, and continues to be the primary engine for growth.
• Profitability gains momentum: Net income more than doubled to $7.8 million compared to $3.2 million a year ago, driven by better cost discipline and higher prices. This resulted in earnings of $0.34 per share, which is a significant jump from the $0.14 per share the company earned in the same period last year.
• Airway clearance temporary dip: Revenue from airway clearance products, which are vests that help clear lungs, fell 7% to $12.1 million. The company says this is a short-term issue caused by distributors working through existing stock of older products as the new AffloVest system is introduced to the market.
• Strong cash position: The company ended the quarter with $69.9 million in cash and zero debt, even after spending $5.3 million to buy back its own stock. This healthy balance sheet provides a safety net while the company integrates its recent purchase of LymphaTech and a new distribution deal for wearable compression sleeves.

Our take: This was a productive quarter where the core business did the heavy lifting, even if the total revenue outlook moved down. The 12% growth in lymphedema sales and rising profit margins show the business is becoming more efficient as it scales. While the vest inventory issues are a nuisance, the underlying health of the core segment keeps the long term case on track.