Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Feb. 26, 2019 | Jun. 29, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | TACTILE SYSTEMS TECHNOLOGY INC | ||
Entity Central Index Key | 1,027,838 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,018 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Current Reporting Status | Yes | ||
Entity Shell Company | false | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Ex Transition Period | false | ||
Entity Common Stock, Shares Outstanding | 18,741,105 | ||
Entity Public Float | $ 905,226,400 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents | $ 20,099 | $ 23,968 |
Marketable securities | 25,786 | 19,944 |
Accounts receivable, net | 24,332 | 17,623 |
Inventories | 11,189 | 11,040 |
Income taxes receivable | 1,793 | 2,119 |
Prepaid expenses and other current assets | 1,762 | 2,178 |
Total current assets | 84,961 | 76,872 |
Property and equipment, net | 4,810 | 3,776 |
Other assets | ||
Intangible assets, net | 5,339 | 2,218 |
Medicare accounts receivable, long-term | 1,884 | 2,718 |
Deferred income taxes | 8,820 | 2,662 |
Other non-current assets | 1,257 | 201 |
Total other assets | 17,300 | 7,799 |
Total assets | 107,071 | 88,447 |
Current liabilities | ||
Accounts payable | 5,110 | 4,253 |
Accrued payroll and related taxes | 7,421 | 6,706 |
Accrued expenses | 2,780 | 2,598 |
Future product royalties | 5 | 17 |
Income taxes | 51 | 212 |
Other current liabilities | 709 | 733 |
Total current liabilities | 16,076 | 14,519 |
Long-term liabilities | ||
Accrued warranty reserve, long-term | 1,725 | 1,141 |
Total liabilities | 17,801 | 15,660 |
Commitments and Contingencies (see Note 13) | ||
Stockholders’ equity | ||
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of December 31, 2018 and 2017 | ||
Common stock, $0.001 par value, 300,000,000 shares authorized; 18,631,127 shares issued and outstanding as of December 31, 2018; 17,872,465 shares issued and 17,846,379 shares outstanding as of December 31, 2017 | 19 | 18 |
Additional paid-in capital | 79,554 | 70,224 |
Retained earnings | 9,705 | 3,082 |
Accumulated other comprehensive loss | (8) | (44) |
Less: treasury stock, at cost — none as of December 31, 2018 and 26,086 shares as of December 31, 2017 | (493) | |
Total stockholders’ equity | 89,270 | 72,787 |
Total liabilities and stockholders’ equity | $ 107,071 | $ 88,447 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated Balance Sheets | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common shares authorized | 300,000,000 | 300,000,000 |
Common Stock, Shares, Issued | 18,631,127 | 17,872,465 |
Common Stock, Shares, Outstanding | 18,631,127 | 17,846,379 |
Treasury stock (in shares) | 0 | 26,086 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Operations | |||
Revenues, net | $ 143,751 | $ 109,283 | $ 84,542 |
Cost of goods sold | 41,493 | 29,015 | 22,940 |
Gross profit | 102,258 | 80,268 | 61,602 |
Operating expenses | |||
Sales and marketing | 60,371 | 44,396 | 33,794 |
Research and development | 5,289 | 5,060 | 4,476 |
Reimbursement, general and administrative | 33,608 | 26,914 | 19,060 |
Total operating expenses | 99,268 | 76,370 | 57,330 |
Income from operations | 2,990 | 3,898 | 4,272 |
Other income | 486 | 292 | 38 |
Income before income taxes | 3,476 | 4,190 | 4,310 |
Income tax (benefit) expense | (3,147) | (1,665) | 1,431 |
Net income | 6,623 | 5,855 | 2,879 |
Convertible preferred stock dividends | 1,247 | ||
Net income attributable to common stockholders | $ 6,623 | $ 5,855 | $ 1,632 |
Net income per common share | |||
Basic (in dollars per share) | $ 0.36 | $ 0.34 | $ 0.18 |
Diluted (in dollars per share) | $ 0.34 | $ 0.31 | $ 0.15 |
Weighted-average common shares used to compute net income per common share | |||
Basic (in shares) | 18,252,689 | 17,355,175 | 8,913,042 |
Diluted (in shares) | 19,347,632 | 18,877,863 | 10,758,684 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated Statements of Comprehensive Income | |||
Net income | $ 6,623 | $ 5,855 | $ 2,879 |
Other comprehensive income (loss): | |||
Unrealized gain (loss) on marketable securities | 60 | (53) | (17) |
Income tax related to items of other comprehensive income (loss) | (24) | 20 | 6 |
Total other comprehensive income (loss) | 36 | (33) | (11) |
Comprehensive income | $ 6,659 | $ 5,822 | $ 2,868 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders’ Equity (Deficit) - USD ($) $ in Thousands | Common StockSeries B Preferred Stock | Common StockSeries A Preferred Stock | Common Stock | Additional Paid In Capital.Series B Preferred Stock | Additional Paid In Capital.Series A Preferred Stock | Additional Paid In Capital. | Retained Earnings or (Accumulated Deficit) | Accumulated Other Comprehensive Loss | Treasury Stock | Series B Preferred Stock | Series A Preferred Stock | Total |
Temporary equity, balance at the beginning at Dec. 31, 2015 | $ 12,599 | $ 20,328 | ||||||||||
Balance at the beginning (in shares) at Dec. 31, 2015 | 2,733,468 | 3,061,488 | ||||||||||
Balances at the beginning at Dec. 31, 2015 | $ 3 | $ (5,652) | $ (5,649) | |||||||||
Balances at the beginning (in shares) at Dec. 31, 2015 | 3,222,902 | |||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Stock-based compensation | $ 2,082 | 2,082 | ||||||||||
Exercise of common stock options and warrants and vesting of restricted stock units | $ 1 | 235 | 236 | |||||||||
Exercise of common stock options and warrants and vesting of restricted stock units (in shares) | 255,217 | |||||||||||
Preferred stock dividends | $ 436 | $ 811 | ||||||||||
Preferred stock dividends | (1,247) | (1,247) | ||||||||||
Sale of common stock from initial public offering, net of offering expenses | $ 4 | 35,378 | 35,382 | |||||||||
Sale of common stock from initial public offering, net of offering expenses (in shares) | 4,120,000 | |||||||||||
Preferred stock dividends paid in cash | (8,207) | |||||||||||
Common stock issued in lieu of series B preferred stock dividend | $ 1 | (1) | ||||||||||
Common stock issued in lieu of series B preferred stock dividend (in shares) | 956,842 | |||||||||||
Conversion of preferred stock to common stock | $ (13,035) | $ (12,932) | ||||||||||
Conversion of preferred stock to common stock (in shares) | (2,733,468) | (3,061,488) | ||||||||||
Conversion of preferred stock to common stock issuances | $ 3 | $ 3 | $ 13,032 | $ 12,929 | $ 13,035 | $ 12,932 | ||||||
Conversion of preferred stock to common stock issuances (in shares) | 2,733,468 | 3,190,985 | ||||||||||
Common stock issued for series A & B preferred stock liquidation preference | $ 2 | (2) | ||||||||||
Common stock issued for series A & B preferred stock liquidation preference (in shares) | 2,354,323 | |||||||||||
Comprehensive income for the period | 2,879 | $ (11) | 2,868 | |||||||||
Balances at the end at Dec. 31, 2016 | $ 17 | 62,406 | (2,773) | (11) | 59,639 | |||||||
Balances at the end (in shares) at Dec. 31, 2016 | 16,833,737 | |||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Stock-based compensation | 4,235 | 4,235 | ||||||||||
Exercise of common stock options and warrants and vesting of restricted stock units | $ 1 | 833 | 834 | |||||||||
Exercise of common stock options and warrants and vesting of restricted stock units (in shares) | 731,596 | |||||||||||
Preferred stock dividends | (387) | (387) | ||||||||||
Common shares issued for employee stock purchase plan | 3,137 | 3,137 | ||||||||||
Common shares issued for employee stock purchase plan (in shares) | 307,132 | |||||||||||
Shares repurchased to cover taxes from restricted stock award vesting | $ (493) | (493) | ||||||||||
Shares repurchased to cover taxes from restricted stock award vesting (in shares) | (26,086) | |||||||||||
Comprehensive income for the period | 5,855 | (33) | 5,822 | |||||||||
Balances at the end at Dec. 31, 2017 | $ 18 | 70,224 | 3,082 | (44) | (493) | 72,787 | ||||||
Balances at the end (in shares) at Dec. 31, 2017 | 17,846,379 | |||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||
Stock-based compensation | 7,974 | 7,974 | ||||||||||
Exercise of common stock options and warrants and vesting of restricted stock units | $ 1 | 1,514 | 1,515 | |||||||||
Exercise of common stock options and warrants and vesting of restricted stock units (in shares) | 661,568 | |||||||||||
Taxes paid for net share settlement of restricted stock units | (2,379) | (2,379) | ||||||||||
Treasury stock issued for option exercises | (493) | $ 493 | ||||||||||
Treasury stock issued for option exercises | 26,086 | |||||||||||
Common shares issued for employee stock purchase plan | 2,714 | 2,714 | ||||||||||
Common shares issued for employee stock purchase plan (in shares) | 97,092 | |||||||||||
Comprehensive income for the period | 6,623 | 36 | 6,659 | |||||||||
Balances at the end at Dec. 31, 2018 | $ 19 | $ 79,554 | $ 9,705 | $ (8) | $ 89,270 | |||||||
Balances at the end (in shares) at Dec. 31, 2018 | 18,631,125 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash flows from operating activities | |||
Net income | $ 6,623 | $ 5,855 | $ 2,879 |
Adjustments to reconcile net income to net cash provided by operating activities | |||
Depreciation and amortization | 3,635 | 1,849 | 799 |
Deferred income taxes | (6,182) | 143 | (611) |
Stock-based compensation expense | 7,974 | 4,235 | 1,889 |
Loss on disposal of equipment | 3 | ||
Loss on sales of marketable securities | 1 | ||
Impairment losses | 2,534 | ||
Changes in assets and liabilities: | |||
Accounts receivable | (6,709) | (3,391) | (522) |
Inventories | (870) | (4,486) | (773) |
Income taxes | 165 | (2,942) | (81) |
Prepaid expenses and other assets | (1,140) | 146 | (407) |
Medicare accounts receivable – long-term | 834 | 105 | (784) |
Accounts payable | 690 | 462 | 1,407 |
Accrued payroll and related taxes | 715 | 14 | 3,337 |
Accrued expenses and other liabilities | 746 | 2,252 | 824 |
Future product royalties | (12) | (50) | (924) |
Net cash provided by operating activities | 9,007 | 4,192 | 7,033 |
Cash flows from investing activities | |||
Proceeds from sales of securities available-for-sale | 2,000 | 1,000 | |
Proceeds from maturities of securities available-for-sale | 15,000 | 1,000 | |
Purchases of securities available-for-sale | (21,680) | (12,051) | (11,011) |
Purchases of property and equipment | (4,196) | (3,746) | (775) |
Acquisition of intangible assets | (5,350) | (74) | (58) |
Other investments | (500) | (145) | |
Net cash used in investing activities | (14,726) | (14,016) | (11,844) |
Cash flows from financing activities | |||
Taxes paid for net share settlement of restricted stock units | (2,379) | (387) | |
Proceeds from exercise of common stock options and warrants | 1,515 | 834 | 236 |
Proceeds from the issuance of common stock from the employee stock purchase plan | 2,714 | 3,137 | |
Shares repurchased to cover taxes from restricted stock award vesting | (493) | ||
Dividends paid on preferred stock | (8,207) | ||
Proceeds from IPO | 41,200 | ||
Fees paid for IPO | (4,777) | ||
Net cash provided by financing activities | 1,850 | 3,091 | 28,452 |
Net change in cash and cash equivalents | (3,869) | (6,733) | 23,641 |
Cash and cash equivalents – beginning of period | 23,968 | 30,701 | 7,060 |
Cash and cash equivalents – end of period | 20,099 | 23,968 | 30,701 |
Supplemental cash flow disclosure | |||
Cash paid for interest | 9 | ||
Cash paid for taxes | 2,883 | 923 | 2,158 |
Capital expenditures incurred but not yet paid | $ 167 | $ 15 | $ 174 |
Nature of Business and Operatio
Nature of Business and Operations | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Business and Operations | |
Nature of Business and Operations | Note 1. Nature of Business and Operations Tactile Systems Technology, Inc. (“we,” “us,” and “our”) is the sole manufacturer and distributor of the Flexitouch and Entre systems, medical devices that help control symptoms of lymphedema, a chronic and progressive medical condition, the Actitouch system, a medical device used to treat venous leg ulcers and chronic venous insufficiency, and the Airwear wrap, a medical device used for the management of venous insufficiency, venous hypertension, venous ulcerations and lymphedema. We provide our products for use in the home and sell them through vascular, wound and lymphedema clinics throughout the United States. We do business as “Tactile Medical.” We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in us being reincorporated as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical.” On August 2, 2016, we closed the initial public offering of our common stock, which resulted in the sale of 4,120,000 shares of our common stock at a public offering price of $10.00 per share. We received net proceeds from the initial public offering of approximately $35.4 million, after deducting underwriting discounts and approximately $2.9 million of transaction expenses. In connection with the closing of the initial public offering, all of our outstanding redeemable convertible preferred stock automatically converted to common stock on August 2, 2016. At August 2, 2016, we did not have any redeemable convertible preferred stock issued or outstanding. Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher sales in the third and fourth quarters as a result of patients having paid their annual insurance deductibles in full, thereby reducing their out-of-pocket costs for our products, and because patients often spend the remaining balances in their healthcare flexible spending accounts at that time. This seasonality applies only to purchases of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year or do not have plans that include patient deductibles for purchases of our products. |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Dec. 31, 2018 | |
Basis of Presentation | |
Basis of Presentation | Note 2. Basis of Presentation Our accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. We have reclassified certain prior year amounts to conform to the current year’s presentation. The results for the year ended December 31, 2018, are not necessarily indicative of results to be expected for any future year. Principles of Consolidation Our accompanying consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Comprehensive Income Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on available-for-sale marketable securities. JOBS Act Accounting Election Prior to December 31, 2018, we were an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result we were eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. However, as of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we no longer qualify as an emerging growth company as of December 31, 2018. Therefore we no longer are able to take advantage of the extended transition period for adopting new or revised accounting standards. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | Note 3. Summary of Significant Accounting Policies Cash and Cash Equivalents Cash and cash equivalents consist of all cash on hand, deposits and funds invested in available-for-sale securities with original maturities of three months or less at the time of purchase. At December 31, 2018 and 2017, our cash was held primarily in checking and money market accounts. Marketable Securities and Equity Investments We determine the appropriate classification of our marketable securities as available-for-sale or held-to-maturity at the time of purchase and periodically reevaluate such classification. Debt securities are classified as held - to - maturity when we have the positive intent and ability to hold the securities to maturity. Debt securities for which we do not have the intent or ability to hold to maturity are classified as available-for-sale. Debt securities not classified as held-to-maturity are classified as available-for-sale and are reported at fair value, with unrealized gains and losses included in the determination of comprehensive income, a component of stockholders' equity. We review our available-for-sale securities for impairment to determine if the impairment is temporary or other-than-temporary. A temporary impairment charge results in an unrealized loss being recorded in other comprehensive income. Other-than-temporary impairments are recorded in net income in the period the impairment is determined to be other-than-temporary . Realized gains and losses on the sale of marketable securities are determined using the specific-identification method. Equity investments (including equity securities) with readily determinable fair value are reported at fair value, with unrealized gains and losses included in the determination of net income. For equity investments with no readily determinable fair value, we measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new indicator of fair value, as an example. As of December 31, 2018 and 2017, the total carrying value of our equity investments, with no readily determinable fair value, were $0.65 million and $0.15 million, respectively, and are included in other non-current assets on our consolidated balance sheets. On an annual basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are impaired and also monitor for any observable price changes. During the years ended December 31, 2018 and 2017, we did not have any impairment loss on these investments. Accounts Receivable, Net The majority of our accounts receivable and revenues are from commercial insurance payers and government payers, such as Medicare, the Veterans Administration and Medicaid. Accounts receivable are recorded based on management’s assessment of the expected consideration to be received, based on a detailed review of historical pricing adjustments and collections. Management relies on the results of the assessment, which includes payment history of the applicable payer as well as historical patient collections, as a primary source of information in estimating the collectability of our accounts receivable. We update our assessment on a quarterly basis, which to date has not resulted in any material adjustments to the valuation of our accounts receivable. We believe the assessment provides reasonable estimates of our accounts receivable valuation, and therefore we believe that substantially all accounts receivable are fully collectible. As such, effective December 31, 2018, management has reclassified certain related accounts which impacted the presentation of accounts receivable on the Consolidated Statements of Cash Flows. We have reclassified prior year amounts to conform with the current year presentation. As a result of this reclassification, the reserves for uncollectible schedule, previously disclosed in the Summary of Significant Accounting Policies, is no longer included in the Notes to the Consolidated Financial Statements. A portion of our claims to Medicare are initially denied and enter the appeals process, where many are ultimately reviewed by an Administrative Law Judge. After final adjudication of all claims, approximately 90% of the claims submitted are approved (this is on a number of claims, not a dollars claimed, basis across all our products). The appeals process can be lengthy, lasting more than a year in most cases. Accordingly, we classify a portion of our Medicare accounts receivable as non-current based on our experience with Medicare collections. Inventories Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value. Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of three to seven years. Leasehold improvements are depreciated over the remaining life of the respective building lease agreement. Patient rental equipment is depreciated over the multiple month rental period. Major expenditures for property and equipment are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and the resulting gains or losses are included in income. The value of equipment for patients who obtain our products through a multiple month rental arrangement is capitalized and depreciated over the term of the rental period, after which time title to this equipment passes to the patient. The value of demonstration equipment in the possession of our field sales representatives is capitalized and depreciated over the estimated useful life of the equipment. Revenue Recognition We derive revenue from the sales and rentals of our products, which consist of our proprietary line of Flexitouch, Entre and Actitouch systems. We recognize revenue when control of the product has been transferred to our customer, in the amount of the expected consideration to be received for the product. In general, revenue from the sale of a product is recognized upon shipment, unless circumstances dictate that control has not yet passed to the customer. We provide a warranty for our products against defects in material and workmanship for a period of one to five years on garments and one to two years on controllers. In accordance with applicable accounting guidance, we have determined these were assurance warranties and therefore not considered a performance obligation. In addition, we did not evaluate immaterial promised goods or services in the context of the contract. As a result, the sales of our products represent a single performance obligation that is satisfied at a point in time and is short-term in nature. In certain cases we receive payment from Medicare sales over a period of time that may exceed one year. Despite these extended payment terms, no significant financing component is deemed to exist as the terms are not for the benefit of the patient with whom we have the contract. Rather, the extended payment terms occur as a result of an initial claim denial, which subsequently enters the Medicare appeals process as noted below. We distribute our products directly to patients who are referred to us by physicians, therapists or nurses. In most cases, there is a third-party payer, such as a commercial insurer, Medicare or the Veterans Administration involved with the transaction. Our contractual relationship resides with the patient when the third-party payer is either a commercial insurer or Medicare and with the Veterans Administration if the patient is covered under their services. Revenue is recognized from such sales upon transfer of control of the product to the customer at a transaction price determined by collection history. As a result, the transaction price is impacted by multiple factors, including the terms and conditions contracted by various third-party payers, and therefore payments from third-party payers typically are less than our standard charge and represent an implicit price concession, resulting in variable consideration. As most contracts are with each individual sale to a patient, we have elected the portfolio approach to determine the transaction price, and ultimately the expected consideration. The portfolios used to determine transaction price are at the payer level, with pricing for each payer assessed based on the underlying similar characteristics. For any of our products sold to patients covered by private payers, such as commercial insurance companies, revenue is recognized upon shipment. A product is not shipped until we have received a prescription from a physician for our products and, as applicable, receipt of prior authorization from payers. At shipment, we invoice the payer for the total product price, and we recognize revenue in the amount of cash consideration anticipated to be received based on the transaction price. After the insurance payer has remitted payment, we separately invoice the patient for their portion of the payment obligation, such as copayments and deductibles. The transaction price is determined based on the payment history of the applicable payer drawn from actual write-off and collections experience from the payer over a rolling 12-month period, as well as historical patient collections. For our products sold to Medicare patients, we recognize revenues from such sales upon shipment of our products, which can occur only after we have received a prescription from a physician and all applicable patient documentation is obtained. The transaction price for our Actitouch and Entre systems is determined based on the payment history using the same methodology as our private insurers. A portion of our claims for our Flexitouch system are initially denied, and enter the appeals process, which can be lengthy. We assess the variable consideration for each of these claims as a percentage of the total invoice price based on ultimate approval and collection history. For our products sold to the Veterans Administration on behalf of the patient, our contract is with the Veterans Administration rather than the patient. We enter into individual sales contracts with the Veterans Administration on behalf of each patient. These contracts determine the amount of consideration, which is typically paid in full within 2-3 days of shipment, and therefore there is no implicit price concession. In addition, the contracts provide for the right of control to transfer to the Veterans Administration upon delivery of the product to the patient, at which time revenue is recognized. We incur incremental costs that directly relate to the sales of our products; however, as the amortization period would be less than one year, we have elected the practical expedient to expense these costs as incurred. We sell our products either directly to patients or the Veterans Administration on behalf of patients, who are referred to us by physicians, therapists or nurses. We bill private insurers and other payers, Medicare, and the Veterans Administration directly for purchase of our product on behalf of a patient and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance obligation. A portion of our revenues are derived from patients who obtain our products under multiple-month rental arrangements. We bill these patients’ insurance payers monthly over the duration of the rental term. Title to these products passes to the patients at the end of the rental period. Patients may return the product before the end of the rental period, and as such, these arrangements are deemed to be month-to-month cancelable leases in accordance with Accounting Standards Codification, or ASC 840, “Leases,” through December 31, 2018. Accordingly, we recognize the related revenue for these rental arrangements monthly, on a pro rata basis, over the lesser of the duration of the rental period or the period during which the patient possesses the product. Advertising Advertising costs are charged to operations when incurred. Advertising expense was $0.1 million for each of the years ended December 31, 2018, 2017, and 2016. Research and Development Costs We expense research and development costs as incurred, including expenses associated with clinical research studies and development. Shipping and Handling Costs We do not charge any shipping and handling costs to our customers. Shipping and handling costs incurred are included in cost of goods sold. Product Warranty We provide a warranty for our products against defects in material and workmanship for a period of one to five years on garments and one to two years on controllers. We record a liability for future warranty claims at the time of sale for the warranty period offered to a customer. If the assumptions used in calculating the provision were to materially change, resulting in more defects than anticipated, an additional provision may be required. Impairment of Long-Lived Assets We review long-lived assets, including property and equipment and patents, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. We will assess long-lived assets used in operations for impairment indicators, including when undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. As of December 31, 2018, indicators existed, including the calculation of an undiscounted cash flow in comparison to carrying amount, that indicated the patent-related intangible assets for our Actitouch system were impaired. The primary valuation technique used in estimating the fair value of patent intangible assets is a discounted cash flow approach. Specifically, we used a relief of royalty rate method which applies a royalty rate to estimated sales, with the resulting amounts then discounted using an appropriate market discount rate. The relief of royalty rate is the estimated royalty rate a market participant would pay to acquire the right to market/produce the product. If the resulting discounted cash flows are less than the book value of the intangible asset, impairment exists, and the asset value must be written down. Based on impairment testing performed in the fourth quarter of 2018, the Actitouch assets were deemed to be fully impaired. The impairment was due to an evaluation of projected future demand and sales volume in the context of results over the past three years, which resulted in the determination this product would be discontinued in the second half of 2019. As such, we wrote off $1.8 million of intangible assets book value, classified within the reimbursement, general and administrative line of the Consolidated Statements of Operations, as well as $0.7 million in inventory related assets, classified within the cost of goods sold line. Stock-Based Compensation The valuation of stock options involves the use of the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. The assumptions include the expected term of the option, the expected volatility of the price of our common stock, expected dividend yield and the risk-free interest rate. These estimates involve inherent uncertainties and the significant application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. We recognize compensation expense for these options on a straight-line basis over the requisite service period (see Note 14). Income Taxes Income taxes are accounted for under the liability method. Deferred income taxes are provided for temporary differences between the financial reporting and the tax bases of assets and liabilities. If we determine in the future that it is more likely than not that we will not realize all or a portion of the deferred tax assets, we will record a valuation allowance in the period the determination is made (see Note 16). Changes in tax rates are reflected in the tax provision as they occur. Net Income (Loss) per Share Attributable to Common Stockholders For the reporting periods prior to our initial public offering, we used the two-class method to compute net income (loss) per common share attributable to common stockholders because we had issued securities, other than common stock, that contractually entitled the holders to participate in our dividends and earnings prior to our initial public offering. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. All series of our convertible preferred stock were considered participating securities. Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. Recent Accounting Pronouncements Prior to December 31, 2018, we were an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In accordance with the JOBS Act, we elected to participate in the exemption and, as a result, our financial statements may not have been comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. As of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we no longer qualified as an emerging growth company as of December 31, 2018 and will no longer be able to take advantage of the extended transition period. Therefore, as of December 31, 2018, we are required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue from Contracts with Customers. ” The new standard replaces Section 605, “ Revenue Recognition ,” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The new standard is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, and enhanced disclosures related to disaggregated revenue information. We adopted this standard for our annual reporting period ended on December 31, 2018, and for interim reporting periods thereafter, due to the determination of our change in filing status. The adoption of this standard using the modified retrospective approach did not have a material or significant impact on our consolidated financial statements, and as such, no adjustment was required to the opening balance of retained earnings as of January 1, 2018. (See above in this Note 3 - Summary of Significant Accounting Policies and Note 15 - Revenue for additional information and disclosures.) In January 2016, the FASB issued ASU No. 2016-01, “ Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities, ” which requires entities to measure certain investments in equity securities at fair value and recognize any changes in fair value within the statement of operations. Under the standard, equity investments that do not have readily determinable fair values are eligible for a measurement alternative that allows for these investments to be recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The ASU is effective for us as of December 31, 2018 and interim periods thereafter. We have applied this ASU to our cost method investments as disclosed in Note 3. Summary of Significant Accounting Policies – Marketable Securities and Equity Investments . The adoption had no impact to the consolidated financial statements as of December 31, 2018. In February 2016, the FASB issued ASU No. 2016-02, “ Leases ” (Topic 842), which supersedes the existing guidance for lease accounting, “ Leases ” (Topic 840). ASU No. 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases that extend beyond one year. As a result of the change in our filing status, the amendments in this ASU will be effective for us for interim and annual periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented in the financial statements. In August 2018, the FASB issued ASU 2018-11, “ Targeted Improvements” to ASC 842, which includes an option to not restate comparative periods in transition and instead to elect to use the effective date of ASC 842, “Leases”, as the date of initial application of transition. Based on the effective date, this guidance will apply and we will adopt this ASU beginning on January 1, 2019, and we plan to elect the transition option provided under ASU 2018-11. We engaged an accounting firm to assist us with the related assessment and have completed the qualitative analysis from both the lessee and lessor perspectives. As part of our process, we elected to utilize certain practical expedients that were provided for transition relief. Accordingly, we are not reassessing expired or existing contracts, lease classifications or related initial direct costs as part of our assessment process. Additionally, we elected the practical expedient to treat lease and non-lease components of fixed payments due to the lessor as one, and therefore no separate allocation is required on the initial implementation date of January 1, 2019, and thereafter. We anticipate the adoption of this standard will result in an increase in our Right of Use assets and lease liabilities in the range of $2.5 to $3.5 million recorded on our Consolidated Balance Sheets on January 1, 2019. We anticipate the most significant impact to our Consolidated Statements of Operations will be related to our rental income, which was recognized as month-to-month, cancelable leases in accordance with ASC 840 through December 31, 2018 and will be recognized as a sales-type lease under ASC 842 thereafter. Rental sales agreements that commenced prior to December 31, 2018, will continue to be recognized as month-to-month, cancelable leases until they are completed, as we were not required to reassess the classification. Rental agreements commencing after January 1, 2019 will be recorded as sales-type leases with the associated revenue and cost of sales recognized on the lease commencement date, with a corresponding asset and liability recorded on the Consolidated Balance Sheet. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments — Credit Losses ,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for us for interim and annual periods beginning January 1, 2020. Therefore, we plan to further evaluate the anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments ,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows. The ASU is effective for us for annual periods beginning December 31, 2018, and interim periods thereafter. We evaluated the adoption of this ASU on our consolidated financial statements in the current year and noted no impact. In January 2017, the FASB issued ASU No. 2017-01 “ Business Combinations (Topic 805) — Clarifying the Definition of a Business ,” to revise the definition of a business and provide new guidance to assist in the evaluation of transactions as either asset acquisitions (disposals) or business acquisitions (disposals). We elected to early-adopt this standard on January 1, 2018, for interim transactions that have not previously been included in issued financial statements, which is permitted under this standard. The adoption of this standard did not have a material impact on our consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-07 “ Improvements to Non-employee Share-Based Payment Accounting ,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The ASU will be effective for us beginning January 1, 2019, including interim periods within that fiscal year. We do not anticipate any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU. |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions | |
Acquisitions | Note 4. Acquisitions On May 22, 2018, we acquired certain assets and the intellectual property of Wright Therapy Products, Inc. (“WTP”) for total consideration of approximately $875,000 plus a potential earn-out to be amortized on a straight-line basis over the life of the related asset. The earn-out is based on certain revenue metrics over the seven-month period beginning June 30, 2018, and will be capitalized to intangible assets if and when it is probable the earn-out will be achieved. As of December 31, 2018, the earn-out period had ended and the total amount accrued and capitalized as an intangible asset was $375,000. The assets include the rights to a portfolio of thirty-one issued and pending patents that includes intellectual property related to WTP’s pneumatic compression therapy devices and five related trademarks, as well as certain customer accounts. Due to the nature of these patents and related trademarks, as well as our planned use, they have been classified as defensive intangible assets on the balance sheet. The acquisition was recorded as an asset acquisition, and an allocation of the purchase price, based on relative fair value, has been completed as reflected below: Gross Weighted-Average (In thousands) Carrying Amount Amortization Period Defensive intangible assets $ 788 7 years Customer accounts 87 5 years Total $ 875 On October 15, 2018, we entered into a license agreement (the “License Agreement”) with Sun Scientific, Inc. (“Sun Scientific”), pursuant to which we licensed certain intellectual property of Sun Scientific, including related to its Aero-Wrap product, in the United States and Canada for use in all medical applications, including but not limited to swelling/edema and ulcers (including the lymphedema and chronic venous insufficiency conditions), but excluding the use of the intellectual property in the field of prophylaxis for deep vein thrombosis. Pursuant to the License Agreement, we paid Sun Scientific an initiation fee of $4.0 million. We have also agreed to pay Sun Scientific a royalty in a range of high single digits to low double digits as a percentage of the net sales of the products containing the licensed intellectual property and a contingent payment if the net sales of the Airwear wrap exceed $80.0 million within the first seven years of the term of the License Agreement. We have concluded as of December 31, 2018 that it is not probable the contingent payment threshold will be achieved, and it will be subsequently reassessed at each quarter-end. The contingent payment may be made, at our option, in cash or shares of our common stock The License Agreement will continue until the date of expiration of the last to expire or be invalidated of the licensed patents, subject to earlier termination under certain circumstances. The license rights to the patents are to be amortized on a straight-line basis over the life of the License Agreement. The License Agreement was recorded as an asset acquisition, and an allocation of the purchase price, based on relative fair value, has been completed as reflected below: Gross Weighted-Average (In thousands) Carrying Amount Amortization Period Patents $ 4,047 12 years |
Marketable Securities
Marketable Securities | 12 Months Ended |
Dec. 31, 2018 | |
Marketable Securities | |
Marketable Securities | Note 5. Marketable Securities Our investments in marketable securities, all of which have original contractual maturities of six to twenty-four months, are classified as available-for-sale and consist of the following: At December 31, 2018 Amortized Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 19,332 $ 5 $ 17 $ 19,320 Corporate debt securities and certificates of deposit 6,464 7 5 6,466 Marketable securities $ 25,796 $ 12 $ 22 $ 25,786 At December 31, 2017 Amortized Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 11,997 $ — $ 56 $ 11,941 Corporate debt securities and certificates of deposit 8,017 — 14 8,003 Marketable securities $ 20,014 $ — $ 70 $ 19,944 Net pre-tax unrealized losses for marketable securities of $22 thousand at December 31, 2018, were recorded as a component of accumulated other comprehensive loss in stockholders' equity. Marketable securities valued at $ 16.0 million were sold during the year ended December 31, 2018, at a loss of $1 thousand. Unrealized losses and fair value of securities available-for-sale aggregated by investment category and the length of time the securities were in a continuous loss position were as follows: At December 31, 2018 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 11,884 $ 11 $ 2,993 $ 6 $ 14,877 $ 17 Corporate debt securities and certificates of deposit 2,993 3 999 2 3,992 5 Marketable securities $ 14,877 $ 14 $ 3,992 $ 8 $ 18,869 $ 22 At December 31, 2017 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 5,974 $ 25 $ 5,967 $ 31 $ 11,941 $ 56 Corporate debt securities and certificates of deposit 7,005 13 998 1 8,003 14 Marketable securities $ 12,979 $ 38 $ 6,965 $ 32 $ 19,944 $ 70 |
Accounts Receivable, Net
Accounts Receivable, Net | 12 Months Ended |
Dec. 31, 2018 | |
Accounts Receivable, Net | |
Accounts Receivable, Net | Note 6. Accounts Receivable, Net Accounts receivable include amounts due from Medicare totaling $2.6 million and $3.5 million relating to Flexitouch system sales to patients as of December 31, 2018 and 2017, respectively, which are waiting for insurance approval. This estimated amount is the portion of the accounts receivable we expect to collect based on approval and collection history from Medicare. We classified $1.9 million and $2.7 million of this receivable as of December 31, 2018 and 2017, respectively, as non-current as we do not expect these claims will be paid within the next twelve months due to the anticipated timing of the appeals process. We had accounts receivable from two insurers representing approximately 29% and 11% of accounts receivable as of December 31, 2018. We had accounts receivable from two insurers representing approximately 32% and 15% of accounts receivable as of December 31, 2017. Revenues from these insurance companies accounted for 29% and 9% of our total revenues for the year ended December 31, 2018, and 31% and 8% for the year ended December 31, 2017. |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2018 | |
Inventories | |
Inventories | Note 7. Inventories Inventories consisted of the following: At December 31, (In thousands) 2018 2017 Finished goods $ 5,318 $ 4,267 Component parts and work-in-process 5,871 6,773 Total inventories $ 11,189 $ 11,040 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Property and Equipment | Note 8. Property and Equipment Property and equipment consisted of the following: At December 31, (In thousands) 2018 2017 Equipment $ 4,442 $ 3,235 Tooling 2,574 1,932 Furniture and fixtures 459 427 Demonstration equipment 632 460 Leasehold improvements 1,001 938 Patient rental equipment 1,342 1,131 Subtotal 10,450 8,123 Less: accumulated depreciation (5,640) (4,347) Property and equipment, net $ 4,810 $ 3,776 Depreciation expense was $3.3 million, $1.5 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets | |
Intangible Assets | Note 9. Intangible Assets Our patents and other intangible assets, all of which are subject to amortization, are summarized as follows: At December 31, Weighted- 2018 2017 Average Gross Gross Amortization Carrying Accumulated Net Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Amount Amortization Amount Patents 12 years $ 4,253 $ 71 $ 4,182 $ 3,536 $ 1,318 $ 2,218 Defensive intangible assets 6 years 1,126 82 1,044 — — — Customer accounts 4 years 125 12 113 — — — Total $ 5,504 $ 165 $ 5,339 $ 3,536 $ 1,318 $ 2,218 Amortization expense was $0 .4 million for the year ended December 31, 2018, and $0.3 million for each of the years ended December 31, 2017 and 2016. Future amortization expenses are expected as follows: (In thousands) 2019 $ 558 2020 558 2021 558 2022 558 2023 491 Thereafter 2,616 Total $ 5,339 The weighted-average remaining amortization period for these intangible assets was 7 years as of December 31, 2018. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Expenses | |
Accrued Expenses | Note 10. Accrued Expenses Accrued expenses consisted of the following: At December 31, (In thousands) 2018 2017 Warranty $ 841 $ 531 Travel and business 557 453 Acquisition earn-out 375 — Legal and consulting 319 317 Deferred rent 155 173 Accrued taxes 115 1,070 Clinical studies 60 15 Other 358 39 Total $ 2,780 $ 2,598 |
Warranty Reserves
Warranty Reserves | 12 Months Ended |
Dec. 31, 2018 | |
Warranty Reserves | |
Warranty Reserves | Note 11. Warranty Reserves The reserve for warranties was as follows: Year Ended December 31, (In thousands) 2018 2017 Beginning balance $ 1,672 $ 793 Warranty provision 1,720 1,487 Processed warranty claims (826) (608) Ending balance $ 2,566 $ 1,672 Accrued warranty reserve, current $ 841 $ 531 Accrued warranty reserve, long-term 1,725 1,141 Total accrued warranty reserve $ 2,566 $ 1,672 |
Credit Agreement
Credit Agreement | 12 Months Ended |
Dec. 31, 2018 | |
Credit Agreement | |
Credit Agreement | Note 12. Credit Agreement On August 3, 2018, we entered into a credit agreement with Wells Fargo Bank, National Association. On February 12, 2019, we entered into a first amendment to our credit agreement, which provided for an increase in our annual capital expenditure limitations. We refer to the credit agreement, as amended, as the “Credit Agreement.” The Credit Agreement provides for a $10,000,000 revolving credit facility. The revolving credit facility expires on August 3, 2021. Subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed an incremental $25,000,000 in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $35,000,000. Amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) LIBOR for an interest period of one month plus 1% (the “Base Rate”) plus an applicable margin or (b) LIBOR plus the applicable margin. The applicable margin is 0.40% to 1.15% on loans bearing interest at the Base Rate and 1.40% to 2.15% on loans bearing interest at LIBOR, in each case depending on our consolidated total leverage ratio. Undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.200% to 0.275%, depending on our consolidated total leverage ratio. As of December 31, 2018, we did not have any outstanding borrowings under the Credit Agreement. Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiaries’ assets and are also guaranteed by our subsidiaries. The Credit Agreement limits our ability to make capital expenditures during a fiscal year in excess of the amounts set forth in the Credit Agreement, which are $5.0 million for 2018, $15.0 million for 2019, $15.0 million for 2020 and $9.0 million for 2021. The Credit Agreement requires that we (i) not permit, as of the last day of each fiscal quarter, our consolidated total leverage ratio to exceed 3.00 to 1.00 and (ii) maintain minimum cash and cash equivalents, measured on the last day of each fiscal quarter, of not less than $7,500,000 (subject to a temporary reduction to $5,000,000 for the two fiscal quarters immediately following a permitted acquisition). As of December 31, 2018, we were in compliance with all financial covenants under the Credit Agreement. The Credit Agreement also contains certain other restrictions and covenants, which, among other things, restrict our ability to acquire or merge with another entity, dispose of our assets, make investments, loans or guarantees, incur additional indebtedness, create liens or other encumbrances, or pay dividends or make other distributions. Amounts due under the Credit Agreement may be accelerated upon an Event of Default (as defined in the Credit Agreement), such as breach of a representation, covenant or agreement of ours, defaults with respect to certain of our other material indebtedness or the occurrence of bankruptcy if not otherwise waived or cured. We may use the proceeds from advances under the revolving credit facility (i) to finance capital expenditures, (ii) to pay fees, commissions and expenses in connection with the Credit Agreement and (iii) for working capital and general corporate purposes. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | Note 13. Commitments and Contingencies Lease Obligations In March 2008, we entered into a non-cancelable operating lease agreement for building space for our corporate headquarters that provides for monthly rent, real estate taxes and operating expenses that was subsequently extended to July 31, 2021. We are looking to sub-lease this space for the remainder of our lease obligation due to our new headquarters lease described below. In July 2016, we entered into a non-cancelable operating lease agreement for building space to accommodate the relocation of our manufacturing, quality, and research and development functions. In December 2018, we entered into an amendment to obtain additional space within the existing building. The amended lease agreement extends through February 2024 and provides for monthly rent, real estate taxes and operating expenses. In October 2018, we entered into a non-cancelable office lease agreement for our new corporate headquarters space that provides for monthly rent, real estate taxes and operating expenses. The initial lease term is through February 2030, with an option to renew for two periods of five years each. Rent expense was $ 1.5 million, $1.1 million and $1.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. In July 2016, we entered into a fleet vehicle lease program for certain members of our field sales organization. We also have operating lease agreements for certain computer and office equipment that expire in 2021. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. Future base minimum lease payments for all lease obligations are expected to be as follows for the years ending December 31: Computer/Office Fleet Vehicle (In thousands) Buildings Equipment Program Total 2019 $ 1,434 $ 51 $ 179 $ 1,664 2020 2,496 34 — 2,530 2021 2,612 3 — 2,615 2022 2,347 — — 2,347 2023 2,348 — — 2,348 Thereafter 13,578 — — 13,578 Total $ 24,815 $ 88 $ 179 $ 25,082 Major Vendors We had purchases from two vendors that accounted for 46% of total purchases for the year ended December 31, 2018. We had purchases from three vendors that accounted for 40% of total purchases for the year ended December 31, 2017. Purchase Commitment We issued purchase orders in 2018 totaling $14.9 million for goods that we expect to receive between February and December of 2019. Retirement Plan We maintain a 401(k) retirement plan for our employees to which eligible employees can contribute a percentage of their pre-tax compensation. Discretionary contributions to the 401(k) plan totaled $0.2 million for each of the years ended December 31, 2018, 2017 and 2016. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' Equity | |
Stockholders' Equity | Note 14. Stockholders' Equity We completed an initial public offering of our common stock on August 2, 2016, in which we sold 4,120,000 shares of our common stock at a public offering price of $10.00 per share. Immediately prior to the completion of the initial public offering, all then-outstanding shares of our Series A and Series B preferred stock were converted into 5,924,453 shares of our common stock. Our Series A preferred stock converted to common stock at a ratio of 1-for-1.03 and our Series B preferred stock converted to common stock at a ratio of 1-for-1. In addition, immediately prior to the completion of the initial public offering, we issued 2,354,323 additional shares of our common stock that our Series A and Series B preferred stockholders were entitled to receive in connection with the conversion of the preferred stock, and we issued 956,842 shares of our common stock to pay accrued dividends on our Series B preferred stock. We also paid $8.2 million in cumulative accrued dividends to our Series A convertible preferred stockholders in connection with the initial public offering, including $0.1 million of dividends paid to the holders of the common restricted shares. Stock-Based Compensation Our 2016 Equity Incentive Plan (the “2016 Plan”) authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors. There were up to 4,800,000 shares of our common stock initially reserved for issuance pursuant to the 2016 Plan. The 2016 Plan provides that the number of shares reserved and available for issuance under the 2016 Plan will automatically increase annually on January 1 of each calendar year, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the lesser of: (a) 5% of the number of common shares of stock outstanding as of December 31 of the immediately preceding calendar year, or (b) 2,500,000 shares; provided, however, that our Board of Directors may determine that any annual increase be a lesser number. In addition, all awards granted under our 2007 Omnibus Stock Plan and our 2003 Stock Option Plan that were outstanding when the 2016 Plan became effective and that are forfeited, expire, are cancelled, are settled for cash or otherwise not issued, will become available for issuance under the 2016 Plan. Pursuant to the automatic increase feature of the 2016 Plan, 892,318 and 841,686 shares were added as available for issuance thereunder on January 1, 2018 and 2017, respectively. Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2019. As of December 31, 2018, 5,161,690 shares were available for future grant pursuant to the 2016 Plan. Upon adoption and approval of the 2016 Plan, all of our previous equity incentive compensation plans were terminated. However, existing awards under those plans continue to vest in accordance with the original vesting schedules and will expire at the end of their original terms. We recorded stock-based compensation expense of $ 8.0 million, $4.2 million and $1.9 million for the years ended December 31, 2018, 2017 and 2016, respectively. This expense was allocated as follows: Year Ended December 31, (In thousands) 2018 2017 2016 Cost of goods sold $ 160 $ 117 $ 112 Sales and marketing expenses 3,254 1,521 514 Research and development expenses 242 140 36 Reimbursement, general and administrative expenses 4,318 2,457 1,227 Total stock-based compensation expense $ 7,974 $ 4,235 $ 1,889 Total stock-based compensation expense includes a modification of share-based awards held by a former executive resulting in a charge of $1.0 million for the year ended December 31, 2018. At December 31, 2018, there was approximately $0.1 million of estimated total unrecognized pre-tax compensation expense related to this modification that is expected to be recognized on a straight-line basis over 0.2 years. Stock Options Stock options issued to participants other than non-employees vest over three or four years and typically have a contractual term of seven or ten years. Annually, stock options are granted to our non-employee directors on the date of the annual meeting of stockholders and vest in full on the earlier of one year after the date of grant or on the date of the next year’s annual meeting of stockholders. These options have a contractual term of seven years. Stock-based compensation expense included in our Consolidated Statements of Operations for stock options was $2.1 million, $1.0 million and $1.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. The total grant date fair value of options vested during the year was $1.5 million, $0.8 million and $0.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. At December 31, 2018, there was approximately $5.9 million of total unrecognized pre-tax stock option expense under our equity compensation plans, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.4 years. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. Annually, we make predictive assumptions regarding future stock price volatility, dividend yield, expected term and forfeiture rate. The dividend yield assumption is based on expected annual dividend yield on the grant date. To date, no dividend on common stock has been paid by us. Expected volatility was estimated using the average historical volatility of public companies of similar size and industry over the similar period as the expected term assumption used for our options. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group. We use the “simplified method” to determine the expected term of the stock option grants. We utilize this method because we do not have sufficient public company exercise data in which to make a reasonable estimate. The following table sets forth the estimated fair values of our stock options granted in each of the years indicated, and the assumptions on which the fair values were determined: 2018 2017 2016 Expected term 4 - 6 years 4 - 6 years 4 - 6 years Expected volatility 42.7 - 43.4% 43.5 - 45.9% Risk-free interest rate 2.6 - 3.1% 1.7 - 2.3% Expected dividend yield Fair value on the date of grant $12.46 - $29.07 $7.82 - $16.23 $3.48 - $7.16 Stock option activity for the three years ended December 31, 2018, is summarized 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, 2015 1,840,448 $ 1.18 5.8 years $ 18,573 Granted 305,236 $ 10.60 Exercised (253,138) $ 0.93 $ 2,447 Forfeited (36,247) $ 5.34 Balance at December 31, 2016 1,856,299 $ 2.69 5.5 years $ 25,467 Granted 345,995 $ 25.26 Exercised (657,916) $ 1.23 $ 15,927 Forfeited (56,658) $ 7.22 Balance at December 31, 2017 1,487,720 $ 8.41 6.2 years $ 29,611 Granted 203,614 $ 47.25 Exercised (553,375) $ 2.74 $ 25,393 Forfeited (61,424) $ 21.27 Balance at December 31, 2018 1,076,535 $ 17.94 6.5 years $ 31,172 Options exercisable at December 31, 2018 622,675 $ 6.75 5.2 years $ 24,161 (1) The exercise price of each option granted during the periods 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 998,269 at December 31, 2017, and 1,359,302 at December 31, 2016 had weighted average exercise prices of $2.45 and $1.06, respectively. The following summarizes additional information about our stock options: Year Ended Number of: 2018 2017 Non-vested options beginning of the year 489,451 496,997 Non-vested options end of the year 453,860 489,451 Vested options 622,675 315,082 Year Ended Weighted-average grant date fair value of: 2018 2017 Non-vested options beginning of the year $ 9.57 $ 2.99 Non-vested options end of the year 14.80 9.57 Vested options 2.84 2.45 Forfeited options 9.45 3.25 Time-Based Restricted Stock Unit s We have granted time-based restricted stock units to certain participants under the 2016 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2016 Plan vest over one to three years. Stock-based compensation expense included in our Consolidated Statements of Operations for time-based restricted stock units was $3.5 million, $2.5 million and $0.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, there was approximately $4.8 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 year ended December 31, 2018 was as follows: Weighted- Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2015 — $ — $ — Granted 327,454 $ 10.45 Vested (1,726) $ 17.29 Cancelled (865) $ 17.35 Balance at December 31, 2016 324,863 $ 10.39 $ 1,972 Granted 240,070 $ 22.28 Vested (87,539) $ 11.81 Cancelled (35,887) $ 15.17 Balance at December 31, 2017 441,507 $ 16.38 $ 12,795 Granted 103,417 $ 38.13 Vested (199,733) $ 15.53 Cancelled (35,559) $ 20.74 Balance at December 31, 2018 309,632 $ 23.69 $ 14,104 Deferred and unissued at December 31, 2018(2) 3,865 $ 32.88 $ 176 (1) The aggregate intrinsic value of time-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period. (2) For the year ended December 31, 2018, there were 1,652 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the director’s termination of service as a director of ours or the occurrence of a change of control of us. These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant. As of December 31, 2018, there were 3,865 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly director retainer payments. These restricted stock units are not included in the “Balance at December 31, 2018” line in the table above because they are fully vested. 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 will be earned if and to the extent performance goals based on revenue and adjusted EBITDA are achieved in 2019. The number of PSUs earned will depend on the level at which the performance targets are achieved, and can range from 50% of target if threshold performance is achieved and up to 150% of target if maximum performance is achieved. One-third of the earned PSUs will vest on the date the Compensation and Organization Committee certifies the number of PSUs earned, and the remaining two thirds of the earned PSUs will vest on the first anniversary of that certification date. All earned and vested PSUs will be settled in shares of common stock. Stock-based compensation expense included in our Consolidated Statements of Operations for PSUs was $0.7 million for the year ended December 31, 2018. As of December 31, 2018, 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 year ended December 31, 2018 was as follows: Performance- Weighted- Based Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2017 — $ — $ — Granted 70,680 $ 33.53 Vested — $ — Cancelled (5,253) $ 32.36 Balance at December 31, 2018 65,427 $ 33.62 $ 2,980 (1) The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period Employee Stock Purchase Plan Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016 and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The plan is available to all our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. The plan provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year. The initial purchase period began on July 27, 2016 and ended on May 15, 2017. A total of 1.6 million shares of common stock were initially reserved for issuance under the plan, and this share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (1) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (2) 500,000 shares or (3) such lesser amount as our Board of Directors may determine. Pursuant to the automatic increase feature of the plan, 178,463 shares were added to the ESPP on January 1, 2018. Our Board of Directors exercised its prerogative to forego the automatic increase on January 1, 2019. On May 15, 2017, 259,981 shares were purchased, utilizing $2.2 million of employee contributions in the initial purchase period. On November 15, 2017, 47,151 shares were purchased, utilizing $0.9 million of employee contributions in the May 16, 2017 to November 15, 2017 purchase period. On May 15, 2018, 63,578 shares were purchased under the ESPP, utilizing $1.4 million of employee contributions in the November 16, 2017 to May 15, 2018 purchase period. On November 15, 2018, 33,514 shares were purchased, utilizing $1.3 million of employee contributions in the May 16, 2018 to November 15, 2018 purchase period. As of December 31, 2018, 1,542,576 shares were available for future issuance under the ESPP. We recognized $0.7 million, $0.7 million and $0.4 million in stock-based compensation expense related to the ESPP for the years ended December 31, 2018, 2017 and 2016, respectively. |
Revenue
Revenue | 12 Months Ended |
Dec. 31, 2018 | |
Revenue | |
Revenue | Note 15. Revenue We derive our revenues from the sale and rental of our Flexitouch, Entre and Actitouch systems to our customers in the United States. While our primary source of revenue is from the sale of our products, our rental revenue represents $13.6 million, $10.1 million, and $7.9 million for the years ended December 31, 2018, 2017 and 2016, respectively, and is primarily derived from rentals of the Flexitouch system. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product: Year Ended December 31, (In thousands) 2018 2017 2016 Revenues Flexitouch system $ 131,935 $ 100,344 $ 73,413 Entre/Actitouch systems 11,816 8,939 11,129 Total $ 143,751 $ 109,283 $ 84,542 Year Ended December 31, 2018 2017 2016 Percentage of total revenues Flexitouch system 92 % 92 % 87 % Entre/Actitouch systems 8 % 8 % 13 % Total 100 % 100 % 100 % Rental revenue for the years ended December 31, 2018 and 2017 was primarily related to private insurers. For the year ended December 31, 2016, rental revenue was primarily related to private insurers and the Veterans Administration. Our revenues from third-party payers, inclusive of sales and rental revenue, for the years ended December 31, 2018, 2017 and 2016 are summarized in the following table: Year Ended December 31, (In thousands) 2018 2017 2016 Veterans Administration $ 28,043 $ 19,727 $ 12,259 Medicare 13,536 8,641 10,063 Private insurers and other payers 102,172 80,915 62,220 Total $ 143,751 $ 109,283 $ 84,542 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | Note 16. Income Taxes The provision (benefit) for income tax expense consisted of the following: Year Ended December 31, (In thousands) 2018 2017 2016 Current income taxes, Federal $ 2,416 $ (2,283) $ 1,809 Current income taxes, State 778 460 233 3,194 (1,823) 2,042 Deferred income taxes, Federal (4,804) 315 (435) Deferred income taxes, State (1,537) (157) (176) (6,341) 158 (611) Total (benefit) provision for income taxes $ (3,147) $ (1,665) $ 1,431 The components of our deferred tax assets and liabilities were as follows: At December 31, (In thousands) 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 4,038 $ 197 Accounts receivable and inventory reserves 1,729 846 Stock-based compensation 1,629 739 Accrued liabilities 946 71 Warranty reserves 634 410 Fixed assets 29 — Intangible assets — 515 Other 66 194 Total deferred tax assets $ 9,071 $ 2,972 Deferred tax liabilities: Depreciation (196) (310) Intangible assets (55) — Total deferred tax liabilities $ (251) $ (310) Net deferred tax assets $ 8,820 $ 2,662 A reconciliation of income tax expense to the statutory federal tax rate is as follows: Year Ended December 31, 2018 2017 2016 Tax expense at statutory rate 21.0 % 34.0 % 34.0 % State income taxes, net of federal benefit 11.9 (4.4) 3.3 Executive compensation 11.8 — — Meals and entertainment 7.6 6.3 5.4 Incentive stock options 1.9 (89.1) 2.7 Employee Stock Purchase Plan 4.5 (4.6) 3.0 Transaction costs — 3.8 — Return to provision 3.6 1.4 — IRS Exam 23.3 — — Deferred reprice - state (0.3) 1.9 (0.3) Deferred true-up — 0.5 (7.9) Deferred reprice - federal — 28.0 — Unrecognized tax benefits (4.6) 5.1 — Excess benefit on non-qualified stock options and RSUs (177.6) (22.8) (8.0) Interest and penalties 6.3 — — Other 0.1 0.2 1.0 Net effective rate (90.5) % (39.7) % 33.2 % A reconciliation of unrecognized tax benefits is as follows: December 31, (In thousands) 2018 2017 2016 Balance beginning of the year $ 212 $ — $ — Gross increases — tax positions in prior year 3,477 212 — Settlement (3,638) — — Balance end of the year $ 51 $ 212 $ — As of December 31, 2018, we had $14.8 million of U.S. federal net operating loss (“NOL”) carry-forwards and approximately $0.9 million of state NOLs. The state NOL carry-forward amounts expire beginning in tax years 2024 if not utilized. We are subject to income tax examinations in the U.S. federal jurisdiction as well as in various state jurisdictions. U.S. federal and state tax years prior to 2014 are closed to examination as of December 31, 2018. We are not currently under examination by any taxing authority. 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. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in our 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. The Internal Revenue Service (“IRS”) commenced an examination of our 2016 U.S. income tax return in the first quarter of 2018. The examination was effectively settled in the fourth quarter of 2018. Management agreed to adjustments proposed by the IRS related to our bonus compensation accrual and Medicare accounts receivable reserves. We have recognized $0.2 million in interest and penalties related to the audit in income tax expense. The gross increases to our unrecognized tax benefits (“UTB”) for the tax, interest, and penalties associated with the proposed adjustments as well as the ultimate settlement with the IRS is reflected within our tabular reconciliation of unrecognized tax benefits above. As of December 31, 2018, we had a UTB with respect to state income taxes of approximately $0.1 million that, if recognized, would affect the effective tax rate. We recognize interest and penalties related to unrecognized tax benefits in tax expense. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws effective for tax years beginning after December 31, 2017, including, but not limited to, the reduction of the U.S. federal corporate income tax rate to 21%. The Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides for a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. Our accounting for the Tax Act is complete, including the remeasurement of our deferred tax assets and liabilities using the reduced corporate federal income tax rate of 21%. 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 purposes including depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves. |
Net Income (Loss) Per Share Att
Net Income (Loss) Per Share Attributable to Common Stockholders | 12 Months Ended |
Dec. 31, 2018 | |
Net Income (Loss) Per Share Attributable to Common Stockholders | |
Net Income (Loss) Per Share Attributable to Common Stockholders | Note 17. Net Income (Loss) Per Share Attributable to Common Stockholders We adopted ASU 2016-09, “ Improvements to Employee Share-Based Payment Accounting ,” in the fourth quarter of 2016 on a retrospective basis, effective January 1, 2016. The following table sets forth the computation of our basic and diluted net income (loss) per share attributable to common stockholders and reflects the adoption of ASU 2016-09: Year Ended December 31, (In thousands, except share and per share data) 2018 2017 2016 Net income $ 6,623 $ 5,855 $ 1,632 Weighted-average shares outstanding 18,252,689 17,355,175 8,913,042 Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares 1,094,943 1,522,688 1,845,642 Weighted-average shares used to compute diluted net income per share 19,347,632 18,877,863 10,758,684 Net income per share - Basic $ 0.36 $ 0.34 $ 0.18 Net income per share - Diluted $ 0.34 $ 0.31 $ 0.15 The following common stock equivalents were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been anti-dilutive: Year Ended December 31, 2018 2017 2016 Restricted stock units 16,283 1,184 — Common stock options 111,565 63,066 1,840,447 Common stock warrants — — 5,800 Employee stock purchase plan — — — Total 127,848 64,250 7,641,204 |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | Note 18. Fair Value Measurements We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our cash equivalents and marketable securities as of December 31, 2018, and December 31, 2017, according to the three-level fair value hierarchy: At December 31, 2018 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 2,447 $ — $ — $ 2,447 U.S. government and agency obligations 16,326 2,994 — 19,320 Corporate debt securities — 6,466 — 6,466 Total $ 18,773 $ 9,460 $ — $ 28,233 At December 31, 2017 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 9,212 $ — $ — $ 9,212 U.S. government and agency obligations 1,000 10,941 — 11,941 Corporate debt securities — 8,003 — 8,003 Total $ 10,212 $ 18,944 $ — $ 29,156 During the year ended December 31, 2018, there were no transfers within the three-level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed, which merits a transfer between the disclosed levels of the valuation hierarchy. The fair values for our currency, money market mutual funds, U.S. government and agency obligations and corporate debt securities are determined based on valuations provided by external investment managers who obtain them from a variety of industry standard data providers. The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, accrued expenses and other liabilities approximate their related fair values due to the short-term maturities of these items. Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. As of December 31, 2018, we re-measured the value of our intangible assets related to the Actitouch product line to their fair value, which was deemed to be $0 using level 3 measurements. We had no re-measurements of non-financial assets to fair value in the years ended December 31, 2017. |
Quarterly Financial Information
Quarterly Financial Information (Unaudited) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Financial Information (Unaudited) | |
