0001558370-24-001330 | 10-K | XBRL Viewer | Tactile Systems Technology INC

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Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Dec. 31, 2023
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Credit Agreement - Maturities of Debt (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 23, 2023	Sep. 08, 2021
Maturities of notes payable
Net Notes Payable		$ 16,800
Term Loan
Maturities of notes payable
2024	$ 3,000
2025	3,000
2026	23,250
Total	29,250
Less: Deferred Financing Fees	(118)
Net Notes Payable	29,132		$ 30,000
Less: Current portion of notes payable	(2,956)
Non-current portion of notes payable	$ 26,176

Accounts Receivable	12 Months Ended
Dec. 31, 2023
Accounts Receivable.
Accounts Receivable	Note 5. Accounts Receivable We had accounts receivable from two insurers representing approximately 36% and 14% of accounts receivable as of December 31, 2023. We had accounts receivable from two insurers representing approximately 45% and 21% of accounts receivable as of December 31, 2022. Revenue from these insurers accounted for 24% and 1% of our total revenue for the year ended December 31, 2023, and 19% and 6% for the year ended December 31, 2022. The credit risks associated with customers which for these purposes are insurers considers aggregation for entities that are known to be under common control.

Accounts Receivable

12 Months Ended

Dec. 31, 2023

Accounts Receivable.

Accounts Receivable

Note 5. Accounts Receivable

We had accounts receivable from two insurers representing approximately 36% and 14% of accounts receivable as of December 31, 2023. We had accounts receivable from two insurers representing approximately 45% and 21% of accounts receivable as of December 31, 2022. Revenue from these insurers accounted for 24% and 1% of our total revenue for the year ended December 31, 2023, and 19% and 6% for the year ended December 31, 2022. The credit risks associated with customers which for these purposes are insurers considers aggregation for entities that are known to be under common control.

Goodwill And Intangible Assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Sep. 30, 2021	Sep. 08, 2021
Goodwill and Intangible Assets
Goodwill	$ 31,063	$ 31,063
Definite-lived intangible assets:
Weighted Average Amortization Period	10 years 1 month 6 days
Gross Carrying Amount	$ 46,268	46,148
Accumulated Amortization	9,535	5,728
Total	36,733	40,420
Unamortized intangible assets:
Total intangible assets (Gross)	56,259	56,103
Total intangible assets (Net)	46,724	50,375			$ 53,500
Amortization expense	3,800	3,800	$ 1,400
Future Amortization
2024	3,793
2025	3,704
2026	3,640
2027	3,631
2027	3,628
Thereafter	18,337
Total	36,733	40,420
Tradenames
Unamortized intangible assets:
Gross Carrying Amount, Indefinite	9,500	9,500
Patents
Unamortized intangible assets:
Gross Carrying Amount, Indefinite	$ 491	$ 455
Patents
Definite-lived intangible assets:
Weighted Average Amortization Period	12 years	12 years
Gross Carrying Amount	$ 1,018	$ 897
Accumulated Amortization	248	173
Total	770	724
Future Amortization
Total	$ 770	$ 724
Defensive intangible assets
Definite-lived intangible assets:
Weighted Average Amortization Period	1 year	2 years
Gross Carrying Amount	$ 1,125	$ 1,126
Accumulated Amortization	920	764
Total	205	362
Future Amortization
Total	205	362
Customer accounts
Definite-lived intangible assets:
Gross Carrying Amount	125	125
Accumulated Amortization	$ 125	114
Total		11
Future Amortization
Total		$ 11
Customer relationships
Definite-lived intangible assets:
Weighted Average Amortization Period	11 years	12 years
Gross Carrying Amount	$ 31,000	$ 31,000
Accumulated Amortization	5,511	3,127
Total	25,489	27,873			31,000
Future Amortization
Total	$ 25,489	$ 27,873			31,000
Developed technology
Definite-lived intangible assets:
Weighted Average Amortization Period	9 years	10 years
Gross Carrying Amount	$ 13,000	$ 13,000
Accumulated Amortization	2,731	1,550
Total	10,269	11,450			13,000
Future Amortization
Total	$ 10,269	$ 11,450			13,000
Maximum \| Customer accounts
Definite-lived intangible assets:
Weighted Average Amortization Period		1 year
AffloVest APA
Goodwill and Intangible Assets
Goodwill				$ 31,100	31,100
Unamortized intangible assets:
Total intangible assets (Net)					$ 53,500

Warranty Reserves (Details) - USD ($) $ in Thousands	12 Months Ended
Warranty Reserves (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Movement in Standard Product Warranty Accrual [Roll Forward]
Beginning balance	$ 4,212	$ 4,959	$ 4,841
Warranty provision	4,611	2,047	2,606
Processed warranty claims	(4,785)	(2,794)	(2,488)
Ending balance	4,038	4,212	4,959
Accrued warranty reserve, current	2,357	2,005	1,851
Accrued warranty reserve, non-current	1,681	2,207	3,108
Total accrued warranty reserve	$ 4,038	$ 4,212	$ 4,959

Fair Value Measurements - Earn out liability (Details) - USD ($) $ in Thousands			12 Months Ended
	Nov. 28, 2023	May 25, 2023	Dec. 31, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Payment on earn-out	$ (5,600)	$ (5,000)	$ (10,575)	$ (5,000)
Significant Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Earn-out liability, beginning balance			13,050	6,200
Payment on earn-out			(10,575)	(5,000)
Fair value adjustments			$ (2,475)	11,850
Earn-out liability, ending balance				$ 13,050

