Tactile Systems TechnologyTCMD

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.