Quarterly Financial Information (Unaudited) | Note 19. Quarterly Financial Information (Unaudited) The quarterly financial data presented below should be read in conjunction with the consolidated financial statements and related notes: Three Months Ended Mar. 31, Jun. 30, Sep. 30, Dec. 31, (In thousands, except per share data) 2018 2018 2018 2018 Revenues $ 26,848 $ 34,133 $ 36,322 $ 46,448 Gross profit 19,539 24,523 26,181 32,015 (Loss) income from operations (1,827) 1,311 1,370 2,136 Net (loss) income (50) 2,572 1,746 2,355 Net income per share - Basic (1) 0.00 0.14 0.10 0.13 Net income per share - Diluted (1) 0.00 0.13 0.09 0.12 Three Months Ended Mar. 31, Jun. 30, Sep. 30, Dec. 31, (In thousands, except per share data) 2017 2017 2017 2017 Revenues $ 19,850 $ 26,264 $ 28,283 $ 34,886 Gross profit 14,226 19,230 20,755 26,057 (Loss) income from operations (2,932) 730 1,258 4,927 Net (loss) income (1,504) 3,787 1,342 2,230 Net (loss) income per share - Basic (1) (0.09) 0.22 0.08 0.13 Net (loss) income per share - Diluted (1) (0.09) 0.20 0.07 0.12 (1) The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation Our accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. We have reclassified certain prior year amounts to conform to the current year’s presentation. The results for the year ended December 31, 2018, are not necessarily indicative of results to be expected for any future year. |
Principles of Consolidation | Principles of Consolidation Our accompanying consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiary, Swelling Solutions, Inc. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Comprehensive Income | Comprehensive Income Comprehensive income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Our comprehensive income represents net income adjusted for unrealized gains and losses on available-for-sale marketable securities. |
JOBS Act Accounting Election | JOBS Act Accounting Election Prior to December 31, 2018, we were an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and as a result we were eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We elected to take advantage of the extended transition period for adopting new or revised accounting standards that have different effective dates for public and private companies until such time as those standards apply to private companies. However, as of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we no longer qualify as an emerging growth company as of December 31, 2018. Therefore we no longer are able to take advantage of the extended transition period for adopting new or revised accounting standards. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents consist of all cash on hand, deposits and funds invested in available-for-sale securities with original maturities of three months or less at the time of purchase. At December 31, 2018 and 2017, our cash was held primarily in checking and money market accounts. |
Marketable Securities and Equity Investments | Marketable Securities and Equity Investments We determine the appropriate classification of our marketable securities as available-for-sale or held-to-maturity at the time of purchase and periodically reevaluate such classification. Debt securities are classified as held - to - maturity when we have the positive intent and ability to hold the securities to maturity. Debt securities for which we do not have the intent or ability to hold to maturity are classified as available-for-sale. Debt securities not classified as held-to-maturity are classified as available-for-sale and are reported at fair value, with unrealized gains and losses included in the determination of comprehensive income, a component of stockholders' equity. We review our available-for-sale securities for impairment to determine if the impairment is temporary or other-than-temporary. A temporary impairment charge results in an unrealized loss being recorded in other comprehensive income. Other-than-temporary impairments are recorded in net income in the period the impairment is determined to be other-than-temporary . Realized gains and losses on the sale of marketable securities are determined using the specific-identification method. Equity investments (including equity securities) with readily determinable fair value are reported at fair value, with unrealized gains and losses included in the determination of net income. For equity investments with no readily determinable fair value, we measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new indicator of fair value, as an example. As of December 31, 2018 and 2017, the total carrying value of our equity investments, with no readily determinable fair value, were $0.65 million and $0.15 million, respectively, and are included in other non-current assets on our consolidated balance sheets. On an annual basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are impaired and also monitor for any observable price changes. During the years ended December 31, 2018 and 2017, we did not have any impairment loss on these investments. |
Accounts Receivable, Net | Accounts Receivable, Net The majority of our accounts receivable and revenues are from commercial insurance payers and government payers, such as Medicare, the Veterans Administration and Medicaid. Accounts receivable are recorded based on management’s assessment of the expected consideration to be received, based on a detailed review of historical pricing adjustments and collections. Management relies on the results of the assessment, which includes payment history of the applicable payer as well as historical patient collections, as a primary source of information in estimating the collectability of our accounts receivable. We update our assessment on a quarterly basis, which to date has not resulted in any material adjustments to the valuation of our accounts receivable. We believe the assessment provides reasonable estimates of our accounts receivable valuation, and therefore we believe that substantially all accounts receivable are fully collectible. As such, effective December 31, 2018, management has reclassified certain related accounts which impacted the presentation of accounts receivable on the Consolidated Statements of Cash Flows. We have reclassified prior year amounts to conform with the current year presentation. As a result of this reclassification, the reserves for uncollectible schedule, previously disclosed in the Summary of Significant Accounting Policies, is no longer included in the Notes to the Consolidated Financial Statements. A portion of our claims to Medicare are initially denied and enter the appeals process, where many are ultimately reviewed by an Administrative Law Judge. After final adjudication of all claims, approximately 90% of the claims submitted are approved (this is on a number of claims, not a dollars claimed, basis across all our products). The appeals process can be lengthy, lasting more than a year in most cases. Accordingly, we classify a portion of our Medicare accounts receivable as non-current based on our experience with Medicare collections. |
Inventories | Inventories Inventories are valued at the lower of cost (first-in, first-out method) or net realizable value. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of three to seven years. Leasehold improvements are depreciated over the remaining life of the respective building lease agreement. Patient rental equipment is depreciated over the multiple month rental period. Major expenditures for property and equipment are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and the resulting gains or losses are included in income. The value of equipment for patients who obtain our products through a multiple month rental arrangement is capitalized and depreciated over the term of the rental period, after which time title to this equipment passes to the patient. The value of demonstration equipment in the possession of our field sales representatives is capitalized and depreciated over the estimated useful life of the equipment. |
Revenue Recognition | Revenue Recognition We derive revenue from the sales and rentals of our products, which consist of our proprietary line of Flexitouch, Entre and Actitouch systems. We recognize revenue when control of the product has been transferred to our customer, in the amount of the expected consideration to be received for the product. In general, revenue from the sale of a product is recognized upon shipment, unless circumstances dictate that control has not yet passed to the customer. We provide a warranty for our products against defects in material and workmanship for a period of one to five years on garments and one to two years on controllers. In accordance with applicable accounting guidance, we have determined these were assurance warranties and therefore not considered a performance obligation. In addition, we did not evaluate immaterial promised goods or services in the context of the contract. As a result, the sales of our products represent a single performance obligation that is satisfied at a point in time and is short-term in nature. In certain cases we receive payment from Medicare sales over a period of time that may exceed one year. Despite these extended payment terms, no significant financing component is deemed to exist as the terms are not for the benefit of the patient with whom we have the contract. Rather, the extended payment terms occur as a result of an initial claim denial, which subsequently enters the Medicare appeals process as noted below. We distribute our products directly to patients who are referred to us by physicians, therapists or nurses. In most cases, there is a third-party payer, such as a commercial insurer, Medicare or the Veterans Administration involved with the transaction. Our contractual relationship resides with the patient when the third-party payer is either a commercial insurer or Medicare and with the Veterans Administration if the patient is covered under their services. Revenue is recognized from such sales upon transfer of control of the product to the customer at a transaction price determined by collection history. As a result, the transaction price is impacted by multiple factors, including the terms and conditions contracted by various third-party payers, and therefore payments from third-party payers typically are less than our standard charge and represent an implicit price concession, resulting in variable consideration. As most contracts are with each individual sale to a patient, we have elected the portfolio approach to determine the transaction price, and ultimately the expected consideration. The portfolios used to determine transaction price are at the payer level, with pricing for each payer assessed based on the underlying similar characteristics. For any of our products sold to patients covered by private payers, such as commercial insurance companies, revenue is recognized upon shipment. A product is not shipped until we have received a prescription from a physician for our products and, as applicable, receipt of prior authorization from payers. At shipment, we invoice the payer for the total product price, and we recognize revenue in the amount of cash consideration anticipated to be received based on the transaction price. After the insurance payer has remitted payment, we separately invoice the patient for their portion of the payment obligation, such as copayments and deductibles. The transaction price is determined based on the payment history of the applicable payer drawn from actual write-off and collections experience from the payer over a rolling 12-month period, as well as historical patient collections. For our products sold to Medicare patients, we recognize revenues from such sales upon shipment of our products, which can occur only after we have received a prescription from a physician and all applicable patient documentation is obtained. The transaction price for our Actitouch and Entre systems is determined based on the payment history using the same methodology as our private insurers. A portion of our claims for our Flexitouch system are initially denied, and enter the appeals process, which can be lengthy. We assess the variable consideration for each of these claims as a percentage of the total invoice price based on ultimate approval and collection history. For our products sold to the Veterans Administration on behalf of the patient, our contract is with the Veterans Administration rather than the patient. We enter into individual sales contracts with the Veterans Administration on behalf of each patient. These contracts determine the amount of consideration, which is typically paid in full within 2-3 days of shipment, and therefore there is no implicit price concession. In addition, the contracts provide for the right of control to transfer to the Veterans Administration upon delivery of the product to the patient, at which time revenue is recognized. We incur incremental costs that directly relate to the sales of our products; however, as the amortization period would be less than one year, we have elected the practical expedient to expense these costs as incurred. We sell our products either directly to patients or the Veterans Administration on behalf of patients, who are referred to us by physicians, therapists or nurses. We bill private insurers and other payers, Medicare, and the Veterans Administration directly for purchase of our product on behalf of a patient and bill patients directly for their cost-sharing amounts, including any portion of an unsatisfied deductible and any copayments or co-insurance obligation. A portion of our revenues are derived from patients who obtain our products under multiple-month rental arrangements. We bill these patients’ insurance payers monthly over the duration of the rental term. Title to these products passes to the patients at the end of the rental period. Patients may return the product before the end of the rental period, and as such, these arrangements are deemed to be month-to-month cancelable leases in accordance with Accounting Standards Codification, or ASC 840, “Leases,” through December 31, 2018. Accordingly, we recognize the related revenue for these rental arrangements monthly, on a pro rata basis, over the lesser of the duration of the rental period or the period during which the patient possesses the product. |
Advertising | Advertising Advertising costs are charged to operations when incurred. Advertising expense was $0.1 million for each of the years ended December 31, 2018, 2017, and 2016. |
Research and Development Costs | Research and Development Costs We expense research and development costs as incurred, including expenses associated with clinical research studies and development. |
Shipping and Handling Costs | Shipping and Handling Costs We do not charge any shipping and handling costs to our customers. Shipping and handling costs incurred are included in cost of goods sold. |
Product Warranty | Product Warranty We provide a warranty for our products against defects in material and workmanship for a period of one to five years on garments and one to two years on controllers. We record a liability for future warranty claims at the time of sale for the warranty period offered to a customer. If the assumptions used in calculating the provision were to materially change, resulting in more defects than anticipated, an additional provision may be required. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets We review long-lived assets, including property and equipment and patents, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. We will assess long-lived assets used in operations for impairment indicators, including when undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. As of December 31, 2018, indicators existed, including the calculation of an undiscounted cash flow in comparison to carrying amount, that indicated the patent-related intangible assets for our Actitouch system were impaired. The primary valuation technique used in estimating the fair value of patent intangible assets is a discounted cash flow approach. Specifically, we used a relief of royalty rate method which applies a royalty rate to estimated sales, with the resulting amounts then discounted using an appropriate market discount rate. The relief of royalty rate is the estimated royalty rate a market participant would pay to acquire the right to market/produce the product. If the resulting discounted cash flows are less than the book value of the intangible asset, impairment exists, and the asset value must be written down. Based on impairment testing performed in the fourth quarter of 2018, the Actitouch assets were deemed to be fully impaired. The impairment was due to an evaluation of projected future demand and sales volume in the context of results over the past three years, which resulted in the determination this product would be discontinued in the second half of 2019. As such, we wrote off $1.8 million of intangible assets book value, classified within the reimbursement, general and administrative line of the Consolidated Statements of Operations, as well as $0.7 million in inventory related assets, classified within the cost of goods sold line. |
Stock-Based Compensation | Stock-Based Compensation The valuation of stock options involves the use of the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. The assumptions include the expected term of the option, the expected volatility of the price of our common stock, expected dividend yield and the risk-free interest rate. These estimates involve inherent uncertainties and the significant application of management’s judgment. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. We recognize compensation expense for these options on a straight-line basis over the requisite service period (see Note 14). |
Income Taxes | Income Taxes Income taxes are accounted for under the liability method. Deferred income taxes are provided for temporary differences between the financial reporting and the tax bases of assets and liabilities. If we determine in the future that it is more likely than not that we will not realize all or a portion of the deferred tax assets, we will record a valuation allowance in the period the determination is made (see Note 16). Changes in tax rates are reflected in the tax provision as they occur. |