Summary of Significant Accounting Policies (Policies)	12 Months Ended
Summary of Significant Accounting Policies (Policies)	Dec. 31, 2023
Summary of Significant Accounting Policies
Basis of Presentation	Basis of Presentation The results for the year ended December 31, 2023, 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.
Risks and Uncertainties	Risks and Uncertainties Coronavirus (COVID-19) The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic. We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, particularly during most of 2021 and during the first quarter of 2022. We have also seen staffing challenges, both in our organization and at the clinics we serve, as another lingering consequence of the COVID-19 pandemic. While we saw some level of recovery in 2022 and 2023, consequences of the pandemic remain uncertain. Although the effects of the COVID-19 pandemic on our operating results continue to subside, the pandemic could still have an unfavorable effect on our financial position, results of operations and cash flows.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents	Cash and Cash Equivalents Cash and cash equivalents consist of all cash on hand and deposits. Our cash was held primarily in checking accounts and an Institutional Insured Liquid Deposit demand account as of December 31, 2023 and 2022. At times the amount of cash on deposit may exceed the federally insured limit of the bank. Deposit accounts at each of the institutions are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2023 and 2022, the Company exceeded FDIC limits at various institutions. The Company has not experienced any losses in such accounts.
Equity Investments	Equity Investments 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 (loss). 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 each of December 31, 2023 and 2022, the total carrying value of our equity investments, with no readily determinable fair value, was $0.3 million, 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, 2023 and 2022, we did not have any impairment loss on these investments.
Accounts Receivable	Accounts Receivable The majority of our accounts receivable and revenue 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. A portion of 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. 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 accumulated depreciation accounts and the resulting gains or losses are included in income. 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 Flexitouch Plus and Entre Plus systems, and from the sales of our AffloVest product. Flexitouch Plus and Entre Plus 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 or rental of a product is recognized upon shipment, unless circumstances dictate that control has not yet passed to the customer. We provide a warranty for these 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 sale or rental of these 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 commercially distribute these 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 revenue 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 Entre Plus systems is determined based on the payment history using the same methodology as our private insurers. A portion of claims for payment for our Flexitouch Plus 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 and rent these 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 purchases or rentals 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 revenue is 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. Rental agreements are recorded as sales-type leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842) (“ASC 842”). Accordingly, as sales-type leases, the transaction price for the entire rental term is recognized upon transfer of control. AffloVest The AffloVest device is sold through durable medical equipment providers. Revenue is recognized when control of the promised goods or services is transferred to the distributors, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the distributor has obtained control of the goods or services, we consider any future performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business. Consequently, revenue from the sale of the AffloVest product is recognized at shipment, unless circumstances dictate that control has not yet passed to the distributor. Certain of our contracts include volume-based incentives which involve rebates that are negotiated at or prior to the time of sale with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these incentive programs, at the time of sale, we determine the most likely amount of the rebate to be paid based on forecasted sales levels. These forecasts are updated at least quarterly for applicable customers, and the transaction price is reduced for the anticipated cost of the rebate. If the forecasted sales for a customer change, the accrual for rebates is adjusted to reflect the new rebates expected to be earned by the customer. Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue sold in the accompanying Consolidated Statements of Operations. We provide a warranty for the AffloVest products against defects in material and workmanship for a period of five years. 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 sale of these products represents a single performance obligation that is satisfied at a point in time and is short-term in nature.
Advertising	Advertising Advertising costs are charged to operations when incurred. Advertising expense was $0.1 million for each of the years ended December 31, 2023, 2022 and 2021.
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 Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in total revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue in the accompanying Consolidated Statements of Operations.
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. 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, such as incurring higher than anticipated warranty claims, 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 (see Note 8 – “Goodwill and Intangible Assets”).
Goodwill
Stock-Based Compensation	Stock-Based Compensation Stock options are valued using the Black-Scholes option-pricing model. The Black-Scholes valuation model 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 13 – “Stockholders’ Equity”).
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 basis 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 15 – “Income Taxes”). Changes in tax rates are reflected in the tax provision as they occur.
Net Income (Loss) Per Common Share	Net Income (Loss) Per Common Share Basic net income (loss) per common share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential stock-based awards outstanding during the period using the treasury stock method. Dilutive potential stock-based awards include outstanding common stock options, time- and performance-based restricted stock units and employee stock purchase plan shares.
Business Segments	Business Segments We operate and report in only one operating and reportable segment. Our chief operating decision maker does not use financial information below revenue to allocate resources.
Accounting Pronouncement Not Yet Adopted	Accounting Pronouncement Not Yet Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which requires entities to enhance disclosures around segment reporting. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” which requires entities to enhance disclosures around income taxes. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.
Recently Adopted Accounting Pronouncement	Recently Adopted Accounting Pronouncement In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848) — Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2022-06”), which provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. We adopted this ASU in the quarter ended June 30, 2023. The adoption of this standard did not have a significant impact on the Company’s financial statements.

Commitments and Contingencies - Legal Proceedings (Details)	May 24, 2022 item
The "Weaver Lawsuit"
Loss Contingencies [Line Items]
Number of former officers and directors	8

Fair Value Measurements (Details) $ in Thousands	Dec. 31, 2023 USD ($)
Fair Value Measurements
Remaining contingent earn-out liability	$ 0

Commitments and Contingencies - Lease related assets and liabilities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Lease-related assets and liabilities
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Right of use operating lease assets	Right of use operating lease assets
Right of use operating lease assets	$ 19,128	$ 21,322
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Operating lease liabilities, Current	Operating lease liabilities, Current
Operating lease liabilities, Current	$ 2,807	$ 2,500
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Operating lease liabilities, non-current	Operating lease liabilities, non-current
Operating lease liabilities, non-current	$ 18,436	$ 20,866
Present value of future minimum lease payments	$ 21,243	$ 23,366
Weighted average remaining lease term	6 years 8 months 12 days	7 years 8 months 12 days
Weighted average discount rate	4.30%	4.20%
Cash paid for operating lease liabilities	$ 3,453	$ 3,575
Non-cash right of use assets obtained in exchange for new operating lease obligations	$ 293	$ 49

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Current assets
Cash and cash equivalents	$ 61,033	$ 21,929
Accounts receivable	43,173	54,826
Net investment in leases	14,195	16,130
Inventories	22,527	23,124
Prepaid expenses and other current assets	4,366	3,754
Total current assets	145,294	119,763
Non-current assets
Property and equipment, net	6,195	6,077
Right of use operating lease assets	19,128	21,322
Intangible assets, net	46,724	50,375
Goodwill	31,063	31,063
Accounts receivable, non-current	10,936	23,061
Deferred income taxes	19,378
Other non-current assets	2,720	3,335
Total non-current assets	136,144	135,233
Total assets	281,438	254,996
Current liabilities
Accounts payable	6,659	9,984
Note payable	2,956	2,968
Earn-out, current		13,050
Accrued payroll and related taxes	16,789	17,100
Accrued expenses	5,904	9,240
Income taxes payable	1,467	2,336
Operating lease liabilities	2,807	2,500
Other current liabilities	4,475	7,152
Total current liabilities	41,057	64,330
Non-current liabilities
Revolving line of credit, non-current		24,916
Note payable, non-current	26,176	20,979
Accrued warranty reserve, non-current	1,681	2,207
Income taxes payable, non-current	446	298
Operating lease liabilities, non-current	18,436	20,866
Total non-current liabilities	46,739	69,266
Total liabilities	87,796	133,596
Commitments and Contingencies (see Note 12)
Stockholders' equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized; none issued and outstanding as of December 31, 2023 and 2022
Common stock, $0.001 par value, 300,000,000 shares authorized; 23,600,584 shares issued and outstanding as of December 31, 2023; 20,252,677 shares issued and outstanding as of December 31, 2022	24	20
Additional paid-in capital	174,724	131,001
Retained earnings (accumulated deficit)	18,894	(9,621)
Total stockholders' equity	193,642	121,400
Total liabilities and stockholders' equity	$ 281,438	$ 254,996

Stockholders' Equity - Stock Options and Restricted Stock (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2023 USD ($) item $ / shares shares	Dec. 31, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) $ / shares shares
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	$ 7,547	$ 9,600	$ 10,173
Dividends paid to date \| $	0
Aggregate Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value \| $			4,932	$ 9,503
Employee Stock Option
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	900	2,500	4,300
Total unrecognized pre-tax compensation expense related to nonvested stock option awards \| $	$ 200
Weighted-average period over which unrecognized compensation cost is expected to be recognized	10 months 24 days
Total grant date fair value of options vested during the period \| $	$ 1,900	$ 3,300	$ 4,300
Estimated fair values and assumptions for stock options granted
Expected term		4 years 6 months	4 years 6 months
Expected dividend yield (as a percent)		0.00%	0.00%
Options Outstanding
Outstanding at beginning of period \| shares	615,307	915,224	1,039,709
Granted \| shares		47,280	188,748
Exercised \| shares	(4,625)	(90,878)	(175,516)
Forfeited \| shares	(25,045)	(92,981)	(92,773)
Cancelled/Expired \| shares	(155,677)	(163,338)	(44,944)
Outstanding at end of period \| shares	429,960	615,307	915,224	1,039,709
Weighted Average Exercise Price Per Share
Outstanding at beginning of period	$ 43.25	$ 39.33	$ 36.43
Granted		6.17	49.33
Exercised	2.97	1.68	22.65
Forfeited	47.54	36.28	49.77
Cancelled/Expired	50.72	37.65	57.78
Outstanding at end of period	$ 40.74	$ 43.25	$ 39.33	$ 36.43
Other information
Options exercisable number of shares exercisable \| shares	386,457	435,363	517,316
Options exercisable, weighted-average exercise price	$ 41.53	$ 43.83	$ 32.60
Weighted average remaining contractual life (in years)	3 years 9 months 18 days	4 years 8 months 12 days	5 years	5 years 7 months 6 days
Options exercisable, weighted-average remaining contractual life	3 years 8 months 12 days
Aggregate Intrinsic Value, Options outstanding \| $	$ 223	$ 164		$ 13,381
Aggregate Intrinsic Value, Exercised \| $	98	$ 916	$ 4,901
Aggregate Intrinsic Value, Options exercisable \| $	$ 125		$ 2,068
Number of:
Non vested options beginning of the year \| shares	179,944	397,908
Non-vested options end of the year \| shares	43,503	179,944	397,908
Vested options end of the year \| shares	386,457	435,363
Weighted-average grant date fair value of:
Non-vested options beginning of the year	$ 16.24	$ 18.02
Non-vested options end of the year	13.57	16.24	$ 18.02
Vested options end of the year	16.51	17.53
Forfeited options during the year	$ 18.36	$ 14.73
Employee Stock Option \| 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 volatility (as a percent)		59.20%	45.00%
Risk-free interest rate (as a percent)		4.30%	0.60%
Fair value on the date of grant (in dollars per share)		$ 8.11	$ 13.04
Employee Stock Option \| 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 volatility (as a percent)			52.30%
Risk-free interest rate (as a percent)			1.10%
Fair value on the date of grant (in dollars per share)			$ 22.90
2023 PSUs
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	$ 500
2022 PSUs
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	400	$ 600
2016 Plan \| Time-Based Restricted Stock Units
Stock-based compensation, general disclosures.
Stock-based compensation expense \| $	5,100	$ 5,800	$ 4,900
Total unrecognized pre-tax compensation expense related to nonvested stock option awards \| $	$ 6,300
Weighted-average period over which unrecognized compensation cost is expected to be recognized	1 year 8 months 12 days
Units Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares) \| shares	590,542	259,147	211,469
Granted (in shares) \| shares	398,698	539,525	189,762
Vested (in shares) \| shares	(270,651)	(123,528)	(106,521)
Cancelled (in shares) \| shares	(129,447)	(84,602)	(35,563)
Restricted stock unit awards outstanding at the end of the period (in shares) \| shares	589,142	590,542	259,147	211,469
Weighted Average Grant Date Fair Value Per Unit
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share)	$ 19.42	$ 42.32	$ 48.29
Granted (in dollars per share)	15.52	15.03	40.31
Vested (in dollars per share)	20.18	43.20	47.43
Cancelled (in dollars per share)	19.79	26.91	51.76
Restricted stock unit awards outstanding at the end of the period (in dollars per share)	$ 16.35	$ 19.42	$ 42.32	$ 48.29
Aggregate Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value \| $	$ 8,425	$ 6,779
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 \| $	$ 900	$ 500	$ 200
Total unrecognized pre-tax compensation expense related to awards \| $	$ 1,300
Weighted-average period over which unrecognized compensation cost is expected to be recognized	1 year 10 months 24 days
Number of performance awards under share-based payment arrangement \| item	3
Units Outstanding
Restricted stock unit awards outstanding at the beginning of the period (in shares) \| shares	155,618	54,317	79,303
Granted (in shares) \| shares	123,575	131,710	39,419
Vested (in shares) \| shares	(13,842)	(4,407)	(34,159)
Cancelled (in shares) \| shares	(67,119)	(26,002)	(30,246)
Restricted stock unit awards outstanding at the end of the period (in shares) \| shares	198,232	155,618	54,317	79,303
Payout percentage	100.00%	100.00%	100.00%
Weighted Average Grant Date Fair Value Per Unit
Restricted stock unit awards outstanding at the beginning of the period (in dollars per share)	$ 25.05	$ 50.22	$ 47.83
Granted (in dollars per share)	15.28	18.54	51.82
Vested (in dollars per share)	42.70	12.31	33.98
Cancelled (in dollars per share)	21.50	42.53	64.39
Restricted stock unit awards outstanding at the end of the period (in dollars per share)	$ 18.93	$ 25.05	$ 50.22	$ 47.83
Aggregate Intrinsic Value
Restricted stock unit awards, Average Intrinsic Value \| $	$ 2,785	$ 1,786		$ 3,564
Restricted stock unit awards deferred and unissued, Average Intrinsic Value \| $			$ 1,034
2016 Plan \| Performance-based stock-settled restricted stock units \| Minimum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	25.00%
Units Outstanding
Percentage to earn or vest the performance-based stock-settled restricted stock units	50.00%
2016 Plan \| Performance-based stock-settled restricted stock units \| Maximum
Stock-based compensation, general disclosures.
Performance goals revenue change and adjusted EBITDA margin	175.00%
Units Outstanding
Percentage to earn or vest the performance-based stock-settled restricted stock units	150.00%
2016 Plan \| Tranche one \| Performance-based stock-settled restricted stock units
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%
2016 Plan \| Tranche one \| 2023 PSUs
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%
2016 Plan \| Tranche two \| Performance-based stock-settled restricted stock units
Stock-based compensation, general disclosures.
Award vesting percentage	66.67%
2016 Plan \| Tranche two \| 2023 PSUs
Stock-based compensation, general disclosures.
Award vesting percentage	33.33%

Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Equity Securities
Equity security without readily determinable fair value	$ 0.3	$ 0.3
Accounts Receivable
Percentage of claims	90.00%
Revenue Recognition
Medicare receivables period of time	1 year
Revenue for practical expedient	true
Advertising
Advertising Expense	$ 0.1	$ 0.1	$ 0.1
Minimum
Property and Equipment
Useful life	3 years
Revenue Recognition
Period for consideration payment after shipment date	2 days
Maximum
Property and Equipment
Useful life	7 years
Revenue Recognition
Period for consideration payment after shipment date	3 days
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
AffloVest
Product Warranty
Product Warranty	5 years

Commitments and Contingencies - Lease commitments and operating lease cost (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Commitments and Contingencies
Operating lease cost	$ 3.6	$ 3.8	$ 3.6

Net Income (Loss) Per Common Share (Tables)

12 Months Ended

Dec. 31, 2023

Net Income (Loss) Per Common Share

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)	2023		2022		2021
Net income (loss)	$	28,515	$	(17,866)	$	(11,811)
Weighted-average shares outstanding		22,925,497		20,067,969		19,719,485
Weighted-average shares used to compute diluted net loss per share		23,176,169		20,067,969		19,719,485
Net income (loss) per share - Basic	$	1.24	$	(0.89)	$	(0.60)
Net income (loss) per share - Diluted	$	1.23	$	(0.89)	$	(0.60)

Schedule of potentially dilutive securities outstanding


	Year Ended
	December 31,
	2023	2022	2021
Restricted stock units	337,202	590,542	265,616
Common stock options	389,229	615,307	915,224
Performance stock units	17,392	155,618	54,317
Employee stock purchase plan	—	100,506	34,809
Total	743,823	1,461,973	1,269,966

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Accrued Expenses
Warranty	$ 2,357	$ 2,005	$ 1,851
Travel	1,038	1,121
Legal and consulting	611	730
In-transit inventory	401	3,228
Clinical studies	363	276
Sales and use tax	183	147
Other	951	1,733
Total	$ 5,904	$ 9,240

Nature of Business and Operations

12 Months Ended

Dec. 31, 2023

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”) manufactures and distributes medical devices for the treatment of patients with underserved chronic diseases at home. We provide our Flexitouch Plus and Entre Plus systems, which help control symptoms of lymphedema, a chronic progressive medical condition, through our direct sales force for use in the home and sell or rent them through vascular, wound and lymphedema clinics throughout the United States.

On September 8, 2021, we acquired the assets of the AffloVest airway clearance business (“AffloVest Acquisition”) from International Biophysics Corporation (“IBC”), a privately-held company which developed and manufactured AffloVest. AffloVest is a portable, wearable vest that treats patients with chronic respiratory conditions. We sell this device through home medical equipment and durable medical equipment (“DME”) providers throughout the United States.

We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in 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.

On February 27, 2023, we closed on a public offering of 2,875,000 shares of our common stock at a public offering price of $13.00 per share. We received net proceeds from this offering of $34.6 million after deducting underwriting discounts, commissions, and offering expenses.

Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products.

Inventories (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Inventories
Finished goods	$ 7,979	$ 5,100
Component parts and work-in-process	14,548	18,024
Total inventories	$ 22,527	$ 23,124

Inventories (Tables)

12 Months Ended

Dec. 31, 2023

Inventories

Schedule of inventories


(In thousands)	At December 31, 2023		At December 31, 2022
Finished goods	$	7,979	$	5,100
Component parts and work-in-process		14,548		18,024
Total inventories	$	22,527	$	23,124

Basis of Presentation

12 Months Ended

Dec. 31, 2023

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.

The results for the year ended December 31, 2023, 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.

Risks and Uncertainties

Coronavirus (COVID-19)

The United States economy in general and our business specifically have been negatively affected by the COVID-19 pandemic. We have seen adverse impacts as it relates to the decline in the number of patients that healthcare facilities and clinics are able to treat due to enhanced safety protocols, particularly during most of 2021 and during the first quarter of 2022. We have also seen staffing challenges, both in our organization and at the clinics we serve, as another lingering consequence of the COVID-19 pandemic. While we saw some level of recovery in 2022 and 2023, consequences of the pandemic remain uncertain. Although the effects of the COVID-19 pandemic on our operating results continue to subside, the pandemic could still have an unfavorable effect on our financial position, results of operations and cash flows.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Total revenue	$ 274,423	$ 246,785	$ 208,057
Total cost of revenue	79,290	70,809	59,844
Gross profit	195,133	175,976	148,213
Operating expenses
Sales and marketing	107,119	106,418	86,775
Research and development	7,823	7,088	5,659
Reimbursement, general and administrative	62,074	60,796	56,802
Intangible asset amortization and earn-out	76	14,432	739
Total operating expenses	177,092	188,734	149,975
Income (loss) from operations	18,041	(12,758)	(1,762)
Other expense	(2,271)	(2,715)	(531)
Income (loss) before income taxes	15,770	(15,473)	(2,293)
Income tax (benefit) expense	(12,745)	2,393	9,518
Net income (loss)	$ 28,515	$ (17,866)	$ (11,811)
Net income (loss) per common share
Basic (in dollars per share)	$ 1.24	$ (0.89)	$ (0.60)
Diluted (in dollars per share)	$ 1.23	$ (0.89)	$ (0.60)
Weighted-average common shares used to compute net income (loss) per common share
Basic (in shares)	22,925,497	20,067,969	19,719,485
Diluted (in shares)	23,176,169	20,067,969	19,719,485
Sales revenue
Total revenue	$ 239,493	$ 211,345	$ 177,914
Total cost of revenue	66,713	59,619	50,222
Gross profit	172,780	151,726	127,692
Rental revenue
Total revenue	34,930	35,440	30,143
Total cost of revenue	12,577	11,190	9,622
Gross profit	$ 22,353	$ 24,250	$ 20,521