Net Income (Loss) per Share Attributable to Common Stockholders | Net Income (Loss) per Share Attributable to Common Stockholders For the reporting periods prior to our initial public offering, we used the two-class method to compute net income (loss) per common share attributable to common stockholders because we had issued securities, other than common stock, that contractually entitled the holders to participate in our dividends and earnings prior to our initial public offering. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings. All series of our convertible preferred stock were considered participating securities. Under the two-class method, for periods with net income, basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock and dilutive potential shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current year earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the year’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Prior to December 31, 2018, we were an “emerging growth company” as defined by the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, (the “Securities Act”), for complying with new or revised accounting standards. In other words, an emerging growth company can selectively delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. In accordance with the JOBS Act, we elected to participate in the exemption and, as a result, our financial statements may not have been comparable to the financial statements of issuers that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies. As of the last business day of our second fiscal quarter of 2018, the market value of our common stock that was held by non-affiliates exceeded $700 million, and as a result, we no longer qualified as an emerging growth company as of December 31, 2018 and will no longer be able to take advantage of the extended transition period. Therefore, as of December 31, 2018, we are required to adopt new or revised accounting standards when they are applicable to public companies that are not emerging growth companies. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “ Revenue from Contracts with Customers. ” The new standard replaces Section 605, “ Revenue Recognition ,” and creates modifications to various other revenue accounting standards for specialized transactions and industries. The new standard is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, and enhanced disclosures related to disaggregated revenue information. We adopted this standard for our annual reporting period ended on December 31, 2018, and for interim reporting periods thereafter, due to the determination of our change in filing status. The adoption of this standard using the modified retrospective approach did not have a material or significant impact on our consolidated financial statements, and as such, no adjustment was required to the opening balance of retained earnings as of January 1, 2018. (See above in this Note 3 - Summary of Significant Accounting Policies and Note 15 - Revenue for additional information and disclosures.) In January 2016, the FASB issued ASU No. 2016-01, “ Financial Instruments – Recognition and Measurement of Financial Assets and Financial Liabilities, ” which requires entities to measure certain investments in equity securities at fair value and recognize any changes in fair value within the statement of operations. Under the standard, equity investments that do not have readily determinable fair values are eligible for a measurement alternative that allows for these investments to be recorded at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The ASU is effective for us as of December 31, 2018 and interim periods thereafter. We have applied this ASU to our cost method investments as disclosed in Note 3. Summary of Significant Accounting Policies – Marketable Securities and Equity Investments . The adoption had no impact to the consolidated financial statements as of December 31, 2018. In February 2016, the FASB issued ASU No. 2016-02, “ Leases ” (Topic 842), which supersedes the existing guidance for lease accounting, “ Leases ” (Topic 840). ASU No. 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases that extend beyond one year. As a result of the change in our filing status, the amendments in this ASU will be effective for us for interim and annual periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented in the financial statements. In August 2018, the FASB issued ASU 2018-11, “ Targeted Improvements” to ASC 842, which includes an option to not restate comparative periods in transition and instead to elect to use the effective date of ASC 842, “Leases”, as the date of initial application of transition. Based on the effective date, this guidance will apply and we will adopt this ASU beginning on January 1, 2019, and we plan to elect the transition option provided under ASU 2018-11. We engaged an accounting firm to assist us with the related assessment and have completed the qualitative analysis from both the lessee and lessor perspectives. As part of our process, we elected to utilize certain practical expedients that were provided for transition relief. Accordingly, we are not reassessing expired or existing contracts, lease classifications or related initial direct costs as part of our assessment process. Additionally, we elected the practical expedient to treat lease and non-lease components of fixed payments due to the lessor as one, and therefore no separate allocation is required on the initial implementation date of January 1, 2019, and thereafter. We anticipate the adoption of this standard will result in an increase in our Right of Use assets and lease liabilities in the range of $2.5 to $3.5 million recorded on our Consolidated Balance Sheets on January 1, 2019. We anticipate the most significant impact to our Consolidated Statements of Operations will be related to our rental income, which was recognized as month-to-month, cancelable leases in accordance with ASC 840 through December 31, 2018 and will be recognized as a sales-type lease under ASC 842 thereafter. Rental sales agreements that commenced prior to December 31, 2018, will continue to be recognized as month-to-month, cancelable leases until they are completed, as we were not required to reassess the classification. Rental agreements commencing after January 1, 2019 will be recorded as sales-type leases with the associated revenue and cost of sales recognized on the lease commencement date, with a corresponding asset and liability recorded on the Consolidated Balance Sheet. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments — Credit Losses ,” to require the measurement of expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable forecasts. The ASU will be effective for us for interim and annual periods beginning January 1, 2020. Therefore, we plan to further evaluate the anticipated impact of the adoption of this ASU on our consolidated financial statements in future periods. In August 2016, the FASB issued ASU No. 2016-15, “ Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments ,” to provide clarity on how certain cash receipt and cash payment transactions are presented and classified within the statement of cash flows. The ASU is effective for us for annual periods beginning December 31, 2018, and interim periods thereafter. We evaluated the adoption of this ASU on our consolidated financial statements in the current year and noted no impact. In January 2017, the FASB issued ASU No. 2017-01 “ Business Combinations (Topic 805) — Clarifying the Definition of a Business ,” to revise the definition of a business and provide new guidance to assist in the evaluation of transactions as either asset acquisitions (disposals) or business acquisitions (disposals). We elected to early-adopt this standard on January 1, 2018, for interim transactions that have not previously been included in issued financial statements, which is permitted under this standard. The adoption of this standard did not have a material impact on our consolidated financial statements. In July 2018, the FASB issued ASU No. 2018-07 “ Improvements to Non-employee Share-Based Payment Accounting ,” which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. The ASU will be effective for us beginning January 1, 2019, including interim periods within that fiscal year. We do not anticipate any material impact on our consolidated financial statements in future periods as a result of the adoption of this ASU. |
Acquisition (Tables)
Acquisition (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Certain Assets and Intellectual Property of WTP | |
Acquisitions | |
Schedule of allocation of the purchase price at acquisition date fair value | Gross Weighted-Average (In thousands) Carrying Amount Amortization Period Defensive intangible assets $ 788 7 years Customer accounts 87 5 years Total $ 875 |
Sun Scientific | |
Acquisitions | |
Schedule of allocation of the purchase price at acquisition date fair value | Gross Weighted-Average (In thousands) Carrying Amount Amortization Period Patents $ 4,047 12 years |
Marketable Securities (Tables)
Marketable Securities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Marketable Securities | |
Schedule of marketable securities | At December 31, 2018 Amortized Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 19,332 $ 5 $ 17 $ 19,320 Corporate debt securities and certificates of deposit 6,464 7 5 6,466 Marketable securities $ 25,796 $ 12 $ 22 $ 25,786 At December 31, 2017 Amortized Unrealized Fair (In thousands) Cost Gains Losses Value U.S. government and agency obligations $ 11,997 $ — $ 56 $ 11,941 Corporate debt securities and certificates of deposit 8,017 — 14 8,003 Marketable securities $ 20,014 $ — $ 70 $ 19,944 |
Schedule of unrealized losses on investment | At December 31, 2018 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 11,884 $ 11 $ 2,993 $ 6 $ 14,877 $ 17 Corporate debt securities and certificates of deposit 2,993 3 999 2 3,992 5 Marketable securities $ 14,877 $ 14 $ 3,992 $ 8 $ 18,869 $ 22 At December 31, 2017 Less than 12 months 12 months or more Total Fair Unrealized Fair Unrealized Fair Unrealized (In thousands) Value Losses Value Losses Value Losses U.S. government and agency obligations $ 5,974 $ 25 $ 5,967 $ 31 $ 11,941 $ 56 Corporate debt securities and certificates of deposit 7,005 13 998 1 8,003 14 Marketable securities $ 12,979 $ 38 $ 6,965 $ 32 $ 19,944 $ 70 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventories | |
Schedule of inventories | At December 31, (In thousands) 2018 2017 Finished goods $ 5,318 $ 4,267 Component parts and work-in-process 5,871 6,773 Total inventories $ 11,189 $ 11,040 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Schedule of components of property and equipment | At December 31, (In thousands) 2018 2017 Equipment $ 4,442 $ 3,235 Tooling 2,574 1,932 Furniture and fixtures 459 427 Demonstration equipment 632 460 Leasehold improvements 1,001 938 Patient rental equipment 1,342 1,131 Subtotal 10,450 8,123 Less: accumulated depreciation (5,640) (4,347) Property and equipment, net $ 4,810 $ 3,776 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets | |
Schedule of finite lived intangible assets | At December 31, Weighted- 2018 2017 Average Gross Gross Amortization Carrying Accumulated Net Carrying Accumulated Net (In thousands) Period Amount Amortization Amount Amount Amortization Amount Patents 12 years $ 4,253 $ 71 $ 4,182 $ 3,536 $ 1,318 $ 2,218 Defensive intangible assets 6 years 1,126 82 1,044 — — — Customer accounts 4 years 125 12 113 — — — Total $ 5,504 $ 165 $ 5,339 $ 3,536 $ 1,318 $ 2,218 |
Schedule of future amortization expense | (In thousands) 2019 $ 558 2020 558 2021 558 2022 558 2023 491 Thereafter 2,616 Total $ 5,339 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Expenses | |
Schedule of Accrued Expenses | At December 31, (In thousands) 2018 2017 Warranty $ 841 $ 531 Travel and business 557 453 Acquisition earn-out 375 — Legal and consulting 319 317 Deferred rent 155 173 Accrued taxes 115 1,070 Clinical studies 60 15 Other 358 39 Total $ 2,780 $ 2,598 |
Warranty Reserves (Tables)
Warranty Reserves (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Warranty Reserves | |
Schedule of warranty reserves | Year Ended December 31, (In thousands) 2018 2017 Beginning balance $ 1,672 $ 793 Warranty provision 1,720 1,487 Processed warranty claims (826) (608) Ending balance $ 2,566 $ 1,672 Accrued warranty reserve, current $ 841 $ 531 Accrued warranty reserve, long-term 1,725 1,141 Total accrued warranty reserve $ 2,566 $ 1,672 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies | |
Schedule of future minimum lease payments | Future base minimum lease payments for all lease obligations are expected to be as follows for the years ending December 31: Computer/Office Fleet Vehicle (In thousands) Buildings Equipment Program Total 2019 $ 1,434 $ 51 $ 179 $ 1,664 2020 2,496 34 — 2,530 2021 2,612 3 — 2,615 2022 2,347 — — 2,347 2023 2,348 — — 2,348 Thereafter 13,578 — — 13,578 Total $ 24,815 $ 88 $ 179 $ 25,082 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Schedule of allocation of stock-based compensation expense | Year Ended December 31, (In thousands) 2018 2017 2016 Cost of goods sold $ 160 $ 117 $ 112 Sales and marketing expenses 3,254 1,521 514 Research and development expenses 242 140 36 Reimbursement, general and administrative expenses 4,318 2,457 1,227 Total stock-based compensation expense $ 7,974 $ 4,235 $ 1,889 |
Schedule of estimated fair values and assumptions for stock options granted | 2018 2017 2016 Expected term 4 - 6 years 4 - 6 years 4 - 6 years Expected volatility 42.7 - 43.4% 43.5 - 45.9% Risk-free interest rate 2.6 - 3.1% 1.7 - 2.3% Expected dividend yield Fair value on the date of grant $12.46 - $29.07 $7.82 - $16.23 $3.48 - $7.16 |
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, 2015 1,840,448 $ 1.18 5.8 years $ 18,573 Granted 305,236 $ 10.60 Exercised (253,138) $ 0.93 $ 2,447 Forfeited (36,247) $ 5.34 Balance at December 31, 2016 1,856,299 $ 2.69 5.5 years $ 25,467 Granted 345,995 $ 25.26 Exercised (657,916) $ 1.23 $ 15,927 Forfeited (56,658) $ 7.22 Balance at December 31, 2017 1,487,720 $ 8.41 6.2 years $ 29,611 Granted 203,614 $ 47.25 Exercised (553,375) $ 2.74 $ 25,393 Forfeited (61,424) $ 21.27 Balance at December 31, 2018 1,076,535 $ 17.94 6.5 years $ 31,172 Options exercisable at December 31, 2018 622,675 $ 6.75 5.2 years $ 24,161 (1) The exercise price of each option granted during the periods 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. |
Schedule of Nonvested Share Activity | Year Ended Number of: 2018 2017 Non-vested options beginning of the year 489,451 496,997 Non-vested options end of the year 453,860 489,451 Vested options 622,675 315,082 Year Ended Weighted-average grant date fair value of: 2018 2017 Non-vested options beginning of the year $ 9.57 $ 2.99 Non-vested options end of the year 14.80 9.57 Vested options 2.84 2.45 Forfeited options 9.45 3.25 |
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, 2015 — $ — $ — Granted 327,454 $ 10.45 Vested (1,726) $ 17.29 Cancelled (865) $ 17.35 Balance at December 31, 2016 324,863 $ 10.39 $ 1,972 Granted 240,070 $ 22.28 Vested (87,539) $ 11.81 Cancelled (35,887) $ 15.17 Balance at December 31, 2017 441,507 $ 16.38 $ 12,795 Granted 103,417 $ 38.13 Vested (199,733) $ 15.53 Cancelled (35,559) $ 20.74 Balance at December 31, 2018 309,632 $ 23.69 $ 14,104 Deferred and unissued at December 31, 2018(2) 3,865 $ 32.88 $ 176 (1) The aggregate intrinsic value of time-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period. (2) For the year ended December 31, 2018, there were 1,652 restricted stock units granted to non-employee directors in lieu of their quarterly cash retainer payments. These restricted stock units were fully vested upon grant and represent the right to receive one share of common stock, per unit, upon the earlier of the director’s termination of service as a director of ours or the occurrence of a change of control of us. These restricted stock units are included in the “Granted” line in the table above and are also included in the “Vested” line in the table above due to their being fully vested upon grant. As of December 31, 2018, there were 3,865 outstanding restricted stock units that had been previously granted to non-employee directors in lieu of their quarterly director retainer payments. These restricted stock units are not included in the “Balance at December 31, 2018” line in the table above because they are fully vested. |
Performance-based stock-settled restricted stock units | |
Schedule of stock-settled restricted stock unit activity | Performance- Weighted- Based Average Grant Aggregate Units Date Fair Value Intrinsic (In thousands except unit and per unit data) Outstanding Per Unit Value (1) Balance at December 31, 2017 — $ — $ — Granted 70,680 $ 33.53 Vested — $ — Cancelled (5,253) $ 32.36 Balance at December 31, 2018 65,427 $ 33.62 $ 2,980 (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) | 12 Months Ended |
Dec. 31, 2018 | |
Revenue | |
Summary of revenue disaggregated by product | Year Ended December 31, (In thousands) 2018 2017 2016 Revenues Flexitouch system $ 131,935 $ 100,344 $ 73,413 Entre/Actitouch systems 11,816 8,939 11,129 Total $ 143,751 $ 109,283 $ 84,542 Year Ended December 31, 2018 2017 2016 Percentage of total revenues Flexitouch system 92 % 92 % 87 % Entre/Actitouch systems 8 % 8 % 13 % Total 100 % 100 % 100 % |
Summary of revenues from third-party payers | Year Ended December 31, (In thousands) 2018 2017 2016 Veterans Administration $ 28,043 $ 19,727 $ 12,259 Medicare 13,536 8,641 10,063 Private insurers and other payers 102,172 80,915 62,220 Total $ 143,751 $ 109,283 $ 84,542 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Schedule of provision (benefit) for income tax expense | Year Ended December 31, (In thousands) 2018 2017 2016 Current income taxes, Federal $ 2,416 $ (2,283) $ 1,809 Current income taxes, State 778 460 233 3,194 (1,823) 2,042 Deferred income taxes, Federal (4,804) 315 (435) Deferred income taxes, State (1,537) (157) (176) (6,341) 158 (611) Total (benefit) provision for income taxes $ (3,147) $ (1,665) $ 1,431 |
Schedule of components of the Company’s deferred tax assets | At December 31, (In thousands) 2018 2017 Deferred tax assets: Net operating loss carryforwards $ 4,038 $ 197 Accounts receivable and inventory reserves 1,729 846 Stock-based compensation 1,629 739 Accrued liabilities 946 71 Warranty reserves 634 410 Fixed assets 29 — Intangible assets — 515 Other 66 194 Total deferred tax assets $ 9,071 $ 2,972 Deferred tax liabilities: Depreciation (196) (310) Intangible assets (55) — Total deferred tax liabilities $ (251) $ (310) Net deferred tax assets $ 8,820 $ 2,662 |