Goodwill and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets

Schedule of finite lived intangible assets


	Weighted-	At December 31, 2023
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	1,018	$	248	$	770
Defensive intangible assets	1 year		1,125		920		205
Customer accounts	—		125		125		—
Customer relationships	11 years		31,000		5,511		25,489
Developed technology	9 years		13,000		2,731		10,269
Subtotal			46,268		9,535		36,733
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			491		—		491
Total intangible assets		$	56,259	$	9,535	$	46,724


	Weighted-	At December 31, 2022
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	897	$	173	$	724
Defensive intangible assets	2 years		1,126		764		362
Customer accounts	< 1 year		125		114		11
Customer relationships	12 years		31,000		3,127		27,873
Developed technology	10 years		13,000		1,550		11,450
Subtotal			46,148		5,728		40,420
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			455		—		455
Total intangible assets		$	56,103	$	5,728	$	50,375

Schedule of future amortization expense


(In thousands)
2024	$	3,793
2025		3,704
2026		3,640
2027		3,631
2028		3,628
Thereafter		18,337
Total	$	36,733

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2023

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 and deposits. Our cash was held primarily in checking accounts and an Institutional Insured Liquid Deposit demand account as of December 31, 2023 and 2022. At times the amount of cash on deposit may exceed the federally insured limit of the bank. Deposit accounts at each of the institutions are insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). At December 31, 2023 and 2022, the Company exceeded FDIC limits at various institutions. The Company has not experienced any losses in such accounts.

Equity Investments

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 (loss). 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 each of December 31, 2023 and 2022, the total carrying value of our equity investments, with no readily determinable fair value, was $0.3 million, 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, 2023 and 2022, we did not have any impairment loss on these investments.

Accounts Receivable

The majority of our accounts receivable and revenue 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.

A portion of 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.

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 accumulated depreciation accounts and the resulting gains or losses are included in income. 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 Flexitouch Plus and Entre Plus systems, and from the sales of our AffloVest product.

Flexitouch Plus and Entre Plus

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 or rental of a product is recognized upon shipment, unless circumstances dictate that control has not yet passed to the customer.

We provide a warranty for these 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 sale or rental of these 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 commercially distribute these 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 revenue 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 Entre Plus systems is determined based on the payment history using the same methodology as our private insurers. A portion of claims for payment for our Flexitouch Plus 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 and rent these 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 purchases or rentals 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 revenue is 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. Rental agreements are recorded as sales-type leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842) (“ASC 842”). Accordingly, as sales-type leases, the transaction price for the entire rental term is recognized upon transfer of control.

AffloVest

The AffloVest device is sold through durable medical equipment providers. Revenue is recognized when control of the promised goods or services is transferred to the distributors, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. When determining whether the distributor has obtained control of the goods or services, we consider any future performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business. Consequently,

revenue from the sale of the AffloVest product is recognized at shipment, unless circumstances dictate that control has not yet passed to the distributor.

Certain of our contracts include volume-based incentives which involve rebates that are negotiated at or prior to the time of sale with the customer and are redeemable only if the customer achieves a specified cumulative level of sales or sales increase. Under these incentive programs, at the time of sale, we determine the most likely amount of the rebate to be paid based on forecasted sales levels. These forecasts are updated at least quarterly for applicable customers, and the transaction price is reduced for the anticipated cost of the rebate. If the forecasted sales for a customer change, the accrual for rebates is adjusted to reflect the new rebates expected to be earned by the customer.

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue sold in the accompanying Consolidated Statements of Operations.

We provide a warranty for the AffloVest products against defects in material and workmanship for a period of five years. 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 sale of these products represents a single performance obligation that is satisfied at a point in time and is short-term in nature.

Advertising

Advertising costs are charged to operations when incurred. Advertising expense was $0.1 million for each of the years ended December 31, 2023, 2022 and 2021.

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

Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in total revenue in the accompanying Consolidated Statements of Operations. Shipping and handling costs incurred for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of revenue in the accompanying Consolidated Statements of Operations.

Product Warranty

We provide a warranty for our products against defects in material and workmanship for a period of one to five years. 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, such as incurring higher than anticipated warranty claims, 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 (see Note 8 – “Goodwill and Intangible Assets”).

Goodwill

Goodwill represents the excess of the purchase price paid over the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of a business. Goodwill is not amortized, but is tested for impairment at least annually or on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We perform our annual assessment of goodwill for impairment as of July 1st of each fiscal year. See Note 8 – “Goodwill and Intangible Assets” for additional information.

Stock-Based Compensation

Stock options are valued using the Black-Scholes option-pricing model. The Black-Scholes valuation model 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 13 – “Stockholders’ Equity”).

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 basis 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 15 – “Income Taxes”). Changes in tax rates are reflected in the tax provision as they occur.

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential stock-based awards outstanding during the period using the treasury stock method. Dilutive potential stock-based awards include outstanding common stock options, time- and performance-based restricted stock units and employee stock purchase plan shares.

Business Segments

We operate and report in only one operating and reportable segment. Our chief operating decision maker does not use financial information below revenue to allocate resources.

Accounting Pronouncement Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which requires entities to enhance disclosures around segment reporting. The guidance is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” which requires entities to enhance disclosures around income taxes. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect this standard will have on its consolidated financial statements and related disclosures.

Recently Adopted Accounting Pronouncement

In December 2022, the FASB issued ASU No. 2022-06, “Reference Rate Reform (Topic 848) — Facilitation of the Effect of Reference Rate Reform on Financial Reporting” (“ASU 2022-06”), which provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU deferred the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. We adopted this ASU in the quarter ended June 30, 2023. The adoption of this standard did not have a significant impact on the Company’s financial statements.

Stockholders' Equity - Employee Stock Purchase Plan (Details) - USD ($) $ in Thousands		12 Months Ended
	Jan. 01, 2024	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021	Apr. 27, 2017
Stockholders' Equity
Stock-based compensation expense		$ 7,547	$ 9,600	$ 10,173
2016 Plan
Stockholders' Equity
Shares reserved		5,809,744
Increase in number of shares reserved and available for issuance	1,180,019
Employee Stock Purchase Plan
Stockholders' Equity
Purchase price of common stock under plan (as a percent)		85.00%
Offering period (in months)		6 months
Shares reserved		1,369,868			1,600,000
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	236,003
Stock-based compensation expense		$ 600	$ 800	$ 800

Accrued Expenses

12 Months Ended

Dec. 31, 2023

Accrued Expenses

Accrued Expenses

Note 9. Accrued Expenses

Accrued expenses consisted of the following:


(In thousands)	At December 31, 2023		At December 31, 2022
Warranty	$	2,357	$	2,005
Travel		1,038		1,121
Legal and consulting		611		730
In-transit inventory		401		3,228
Clinical studies		363		276
Sales and use tax		183		147
Other		951		1,733
Total	$	5,904	$	9,240

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2023

Accrued Expenses

Schedule of Accrued Expenses


(In thousands)	At December 31, 2023		At December 31, 2022
Warranty	$	2,357	$	2,005
Travel		1,038		1,121
Legal and consulting		611		730
In-transit inventory		401		3,228
Clinical studies		363		276
Sales and use tax		183		147
Other		951		1,733
Total	$	5,904	$	9,240

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2023

Income Taxes

Schedule of provision (benefit) for income tax expense


	Year Ended December 31,
(In thousands)	2023		2022		2021
Current income taxes, Federal	$	5,045	$	1,838	$	(1,274)
Current income taxes, State		1,440		637		214
		6,485		2,475		(1,060)

Deferred income taxes, Federal		(19,046)		(32)		7,874
Deferred income taxes, State		(332)		—		2,356
		(19,378)		(32)		10,230

Unrecognized tax benefit, Federal		148		(50)		348
Unrecognized tax benefit, State		—		—		—
		148		(50)		348

Total (benefit) provision for income taxes	$	(12,745)	$	2,393	$	9,518

Schedule of components of the Company's deferred tax assets


	At December 31,
(In thousands)	2023		2022
Deferred tax assets:
Operating lease liability	$	5,394	$	5,945
Net operating loss carryforwards		50		179
Accounts receivable and inventory reserves		7,065		6,013
Stock-based compensation		5,144		4,886
Accrued liabilities		2,056		1,914
Warranty reserves		1,025		1,071
Intangible assets		1,645		2,947
Business credits		630		536
R&D expenses		2,189		1,103
Other		309		183
Total deferred tax assets		25,507		24,777

Deferred tax liabilities:
Right-of-use asset		(4,799)		(5,425)
Fixed assets		(975)		(1,080)
Prepaid expenses		(232)		(251)
Other		(123)		(186)
Total deferred tax liabilities		(6,129)		(6,942)

Valuation allowance		—		(17,835)

Net deferred tax assets	$	19,378	$	—

Schedule of reconciliation of income tax expense (benefit)


	Year Ended December 31,
	2023		2022		2021
Tax expense at statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	5.2		4.1		(1.1)
Executive compensation	0.9		—		(14.2)
Meals and entertainment	2.1		—		—
Employee Stock Purchase Plan	0.9		(1.0)		(7.5)
Federal business credits	(1.5)		1.6		10.9
Valuation allowance	(113.3)		(37.4)		(525.0)
Return to provision	0.5		(0.2)		(6.5)
Research and development credits	—		—		60.2
Deferred reprice - state	0.2		0.9		3.3
Unrecognized tax benefits	0.3		(0.3)		(2.2)
Excess benefit on non-qualified stock options and RSUs	2.3		(3.7)		47.2
Interest and penalties	0.1		—		(0.7)
162(m) write down	1.6		—		—
Other	(1.1)		(0.5)		(0.5)
Net effective rate	(80.8)	%	(15.5)	%	(415.1)	%

Schedule of unrecognized tax benefits ("UTB")


	December 31,
(In thousands)	2023		2022		2021
Balance beginning of the year	$	612	$	522	$	—
Gross change — tax positions in prior year		90		90		522
Balance end of the year	$	702	$	612	$	522

Commitments and Contingencies

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies

Commitments and Contingencies

Note 12. Commitments and Contingencies

Lease Obligations

We lease property and equipment under operating leases, typically with terms greater than 12 months, and determine if an arrangement contains a lease at inception. In general, an arrangement contains a lease if there is an identified asset and we have the right to direct the use of and obtain substantially all of the economic benefit from the use of the identified asset. We record an operating lease liability at the present value of lease payments over the lease term on the commencement date. The related right of use (“ROU”) operating lease asset reflects rental escalation clauses, as well as renewal options and/or termination options. The exercise of lease renewal and/or termination options are at our discretion and are included in the determination of the lease term and lease payment obligations when it is deemed reasonably certain that the option will be exercised. When available, we use the rate implicit in the lease to discount lease payments to present value; however, certain leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

We classify our leases as buildings, vehicles or computer and office equipment and do not separate lease and nonlease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Consolidated Balance Sheets.

None of our lease agreements contain material restrictive covenants or residual value guarantees.

Buildings

We lease certain office and warehouse space at various locations in the United States where we provide services. These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Consolidated Balance Sheets, with rent expense recognized on a straight-line basis over the term of the lease. The remaining lease terms vary from approximately one to eight years as of December 31, 2023.

We entered into a lease (“initial lease”) in October 2018, for approximately 80,000 square feet of office space for our new corporate headquarters in Minneapolis, Minnesota. In December 2018, we amended the

initial lease to add approximately 29,000 square feet of additional office space, which is accounted for as a separate lease (“second lease”) in accordance with ASU No. 2016-02, “Leases” (Topic 842) (“ASC 842”). In December 2019, we further amended the lease which extended the expiration date of the initial lease, extended the expiration date of and added approximately 4,000 square feet to the second lease, as well as added approximately 37,000 square feet of additional office space, accounted for as a separate lease (“third lease”) in accordance with ASC 842. The portion of the space covered under the initial lease was placed in service in September 2019. The portion of the space covered under the second lease commenced in September 2020. Finally, the portion of the space covered under the third lease commenced in September 2021. The three portions were recognized as an operating lease and included in the ROU operating lease assets and operating lease liabilities on the Consolidated Balance Sheets.