Schedule of reconciliation of income tax expense (benefit) | Year Ended December 31, 2018 2017 2016 Tax expense at statutory rate 21.0 % 34.0 % 34.0 % State income taxes, net of federal benefit 11.9 (4.4) 3.3 Executive compensation 11.8 — — Meals and entertainment 7.6 6.3 5.4 Incentive stock options 1.9 (89.1) 2.7 Employee Stock Purchase Plan 4.5 (4.6) 3.0 Transaction costs — 3.8 — Return to provision 3.6 1.4 — IRS Exam 23.3 — — Deferred reprice - state (0.3) 1.9 (0.3) Deferred true-up — 0.5 (7.9) Deferred reprice - federal — 28.0 — Unrecognized tax benefits (4.6) 5.1 — Excess benefit on non-qualified stock options and RSUs (177.6) (22.8) (8.0) Interest and penalties 6.3 — — Other 0.1 0.2 1.0 Net effective rate (90.5) % (39.7) % 33.2 % |
Schedule of unrecognized tax benefits | December 31, (In thousands) 2018 2017 2016 Balance beginning of the year $ 212 $ — $ — Gross increases — tax positions in prior year 3,477 212 — Settlement (3,638) — — Balance end of the year $ 51 $ 212 $ — |
Net Income (Loss) Per Share A_2
Net Income (Loss) Per Share Attributable to Common Stockholders (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Net Income (Loss) Per Share Attributable to Common Stockholders | |
Schedule of computation of the basic and diluted net income (loss) per share | Year Ended December 31, (In thousands, except share and per share data) 2018 2017 2016 Net income $ 6,623 $ 5,855 $ 1,632 Weighted-average shares outstanding 18,252,689 17,355,175 8,913,042 Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares 1,094,943 1,522,688 1,845,642 Weighted-average shares used to compute diluted net income per share 19,347,632 18,877,863 10,758,684 Net income per share - Basic $ 0.36 $ 0.34 $ 0.18 Net income per share - Diluted $ 0.34 $ 0.31 $ 0.15 |
Schedule of potentially dilutive securities outstanding | Year Ended December 31, 2018 2017 2016 Restricted stock units 16,283 1,184 — Common stock options 111,565 63,066 1,840,447 Common stock warrants — — 5,800 Employee stock purchase plan — — — Total 127,848 64,250 7,641,204 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements | |
Schedule of fair value measurements for our cash equivalents and marketable securities | At December 31, 2018 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 2,447 $ — $ — $ 2,447 U.S. government and agency obligations 16,326 2,994 — 19,320 Corporate debt securities — 6,466 — 6,466 Total $ 18,773 $ 9,460 $ — $ 28,233 At December 31, 2017 Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (In thousands) (Level 1) (Level 2) (Level 3) Total Recurring Fair Value Measurements: Money market mutual funds $ 9,212 $ — $ — $ 9,212 U.S. government and agency obligations 1,000 10,941 — 11,941 Corporate debt securities — 8,003 — 8,003 Total $ 10,212 $ 18,944 $ — $ 29,156 |
Quarterly Financial Informati_2
Quarterly Financial Information (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Quarterly Financial Information (Unaudited) | |
Schedule of quarterly financial information | Three Months Ended Mar. 31, Jun. 30, Sep. 30, Dec. 31, (In thousands, except per share data) 2018 2018 2018 2018 Revenues $ 26,848 $ 34,133 $ 36,322 $ 46,448 Gross profit 19,539 24,523 26,181 32,015 (Loss) income from operations (1,827) 1,311 1,370 2,136 Net (loss) income (50) 2,572 1,746 2,355 Net income per share - Basic (1) 0.00 0.14 0.10 0.13 Net income per share - Diluted (1) 0.00 0.13 0.09 0.12 Three Months Ended Mar. 31, Jun. 30, Sep. 30, Dec. 31, (In thousands, except per share data) 2017 2017 2017 2017 Revenues $ 19,850 $ 26,264 $ 28,283 $ 34,886 Gross profit 14,226 19,230 20,755 26,057 (Loss) income from operations (2,932) 730 1,258 4,927 Net (loss) income (1,504) 3,787 1,342 2,230 Net (loss) income per share - Basic (1) (0.09) 0.22 0.08 0.13 Net (loss) income per share - Diluted (1) (0.09) 0.20 0.07 0.12 The summation of quarterly per share amounts may not equal the calculation for the full year, as each quarterly calculation is performed discretely. |
Nature of Business and Operat_2
Nature of Business and Operations (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 02, 2016 | Dec. 31, 2016 |
Subsidiary, Sale of Stock | ||
Proceeds from IPO | $ 41,200 | |
IPO | ||
Subsidiary, Sale of Stock | ||
Number of shares of common stock sold | 4,120,000 | |
IPO price per share (in dollars per share) | $ 10 | |
Proceeds from IPO | $ 35,400 | |
Expense Relating To Initial Public Offering | $ 2,900 |
Basis of presentation (Details)
Basis of presentation (Details) $ in Millions | 3 Months Ended |
Jun. 30, 2018USD ($) | |
Basis of Presentation | |
Minimum market value of common stock that was held by non-affiliates | $ 700 |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||
Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 01, 2019 | |
Equity Securities | |||||
Equity security without readily determinable fair value | $ 650 | $ 150 | |||
Accounts Receivable | |||||
Percentage of claims | 90.00% | ||||
Revenue Recognition | |||||
Medicare receivables period of time | 1 year | ||||
Revenue for practical expedient | true | ||||
Advertising | |||||
Advertising Expense | $ 100 | $ 100 | $ 100 | ||
Recent Accounting Pronouncements | |||||
Minimum market value of the Company common stock that was held by non-affiliates | $ 700,000 | ||||
Minimum | |||||
Property and Equipment | |||||
Useful life | 3 years | ||||
Revenue Recognition | |||||
Period for consideration payment after shipment date | 2 days | ||||
Minimum | Scenario, Forecast | Accounting Standards Update 2016-02 [Member] | |||||
Recent Accounting Pronouncements | |||||
Right of Use assets | $ 2,500 | ||||
Lease liabilities | 2,500 | ||||
Maximum | |||||
Property and Equipment | |||||
Useful life | 7 years | ||||
Revenue Recognition | |||||
Period for consideration payment after shipment date | 3 days | ||||
Maximum | Scenario, Forecast | Accounting Standards Update 2016-02 [Member] | |||||
Recent Accounting Pronouncements | |||||
Right of Use assets | 3,500 | ||||
Lease liabilities | $ 3,500 | ||||
Garments | Minimum | |||||
Product Warranty | |||||
Product Warranty | 1 year | ||||
Garments | Maximum | |||||
Product Warranty | |||||
Product Warranty | 5 years | ||||
Controllers | Minimum | |||||
Product Warranty | |||||
Product Warranty | 1 year | ||||
Controllers | Maximum | |||||
Product Warranty | |||||
Product Warranty | 2 years | ||||
Entre/Actitouch systems | |||||
Impairment of Long-Lived Assets | |||||
Reduction in demand and sales volume, period | 3 years | ||||
Research and development | Entre/Actitouch systems | |||||
Impairment of Long-Lived Assets | |||||
Intangible assets wrote off | $ 1,800 | ||||
Cost of goods sold | Entre/Actitouch systems | |||||
Impairment of Long-Lived Assets | |||||
Inventory wrote off | $ 700 |
Acquisitions (Details)
Acquisitions (Details) | Oct. 15, 2018USD ($) | May 22, 2018USD ($)item | Dec. 31, 2018USD ($) |
Certain Assets and Intellectual Property of WTP | |||
Asset Acquisition | |||
Total consideration | $ 875,000 | ||
Capitalized intangible assets | $ 375,000 | ||
Number of issued and pending patents in the acquired portfolio | item | 31 | ||
Number of trademarks in the acquired portfolio | item | 5 | ||
Sun Scientific | |||
Asset Acquisition | |||
Initiation fee | $ 4,000,000 | ||
Net sales of a product | $ 80,000,000 | ||
Term of the license agreement | 7 years |
Acquisition (Allocation of purc
Acquisition (Allocation of purchase price) (Details) - USD ($) $ in Thousands | Oct. 15, 2018 | May 22, 2018 |
Certain Assets and Intellectual Property of WTP | ||
Asset Acquisition | ||
Gross Carrying Amount | $ 875 | |
Patents | Sun Scientific | ||
Asset Acquisition | ||
Gross Carrying Amount | $ 4,047 | |
Weighted average amortization period | 12 years | |
Defensive intangible assets | Certain Assets and Intellectual Property of WTP | ||
Asset Acquisition | ||
Gross Carrying Amount | $ 788 | |
Weighted average amortization period | 7 years | |
Customer accounts | Certain Assets and Intellectual Property of WTP | ||
Asset Acquisition | ||
Gross Carrying Amount | $ 87 | |
Weighted average amortization period | 5 years |
Marketable Securities (Details)
Marketable Securities (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Marketable Securities | ||
Cost | $ 25,796 | $ 20,014 |
Unrealized Gains | 12 | |
Unrealized Losses | 22 | 70 |
Fair Value | 25,786 | 19,944 |
Fair value less than 12 months | 14,877 | 12,979 |
Unrealized losses, less than 12 months | 14 | 38 |
Fair value, 12 months or more | 3,992 | 6,965 |
Unrealized losses, 12 months or more | 8 | 32 |
Fair value, Total | 18,869 | 19,944 |
Unrealized loss, Total | 22 | 70 |
Unrealized holding loss on marketable debt securities in other comprehensive loss | 22 | |
Marketable securities sold | 16,000 | |
Gain or loss on sale of marketable securities | (1) | |
Gain or loss on marketable securities | $ (1) | |
Minimum | ||
Marketable Securities | ||
Contractual maturities of marketable securities | 6 months | |
Maximum | ||
Marketable Securities | ||
Contractual maturities of marketable securities | 24 months | |
U.S. government and agency obligations | ||
Marketable Securities | ||
Cost | $ 19,332 | 11,997 |
Unrealized Gains | 5 | |
Unrealized Losses | 17 | 56 |
Fair Value | 19,320 | 11,941 |
Fair value less than 12 months | 11,884 | 5,974 |
Unrealized losses, less than 12 months | 11 | 25 |
Fair value, 12 months or more | 2,993 | 5,967 |
Unrealized losses, 12 months or more | 6 | 31 |
Fair value, Total | 14,877 | 11,941 |
Unrealized loss, Total | 17 | 56 |
Corporate debt securities | ||
Marketable Securities | ||
Cost | 6,464 | 8,017 |
Unrealized Gains | 7 | |
Unrealized Losses | 5 | 14 |
Fair Value | 6,466 | 8,003 |
Fair value less than 12 months | 2,993 | 7,005 |
Unrealized losses, less than 12 months | 3 | 13 |
Fair value, 12 months or more | 999 | 998 |
Unrealized losses, 12 months or more | 2 | 1 |
Fair value, Total | 3,992 | 8,003 |
Unrealized loss, Total | $ 5 | $ 14 |
Accounts Receivable, Net (Detai
Accounts Receivable, Net (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item | |
Accounts Receivable, Net | ||
Medicare accounts receivable | $ 2,600 | $ 3,500 |
Medicare accounts receivable, long-term | $ 1,884 | $ 2,718 |
Number of insurers | item | 2 | 2 |
Insurer One | Customer Concentration Risk | Revenue | ||
Accounts Receivable, Net | ||
Percentage of concentration | 29.00% | 31.00% |
Insurer One | Credit Concentration Risk | Accounts Receivable | ||
Accounts Receivable, Net | ||
Percentage of concentration | 29.00% | 32.00% |
Insurer Two | Customer Concentration Risk | Revenue | ||
Accounts Receivable, Net | ||
Percentage of concentration | 9.00% | 8.00% |
Insurer Two | Credit Concentration Risk | Accounts Receivable | ||
Accounts Receivable, Net | ||
Percentage of concentration | 11.00% | 15.00% |
Inventories (Details)
Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished goods | $ 5,318 | $ 4,267 |
Component parts and work-in-process | 5,871 | 6,773 |
Total inventories | $ 11,189 | $ 11,040 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and Equipment | |||
Subtotal | $ 10,450 | $ 8,123 | |
Less: accumulated depreciation | (5,640) | (4,347) | |
Property and equipment, net | 4,810 | 3,776 | |
Depreciation expense | 3,300 | 1,500 | $ 600 |
Equipment | |||
Property and Equipment | |||
Subtotal | 4,442 | 3,235 | |
Tooling | |||
Property and Equipment | |||
Subtotal | 2,574 | 1,932 | |
Furniture and Fixtures | |||
Property and Equipment | |||
Subtotal | 459 | 427 | |
Demonstration equipment | |||
Property and Equipment | |||
Subtotal | 632 | 460 | |
Leasehold improvements | |||
Property and Equipment | |||
Subtotal | 1,001 | 938 | |
Patient rental equipment | |||
Property and Equipment | |||
Subtotal | $ 1,342 | $ 1,131 |
Intangible Assets (Details)
Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Patents and Intangibles | |||
Weighted Average Amortization Period | 7 years | ||
Gross Carrying Amount | $ 5,504 | $ 3,536 | |
Accumulated Amortization | 165 | 1,318 | |
Net Amount | 5,339 | 2,218 | |
Amortization expense | 400 | $ 300 | $ 300 |
Future Amortization | |||
2,019 | 558 | ||
2,020 | 558 | ||
2,021 | 558 | ||
2,022 | 558 | ||
2,023 | 491 | ||
Thereafter | $ 2,616 | ||
Patents | |||
Patents and Intangibles | |||
Weighted Average Amortization Period | 12 years | 12 years | |
Gross Carrying Amount | $ 4,253 | $ 3,536 | |
Accumulated Amortization | 71 | 1,318 | |
Net Amount | $ 4,182 | $ 2,218 | |
Defensive intangible assets | |||
Patents and Intangibles | |||
Weighted Average Amortization Period | 6 years | 6 years | |
Gross Carrying Amount | $ 1,126 | ||
Accumulated Amortization | 82 | ||
Net Amount | $ 1,044 | ||
Customer accounts | |||
Patents and Intangibles | |||
Weighted Average Amortization Period | 4 years | 4 years | |
Gross Carrying Amount | $ 125 | ||
Accumulated Amortization | 12 | ||
Net Amount | $ 113 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Accrued Expenses | ||
Warranty | $ 841 | $ 531 |
Travel and business | 557 | 453 |
Acquisition earn-out | 375 | |
Legal and consulting | 319 | 317 |
Deferred rent | 155 | 173 |
Accrued taxes | 115 | 1,070 |
Clinical studies | 60 | 15 |
Other | 358 | 39 |
Total | $ 2,780 | $ 2,598 |
Warranty Reserves (Details)
Warranty Reserves (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Beginning balance | $ 1,672 | $ 793 |
Warranty provision | 1,720 | 1,487 |
Processed warranty claims | (826) | (608) |
Ending balance | 2,566 | 1,672 |
Accrued warranty reserve, current | 841 | 531 |
Accrued warranty reserve, long-term | 1,725 | 1,141 |
Total accrued warranty reserve | $ 2,566 | $ 1,672 |
Credit Agreement (Details)
Credit Agreement (Details) - USD ($) | Aug. 03, 2018 | Dec. 31, 2018 |
Credit Agreement | ||
Line of credit | $ 10,000,000 | |
Aggregate Borrowings | 25,000,000 | |
Total aggregate principal amount of loans | $ 35,000,000 | |
Credit facility outstanding amount | $ 0 | |
Capital expenditures | ||
2,018 | 5,000,000 | |
2,019 | 15,000,000 | |
2,020 | 15,000,000 | |
2,021 | $ 9,000,000 | |
Maximum leverage Ratio | 300.00% | |
Minimum cash and cash equivalents | $ 7,500,000 | |
Cash and cash equivalents, temporary reduction | $ 5,000,000 | |
Maximum | ||
Credit Agreement | ||
Unused line fee (as a percent) | 0.275% | |
Minimum | ||
Credit Agreement | ||
Unused line fee (as a percent) | 0.20% | |
Federal Funds | ||
Credit Agreement | ||
Basis spread (as a percent) | 0.50% | |
Base Rate | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.00% | |
Base Rate | Maximum | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.15% | |
Base Rate | Minimum | ||
Credit Agreement | ||
Basis spread (as a percent) | 0.40% | |
LIBOR | Maximum | ||
Credit Agreement | ||
Basis spread (as a percent) | 2.15% | |
LIBOR | Minimum | ||
Credit Agreement | ||
Basis spread (as a percent) | 1.40% |
Commitments and Contingencies_2
Commitments and Contingencies (Details) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Oct. 31, 2018item | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Operating Leased Assets [Line Items] | ||||
Rent expense | $ 1,500 | $ 1,100 | $ 1,000 | |
2,019 | 1,664 | |||
2,020 | 2,530 | |||
2,021 | 2,615 | |||
2,022 | 2,347 | |||
2,023 | 2,348 | |||
Thereafter | 13,578 | |||
Total | 25,082 | |||
Lease Agreements | ||||
Operating Leased Assets [Line Items] | ||||
Number of times to renew | item | 2 | |||
Renewal term | 5 years | |||
Building | ||||
Operating Leased Assets [Line Items] | ||||
2,019 | 1,434 | |||
2,020 | 2,496 | |||
2,021 | 2,612 | |||
2,022 | 2,347 | |||
2,023 | 2,348 | |||
Thereafter | 13,578 | |||
Total | 24,815 | |||
Computer/Office Equipment | ||||
Operating Leased Assets [Line Items] | ||||
2,019 | 51 | |||
2,020 | 34 | |||
2,021 | 3 | |||
Total | 88 | |||
Fleet Vehicle Program | ||||
Operating Leased Assets [Line Items] | ||||
2,019 | 179 | |||
Total | $ 179 |
Commitments and Contingencies -
Commitments and Contingencies - Major Vendors (Details) $ in Millions | 12 Months Ended | |
Dec. 31, 2018USD ($)item | Dec. 31, 2017item | |
Commitments and Contingencies | ||
Number of vendors | item | 2 | 3 |
Purchase commitments | ||
Purchase commitments expect to receive in 2019 | $ | $ 14.9 | |
Purchases | Vendor | ||
Commitments and Contingencies | ||
Accounts Receivable (in percentage) | 46.00% | 40.00% |
Commitments and Contingencies_3
Commitments and Contingencies - Retirement Plan (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
401(k) | |||
Retirement Plan | |||
Discretionary contributions | $ 0.2 | $ 0.2 | $ 0.2 |
Stockholders' Equity - Series A
Stockholders' Equity - Series A & B Preferred Stock (Details) $ / shares in Units, $ in Millions | Aug. 02, 2016USD ($)$ / sharesshares |
Preferred stock | |
Conversion of preferred stock to common stock (in shares) | 5,924,453 |
Number of new stock issued relating to the IPO that Series A and Series B preferred stockholders are entitled to receive | 2,354,323 |
IPO | |
Preferred stock | |
Number of shares of common stock sold | 4,120,000 |
Share price (in dollars per share) | $ / shares | $ 10 |
Series B Preferred Stock | |
Preferred stock | |
Preferred stock to common stock conversion ratio | 1 |
Number of new stock issued to pay accrued stock dividends relating to initial offering price | 956,842 |
Series A Preferred Stock | |
Preferred stock | |
Preferred stock to common stock conversion ratio | 1.03 |
Accrued Cumulative Dividends | $ | $ 8.2 |
Payment of dividends | $ | $ 0.1 |
Stockholders' Equity - Stock-Ba
Stockholders' Equity - Stock-Based Compensation General Information (Details) | Dec. 31, 2018shares |
2016 Plan | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of shares authorized | 4,800,000 |
Stockholders' Equity - Stock-_2
Stockholders' Equity - Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | Jan. 01, 2018 | Jan. 01, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Stock-based compensation | |||||
Compensation expense | $ 7,974 | $ 4,235 | $ 1,889 | ||
Unrecognized stock-based compensation | |||||
Unrecognized stock-based compensation expense | $ 100 | ||||
Unrecognized stock-based compensation expense, period for recognition | 2 months 12 days | ||||
Former executive | |||||
Stock-based compensation | |||||
Compensation expense | $ 1,000 | ||||
Cost of goods sold | |||||
Stock-based compensation | |||||
Compensation expense | 160 | 117 | 112 | ||
Sales and marketing | |||||
Stock-based compensation | |||||
Compensation expense | 3,254 | 1,521 | 514 | ||
Research and development | |||||
Stock-based compensation | |||||
Compensation expense | 242 | 140 | 36 | ||
Reimbursement, general and administrative | |||||
Stock-based compensation | |||||
Compensation expense | $ 4,318 | $ 2,457 | $ 1,227 | ||
2016 Plan | |||||
Stock-based compensation | |||||
Shares available for future issuance | 5,161,690 | ||||
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% | ||||
Automatic annual increase to the number of shares reserved and available for issuance | 2,500,000 | ||||