Vehicles

We lease vehicles for certain members of our field sales organization under a vehicle fleet program whereby the initial, noncancelable lease is for a term of 367 days, thus more than one year. Subsequent to the initial term, the lease becomes a month-to-month, cancelable lease. As of December 31, 2023, we did not have any vehicles with agreements within the initial, noncancelable lease term that are recorded as ROU operating lease assets and operating lease liabilities. As of December 31, 2022, we had approximately two vehicles with agreements within the initial, noncancelable lease term that were recorded as ROU operating lease assets and operating lease liabilities.

Computer and Office Equipment

We also have operating lease agreements for certain computer and office equipment. The remaining lease terms as of December 31, 2023, ranged from less than one year to approximately four years with fixed monthly payments that are included in the ROU operating lease assets and operating lease liabilities. The leases provide an option to purchase the related equipment at fair market value at the end of the lease. The leases will automatically renew as a month-to-month rental at the end of the lease if the equipment is not purchased or returned.

Lease Position, Undiscounted Cash Flow and Supplemental Information

The table below presents information related to our ROU operating lease assets and operating lease liabilities that we have recorded:


(In thousands)	At December 31, 2023		At December 31, 2022
Right of use operating lease assets	$	19,128	$	21,322

Operating lease liabilities:
Current	$	2,807	$	2,500
Non-current		18,436		20,866
Total	$	21,243	$	23,366

Operating leases:
Weighted average remaining lease term		6.7 years		7.7 years
Weighted average discount rate		4.3%		4.2%

	Year Ended December 31,
	2023		2022
Supplemental cash flow information for our operating leases:
Cash paid for operating lease liabilities	$	3,453	$	3,575
Non-cash right of use assets obtained in exchange for new operating lease obligations	$	293	$	49

The table below reconciles the undiscounted cash flows under the operating lease liabilities recorded on the Consolidated Balance Sheets for the periods presented:


(In thousands)
2024	$	3,539
2025		3,644
2026		3,715
2027		3,210
2028		3,185
Thereafter		6,939
Total minimum lease payments		24,232
Less: Amount of lease payments representing interest		(2,989)
Present value of future minimum lease payments		21,243
Less: Current obligations under operating lease liabilities		(2,807)
Non-current obligations under operating lease liabilities	$	18,436

Operating lease costs were $3.6 million, $3.8 million and $3.6 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Major Vendors

We had purchases from one vendor that accounted for 25% of our total purchases for the year ended December 31, 2023, and purchases from one vendor that accounted for 18% of total purchases for the year ended December 31, 2022.

Purchase Commitment

We issued purchase orders in 2023 totaling $24.3 million for goods that we expect to receive within the next year.

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. We recorded an expense related to our discretionary contributions to the 401(k) plan of $1.5 million, $1.5 million and $1.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Legal Proceedings

From time to time, we are subject to various claims and legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

On May 24, 2022, a stockholder derivative lawsuit was filed in the United States District Court for the District of Minnesota, purportedly on behalf of the Company against certain of our present and former officers and directors and the Company (as a nominal defendant), captioned Jack Weaver v. Moen, et al., File No. 0:22-cv-01403-NEB-BRT (the “Weaver Lawsuit”). The Weaver Lawsuit generally arises out of the same subject matter as a previously settled securities class action captioned Brian Mart v. Tactile Sys. Tech., Inc., et al., File No. 0:20-cv-02074-NEB-BRT (D. Minn.) (the “Mart Lawsuit”), which alleged, inter alia, that we and eight of our former officers and directors made materially false or misleading statements about our business, operational and compliance policies. The Weaver Lawsuit alleges the following claims under the Exchange Act and common law: (1) that the director defendants made materially false or misleading public statements in proxy statements in violation of Section 14(a) of the Exchange Act; (2) that the director defendants’ stock and option awards should be rescinded under Section 29(b) of the Exchange Act; (3) that the officer defendants’ employment contract compensation should be rescinded under Section 29(b) of the Exchange Act; (4) that certain officer defendants are liable for contribution arising out of any liability incurred in the Mart Lawsuit, under

Sections 10(b) and 21D of the Exchange Act; (5) that the individual defendants breached their fiduciary duties; and (6) that the individual defendants were unjustly enriched. The lawsuit seeks unspecified damages. In August 2022, the matter was transferred to the United States District Court for the District of Delaware by order granting the Parties Stipulation to Transfer. On February 10, 2023, we filed a motion to dismiss the action. The plaintiff filed an Amended Complaint on March 3, 2023. On March 31, 2023, we filed a motion to dismiss the Amended Complaint, which is pending. On July 31, 2023, the plaintiff filed a Joint Notice of Preliminary Settlement indicating that the parties have reached a non-binding settlement-in-principal on most of the material terms that would resolve all claims between the parties and requested that the Court temporarily stay all deadlines, hearings, and conferences while the parties continue to finalize settlement.

Property and Equipment (Tables)

12 Months Ended

Dec. 31, 2023

Property and Equipment

Schedule of components of property and equipment


	At December 31,
(In thousands)	2023		2022
Equipment	$	4,459	$	8,274
Tooling		4,555		3,390
Furniture and fixtures		2,068		2,087
Leasehold improvements		1,529		1,493
Demonstration equipment		896		1,012
Construction in progress		1,271		606
Subtotal		14,778		16,862
Less: accumulated depreciation		(8,583)		(10,785)
Property and equipment, net	$	6,195	$	6,077

Net Income (Loss) Per Common Share - Basic and Diluted Net income (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Net Income (Loss) Per Common Share
Net Income (Loss)	$ 28,515	$ (17,866)	$ (11,811)
Weighted-average shares outstanding	22,925,497	20,067,969	19,719,485
Weighted-average shares used to compute diluted net loss per share	23,176,169	20,067,969	19,719,485
Net income (loss) per share - Basic	$ 1.24	$ (0.89)	$ (0.60)
Net income (loss) per share - Diluted	$ 1.23	$ (0.89)	$ (0.60)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Fair Value Measurements

Fair Value Measurements

Note 17. Fair Value Measurements

We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3).