Increase in number of shares reserved and available for issuance | 892,318 | 841,686 |
Stockholders' Equity - Stock Op
Stockholders' Equity - Stock Options and Restricted Stock (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Stock-based compensation, general disclosures | ||||||||
Stock-based compensation expense | $ 7,974 | $ 4,235 | $ 1,889 | |||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 2 months 12 days | |||||||
Dividends paid to date | $ 0 | |||||||
Number of: | ||||||||
Non vested options beginning of the year | 489,451 | 496,997 | ||||||
Non-vested options end of the year | 453,860 | 489,451 | 496,997 | |||||
Vested options | 622,675 | 315,082 | ||||||
Weighted-average grant date fair value of: | ||||||||
Non-vested options beginning of the year | $ 9.57 | $ 2.99 | ||||||
Non-vested options end of the year | 14.80 | 9.57 | $ 2.99 | |||||
Vested options | 2.84 | 2.45 | ||||||
Forfeited options | $ 9.45 | $ 3.25 | ||||||
Weighted Average Grant Date Fair Value Per Share | ||||||||
Weighted average remaining contractual life (in years) | 6 years 6 months | 6 years 2 months 12 days | 5 years 6 months | 5 years 9 months 18 days | ||||
Options exercisable, weighted-average remaining contractual life | 5 years 2 months 12 days | |||||||
Restricted stock unit awards, Average Intrinsic Value | ||||||||
Restricted stock unit awards, Average Intrinsic Value | $ 1,972 | |||||||
Common stock options | ||||||||
Stock-based compensation, general disclosures | ||||||||
Term (in years) | 7 years | |||||||
Stock-based compensation expense | $ 2,100 | $ 1,000 | $ 1,500 | |||||
Total grant date fair value of options vested during the period | $ 1,500 | $ 800 | $ 200 | |||||
Total unrecognized pre-tax compensation expense related to nonvested stock option awards | $ 5,900 | |||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 2 years 4 months 24 days | |||||||
Estimated fair values and assumptions for stock options granted | ||||||||
Expected volatility (as a percent) | 43.00% | |||||||
Risk-free interest rate (as a percent) | 1.00% | |||||||
Expected dividend yield (as a percent) | 0.00% | 0.00% | 0.00% | |||||
Options | ||||||||
Outstanding at beginning of period | 1,487,720 | 1,856,299 | 1,840,448 | |||||
Granted | 203,614 | 345,995 | 305,236 | |||||
Exercised | (553,375) | (657,916) | (253,138) | |||||
Cancelled | (61,424) | (56,658) | (36,247) | |||||
Outstanding at end of period | 1,076,535 | 1,487,720 | 1,856,299 | 1,840,448 | ||||
Weighted Average Exercise Price ($/share) | ||||||||
Outstanding at beginning of period | $ 8.41 | $ 2.69 | $ 1.18 | |||||
Granted | 47.25 | 25.26 | 10.60 | |||||
Exercised | 2.74 | 1.23 | 0.93 | |||||
Forfeited | 21.27 | 7.22 | 5.34 | |||||
Outstanding at end of period | $ 17.94 | $ 8.41 | $ 2.69 | $ 1.18 | ||||
Other information | ||||||||
Options exercisable Number of Exercisable | 622,675 | 998,269 | 1,359,302 | |||||
Options exercisable, weighted-average exercise price | $ 6.75 | $ 2.45 | $ 1.06 | |||||
Options outstanding | $ 31,172 | $ 29,611 | $ 25,467 | $ 18,573 | ||||
Options exercisable | $ 24,161 | |||||||
Exercised | $ 25,393 | $ 15,927 | $ 2,447 | |||||
Restricted stock unit awards, Average Intrinsic Value | ||||||||
Number of option outstanding | 1,487,720 | 1,856,299 | 1,840,448 | 1,840,448 | 1,076,535 | 1,487,720 | 1,856,299 | 1,840,448 |
Options Outstanding, weighted average exercise price | $ 8.41 | $ 2.69 | $ 1.18 | $ 1.18 | $ 17.94 | $ 8.41 | $ 2.69 | $ 1.18 |
Options exercisable Number of Exercisable | 622,675 | 998,269 | 1,359,302 | |||||
Options exercisable, weighted-average exercise price | $ 6.75 | $ 2.45 | $ 1.06 | |||||
Common stock options | Minimum | ||||||||
Stock-based compensation, general disclosures | ||||||||
Vesting period (in years) | 3 years | |||||||
Term (in years) | 7 years | |||||||
Estimated fair values and assumptions for stock options granted | ||||||||
Expected term | 4 years | 4 years | 4 years | |||||
Expected volatility (as a percent) | 42.70% | 43.50% | ||||||
Risk-free interest rate (as a percent) | 2.60% | 1.70% | ||||||
Fair value per share of options on the date of grant (in dollars per share) | $ 12.46 | $ 7.82 | $ 3.48 | |||||
Other information | ||||||||
Fair value per share of options on the date of grant (in dollars per share) | $ 12.46 | $ 7.82 | $ 3.48 | |||||
Common stock options | Maximum | ||||||||
Stock-based compensation, general disclosures | ||||||||
Vesting period (in years) | 4 years | |||||||
Term (in years) | 10 years | |||||||
Estimated fair values and assumptions for stock options granted | ||||||||
Expected term | 6 years | 6 years | 6 years | |||||
Expected volatility (as a percent) | 43.40% | 45.90% | ||||||
Risk-free interest rate (as a percent) | 3.10% | 2.30% | ||||||
Fair value per share of options on the date of grant (in dollars per share) | $ 29.07 | $ 16.23 | $ 7.16 | |||||
Other information | ||||||||
Fair value per share of options on the date of grant (in dollars per share) | $ 29.07 | $ 16.23 | $ 7.16 | |||||
Time-Based Restricted Stock Units | ||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Number of share of common stock that restricted stock unit has the right to convert to | 1 | |||||||
Time-Based Restricted Stock Units | Non-employee Directors | ||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Granted (in shares) | 1,652 | |||||||
Number of granted and vested restricted stock units | 3,865 | |||||||
2016 Plan | Restricted Stock Units | ||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Deferred and unissued (in shares) | 3,865 | |||||||
Weighted Average Grant Date Fair Value Per Share | ||||||||
Deferred and unissued (in dollars per share) | $ 32.88 | |||||||
2016 Plan | Time-Based Restricted Stock Units | ||||||||
Stock-based compensation, general disclosures | ||||||||
Stock-based compensation expense | $ 3,500 | $ 2,500 | $ 700 | |||||
Total unrecognized pre-tax compensation expense related to nonvested stock option awards | $ 4,800 | |||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 1 year 10 months 24 days | |||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Restricted stock unit awards outstanding at the beginning of the period (in shares) | 441,507 | 324,863 | ||||||
Granted (in shares) | 103,417 | 240,070 | 327,454 | |||||
Vested (in shares) | (199,733) | (87,539) | (1,726) | |||||
Cancelled (in shares) | (35,559) | (35,887) | (865) | |||||
Restricted stock unit awards outstanding at the end of the period (in shares) | 309,632 | 441,507 | 324,863 | |||||
Weighted Average Grant Date Fair Value Per Share | ||||||||
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share) | $ 16.38 | $ 10.39 | ||||||
Granted (in dollars per share) | 38.13 | 22.28 | $ 10.45 | |||||
Vested (in dollars per share) | 15.53 | 11.81 | 17.29 | |||||
Cancelled (in dollars per share) | 20.74 | 15.17 | 17.35 | |||||
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ 23.69 | $ 16.38 | $ 10.39 | |||||
Restricted stock unit awards, Average Intrinsic Value | ||||||||
Restricted stock unit awards, Average Intrinsic Value | 14,104 | $ 12,795 | ||||||
Restricted stock unit awards deferred and unissued, Average Intrinsic Value | 176 | |||||||
2016 Plan | Time-Based Restricted Stock Units | Minimum | ||||||||
Stock-based compensation, general disclosures | ||||||||
Vesting period (in years) | 1 year | |||||||
2016 Plan | Time-Based Restricted Stock Units | Maximum | ||||||||
Stock-based compensation, general disclosures | ||||||||
Vesting period (in years) | 3 years | |||||||
2016 Plan | Performance-based stock-settled restricted stock units | ||||||||
Stock-based compensation, general disclosures | ||||||||
Stock-based compensation expense | $ 700 | |||||||
Weighted-average period over which unrecognized compensation cost is expected to be recognized | 2 years 4 months 24 days | |||||||
Total unrecognized pre-tax compensation expense related to awards | 1,500 | |||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Granted (in shares) | 70,680 | |||||||
Cancelled (in shares) | (5,253) | |||||||
Restricted stock unit awards outstanding at the end of the period (in shares) | 65,427 | |||||||
Weighted Average Grant Date Fair Value Per Share | ||||||||
Granted (in dollars per share) | $ 33.53 | |||||||
Cancelled (in dollars per share) | 32.36 | |||||||
Restricted stock unit awards outstanding at the end of the period (in dollars per share) | $ 33.62 | |||||||
Restricted stock unit awards, Average Intrinsic Value | ||||||||
Restricted stock unit awards, Average Intrinsic Value | $ 2,980 | |||||||
2016 Plan | Performance-based stock-settled restricted stock units | Minimum | ||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Percentage to earn or vest the performance-based stock-settled restricted stock units | 50.00% | |||||||
2016 Plan | Performance-based stock-settled restricted stock units | Maximum | ||||||||
Number of Stock-Settled Restricted Stock Unit Awards Outstanding | ||||||||
Percentage to earn or vest the performance-based stock-settled restricted stock units | 150.00% | |||||||
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 | Nov. 15, 2018 | May 15, 2018 | Jan. 01, 2018 | Nov. 15, 2017 | May 15, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Apr. 27, 2017 |
Stockholders' Equity | |||||||||
Shares issued | $ 2,714 | $ 3,137 | |||||||
Stock-based compensation expense | $ 7,974 | 4,235 | $ 1,889 | ||||||
Employee Stock Purchase Plan | |||||||||
Stockholders' Equity | |||||||||
Purchase price of common stock under plan (as a percent) | 85.00% | ||||||||
Offering period (in months) | 6 months | ||||||||
Shares issued (in shares) | 33,514 | 63,578 | 47,151 | 259,981 | |||||
Shares issued | $ 1,300 | $ 1,400 | $ 900 | $ 2,200 | |||||
Incremental share increase (as a percent) | 1.00% | ||||||||
Incremental share increase (in shares) | 500,000 | ||||||||
Increase in number of shares reserved and available for issuance | 178,463 | ||||||||
Shares reserved | 1,542,576 | 1,600,000 | |||||||
Stock-based compensation expense | $ 700 | $ 700 | $ 400 |
Revenue (Details)
Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenue | |||||||||||
Revenues | $ 46,448 | $ 36,322 | $ 34,133 | $ 26,848 | $ 34,886 | $ 28,283 | $ 26,264 | $ 19,850 | $ 143,751 | $ 109,283 | $ 84,542 |
Percentage of revenue (in percent) | 100.00% | 100.00% | 100.00% | ||||||||
Veterans Administration | |||||||||||
Revenue | |||||||||||
Revenues | $ 28,043 | $ 19,727 | $ 12,259 | ||||||||
Medicare | |||||||||||
Revenue | |||||||||||
Revenues | 13,536 | 8,641 | 10,063 | ||||||||
Private insurers and other payers | |||||||||||
Revenue | |||||||||||
Revenues | 102,172 | 80,915 | 62,220 | ||||||||
Flexitouch system | |||||||||||
Revenue | |||||||||||
Revenues | $ 131,935 | $ 100,344 | $ 73,413 | ||||||||
Percentage of revenue (in percent) | 92.00% | 92.00% | 87.00% | ||||||||
Rental revenue | |||||||||||
Revenue | |||||||||||
Revenues | $ 13,600 | $ 10,100 | $ 7,900 | ||||||||
Entre/Actitouch systems | |||||||||||
Revenue | |||||||||||
Revenues | $ 11,816 | $ 8,939 | $ 11,129 | ||||||||
Percentage of revenue (in percent) | 8.00% | 8.00% | 13.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes | |||
Current income taxes, Federal | $ 2,416 | $ (2,283) | $ 1,809 |
Current income taxes, State | 778 | 460 | 233 |
Current income taxes | 3,194 | (1,823) | 2,042 |
Deferred income taxes, Federal | (4,804) | 315 | (435) |
Deferred income taxes, State | (1,537) | (157) | (176) |
Deferred income taxes | (6,341) | 158 | (611) |
Total (benefit) provision for income taxes | (3,147) | (1,665) | $ 1,431 |
Interest and penalties related to income tax expense | 200 | ||
Components of Deferred Tax Assets | |||
Net operating loss carryforwards | 4,038 | 197 | |
Accounts receivable and inventory reserves | 1,729 | 846 | |
Stock-based compensation | 1,629 | 739 | |
Accrued liabilities | 946 | 71 | |
Warranty reserves | 634 | 410 | |
Fixed assets | 29 | ||
Intangible assets | 515 | ||
Other | 66 | 194 | |
Total deferred tax assets | 9,071 | 2,972 | |
Deferred tax liabilities: | |||
Depreciation | (196) | (310) | |
Intangible assets | (55) | ||
Total deferred tax liabilities | (251) | (310) | |
Net deferred tax assets | $ 8,820 | $ 2,662 | |
Effective Income Tax Rate Reconciliation, Percent | |||
Tax expense at statutory rate | 21.00% | 34.00% | 34.00% |
State income taxes, net of federal benefit | 11.90% | (4.40%) | 3.30% |
Executive compensation | 11.80% | ||
Meals and entertainment | 7.60% | 6.30% | 5.40% |
Incentive stock options | 1.90% | (89.10%) | 2.70% |
Employee Stock Purchase Plan | 4.50% | (4.60%) | 3.00% |
Transaction costs | 3.80% | ||
Return to provision | 3.60% | 1.40% | |
IRS Exam | 23.30% | ||
Deferred reprice - state | (0.30%) | 1.90% | (0.30%) |
Deferred true-up | 0.50% | (7.90%) | |
Deferred reprice - federal | 28.00% | ||
Unrecognized tax benefits | (4.60%) | 5.10% | |
Excess benefit on non-qualified stock options and RSUs | (177.60%) | (22.80%) | (8.00%) |
Interest and penalties | 6.30% | ||
Other | 0.10% | 0.20% | 1.00% |
Net effective rate | (90.50%) | (39.70%) | 33.20% |
Reconciliation of unrecognized tax benefits | |||
Balance beginning of the year | $ 212 | ||
Gross increases — tax positions in prior period | 3,477 | $ 212 | |
Settlement | (3,638) | ||
Balance end of the year | 51 | $ 212 | |
U.S. federal | |||
Components of Deferred Tax Assets | |||
Net operating loss carryforwards | 14,800 | ||
State | |||
Income Taxes | |||
Tax benefits that, if recognized, would impact the effective tax rate | 100 | ||
Components of Deferred Tax Assets | |||
Net operating loss carryforwards | $ 900 |
Net Income (Loss) Per Share A_3
Net Income (Loss) Per Share Attributable to Common Stockholders (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Net Income (Loss) Per Share Attributable to Common Stockholders | |||||||||||
Net income | $ 2,355 | $ 1,746 | $ 2,572 | $ (50) | $ 2,230 | $ 1,342 | $ 3,787 | $ (1,504) | $ 6,623 | $ 5,855 | $ 1,632 |
Weighted-average shares outstanding | 18,252,689 | 17,355,175 | 8,913,042 | ||||||||
Effect of restricted stock units, common stock options, warrants, and employee stock purchase plan shares | 1,094,943 | 1,522,688 | 1,845,642 | ||||||||
Weighted-average shares used to compute diluted net income per share | 19,347,632 | 18,877,863 | 10,758,684 | ||||||||
Net income per share - Basic | $ 0.13 | $ 0.10 | $ 0.14 | $ 0 | $ 0.13 | $ 0.08 | $ 0.22 | $ (0.09) | $ 0.36 | $ 0.34 | $ 0.18 |
Net income per share - Diluted | $ 0.12 | $ 0.09 | $ 0.13 | $ 0 | $ 0.12 | $ 0.07 | $ 0.20 | $ (0.09) | $ 0.34 | $ 0.31 | $ 0.15 |
Net Income (Loss) Per Share A_4
Net Income (Loss) Per Share Attributable to Common Stockholders (Details) - shares | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Net Income (Loss) Per Share Attributable to Common Stockholders | |||
Antidilutive securities excluded from computation of earnings per share | 127,848 | 64,250 | 7,641,204 |
Restricted Stock Units | |||
Net Income (Loss) Per Share Attributable to Common Stockholders | |||
Antidilutive securities excluded from computation of earnings per share | 16,283 | 1,184 | |
Common stock options | |||
Net Income (Loss) Per Share Attributable to Common Stockholders | |||
Antidilutive securities excluded from computation of earnings per share | 111,565 | 63,066 | 1,840,447 |
Common stock warrants | |||
Net Income (Loss) Per Share Attributable to Common Stockholders | |||
Antidilutive securities excluded from computation of earnings per share | 5,800 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Fair Value Measurements | ||
Available for sale debt securities | $ 25,786,000 | $ 19,944,000 |
Amount of transfers of marketable securities within the three level hierarchy | 0 | |
Intangible assets | 5,339,000 | 2,218,000 |
U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 19,320,000 | 11,941,000 |
Corporate debt securities | ||
Fair Value Measurements | ||
Available for sale debt securities | 6,466,000 | 8,003,000 |
Recurring | ||
Fair Value Measurements | ||
Available for sale debt securities | 28,233,000 | 29,156,000 |
Recurring | Money market mutual funds | ||
Fair Value Measurements | ||
Marketable securities | 2,447,000 | 9,212,000 |
Recurring | U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 19,320,000 | 11,941,000 |
Recurring | Corporate debt securities | ||
Fair Value Measurements | ||
Available for sale debt securities | 6,466,000 | 8,003,000 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value Measurements | ||
Available for sale debt securities | 18,773,000 | 10,212,000 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | Money market mutual funds | ||
Fair Value Measurements | ||
Marketable securities | 2,447,000 | 9,212,000 |
Recurring | Quoted Prices in Active Markets for Identical Assets (Level 1) | U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 16,326,000 | 1,000,000 |
Recurring | Significant Other Observable Inputs (Level 2) | ||
Fair Value Measurements | ||
Available for sale debt securities | 9,460,000 | 18,944,000 |
Recurring | Significant Other Observable Inputs (Level 2) | U.S. government and agency obligations | ||
Fair Value Measurements | ||
Available for sale debt securities | 2,994,000 | 10,941,000 |
Recurring | Significant Other Observable Inputs (Level 2) | Corporate debt securities | ||
Fair Value Measurements | ||
Available for sale debt securities | 6,466,000 | $ 8,003,000 |
Non-recurring | Entre/Actitouch systems | ||
Fair Value Measurements | ||
Intangible assets | 0 | |
Non-recurring | Significant Unobservable Inputs (Level 3) | Entre/Actitouch systems | ||
Fair Value Measurements | ||
Intangible assets | $ 0 |
Quarterly Financial Informati_3
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Quarterly Financial Information (Unaudited) | |||||||||||
Revenues | $ 46,448 | $ 36,322 | $ 34,133 | $ 26,848 | $ 34,886 | $ 28,283 | $ 26,264 | $ 19,850 | $ 143,751 | $ 109,283 | $ 84,542 |
Gross profit | 32,015 | 26,181 | 24,523 | 19,539 | 26,057 | 20,755 | 19,230 | 14,226 | 102,258 | 80,268 | 61,602 |
(Loss) income from operations | 2,136 | 1,370 | 1,311 | (1,827) | 4,927 | 1,258 | 730 | (2,932) | 2,990 | 3,898 | 4,272 |
Net (loss) income | $ 2,355 | $ 1,746 | $ 2,572 | $ (50) | $ 2,230 | $ 1,342 | $ 3,787 | $ (1,504) | $ 6,623 | $ 5,855 | $ 1,632 |
Net (loss) income per share - Basic | $ 0.13 | $ 0.10 | $ 0.14 | $ 0 | $ 0.13 | $ 0.08 | $ 0.22 | $ (0.09) | $ 0.36 | $ 0.34 | $ 0.18 |
Net (loss) income per share - Diluted | $ 0.12 | $ 0.09 | $ 0.13 | $ 0 | $ 0.12 | $ 0.07 | $ 0.20 | $ (0.09) | $ 0.34 | $ 0.31 | $ 0.15 |