As of December 31, 2023, our obligations under the AffloVest earn-out arrangements had been paid in full. Prior to the determination of the actual amount of the earn-out, the earn-out liability was valued by employing a Monte Carlo Simulation model in a risk-neutral framework, which is a Level 3 input. The underlying simulated variable included recognized revenue. The recognized revenue volatility estimate was based on a study of historical asset volatility for a set of comparable public companies. The model included other assumptions including the market price of risk, which was calculated as the weighted average cost of capital less the long-term risk-free rate. The earn-out liability was adjusted to fair value at each reporting date until the end of the earn-out period, which was September 30, 2023. Changes in fair value were included in intangible asset amortization and earn-out expenses in our Consolidated Statements of Operations.

Changes in the earn-out liability measured at fair value using Level 3 inputs were as follows:


(In thousands)
Earn-out liability at December 31, 2022	$	13,050
Payments on earn-out		(10,575)
Fair value adjustments		(2,475)
Earn-out liability at December 31, 2023	$	—


(In thousands)
Earn-out liability at December 31, 2021	$	6,200
Payment on earn-out		(5,000)
Fair value adjustments		11,850
Earn-out liability at December 31, 2022	$	13,050

On May 25, 2023, the Company paid $5.0 million, plus an imputed interest payment of $250,000, relating to the initial earn-out. Subsequent to September 30, 2023, it was determined that the calculated amount of the second earn-out payment was $5.6 million, which was paid by the Company on November 28, 2023.

There is no remaining contingent earn-out liability as of December 31, 2023. The following provides information regarding fair value measurements for our remaining contingent earn-out liability as of December 31, 2022, according to the three-level fair value hierarchy:


	At December 31, 2022
	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:
Earn-out liability	$	—	$	—	$	8,050	$	8,050
Total	$	—	$	—	$	8,050	$	8,050

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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Warranty Reserves

12 Months Ended

Dec. 31, 2023

Warranty Reserves

Warranty Reserves

Note 10. Warranty Reserves

The activity in the warranty reserve during and as of the end of the years presented was as follows:


	Year Ended
	December 31,
(In thousands)	2023		2022			2021
Beginning balance	$	4,212	$	4,959	$	4,841
Warranty provision		4,611		2,047		2,606
Processed warranty claims		(4,785)		(2,794)		(2,488)
Ending balance	$	4,038	$	4,212	$	4,959

Accrued warranty reserve, current	$	2,357	$	2,005	$	1,851
Accrued warranty reserve, non-current		1,681		2,207		3,108
Total accrued warranty reserve	$	4,038	$	4,212	$	4,959

Acquisitions (Details)	Nov. 04, 2021 USD ($)	Sep. 08, 2021 USD ($)
Reimbursement, general and administrative expenses
Acquisitions
Transaction costs		$ 800,000
AffloVest APA \| Second earn-out amendment
Acquisitions
Contingent consideration	$ 5,600,000
AffloVest APA
Acquisitions
Purchase price		80,000,000.0
Escrow account		500,000
Working capital adjustments		200,000
Amount released to IBC		300,000
Business revenue to exceed base revenue, Multiplier	1.5
Earn-out liability		$ 6,400,000
Earn-out liability, asset acquisition	$ 10,000,000.0
AffloVest APA \| Earn-out period exceed Base Revenues from October 1, 2021 to September 30, 2022
Acquisitions
Business revenue to exceed base revenue, Multiplier		1.5
AffloVest APA \| Earn-out period exceed Base Revenues from October 1, 2022 to September 30, 2023
Acquisitions
Business revenue to exceed base revenue, Multiplier		1.5
AffloVest APA \| Earn-out period on or before November 28,2022
Acquisitions
Earn-out liability, asset acquisition	5,000,000.0
AffloVest APA \| Earn-out period on or before May 26, 2023
Acquisitions
Earn-out liability, asset acquisition	5,000,000.0
Imputed interest payment	$ 250,000
AffloVest APA \| Second earn-out amendment
Acquisitions
Business revenue to exceed base revenue, Multiplier	3.0
Earn-out liability, asset acquisition	$ 10,000,000.0
AffloVest APA \| Maximum
Acquisitions
Total consideration transferred		$ 100,000,000.0
AffloVest APA \| Maximum \| Earn-out period exceed Base Revenues from October 1, 2021 to September 30, 2022
Acquisitions
Earn-out liability		10,000,000.0
AffloVest APA \| Maximum \| Earn-out period exceed Base Revenues from October 1, 2022 to September 30, 2023
Acquisitions
Earn-out liability, asset acquisition		$ 10,000,000.0

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Cash flows from operating activities
Net income (loss)	$ 28,515	$ (17,866)	$ (11,811)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	6,539	6,268	3,681
Deferred income taxes	(19,378)	(32)	10,230
Stock-based compensation expense	7,547	9,600	10,173
Loss on disposal of property and equipment and intangibles	3	20	20
Change in fair value of earn-out liability	(2,475)	11,850	(200)
Changes in assets and liabilities, net of acquisition:
Accounts receivable	11,653	(5,348)	(5,629)
Net investment in leases	1,935	(3,648)	(1,774)
Inventories	597	(3,907)	972
Income taxes	(721)	2,270	(2,294)
Prepaid expenses and other assets	72	(950)	(1,489)
Right of use operating lease assets	71	168	614
Accounts receivable, non-current	12,125	(10,214)	(3,414)
Accounts payable	(3,853)	4,961	826
Accrued payroll and related taxes	(311)	4,961	551
Accrued expenses and other liabilities	(6,464)	7,076	2,175
Net cash provided by operating activities	35,855	5,209	2,631
Cash flows from investing activities
Payments related to acquisition			(79,829)
Purchases of property and equipment	(2,324)	(1,780)	(2,103)
Proceeds from sale of property and equipment		11
Intangible assets expenditures	(157)	(140)	(252)
Net cash used in investing activities	(2,481)	(1,909)	(82,184)
Cash flows from financing activities
Proceeds from issuance of note payable	8,250		30,000
Proceeds from revolving line of credit			25,000
Payment on earn-out	(10,575)	(5,000)
Payments on note payable	(3,000)	(6,000)
Payment on revolving line of credit	(25,000)
Payments of deferred debt issuance costs	(125)	(39)	(188)
Taxes paid for net share settlement of performance and restricted stock units			(1,173)
Proceeds from exercise of common stock options	14	153	3,976
Proceeds from the issuance of common stock from the employee stock purchase plan	1,541	1,286	2,312
Proceeds from issuance of common stock at market	34,625
Net cash provided by (used in) financing activities	5,730	(9,600)	59,927
Net increase (decrease) in cash and cash equivalents	39,104	(6,300)	(19,626)
Cash and cash equivalents - beginning of period	21,929	28,229	47,855
Cash and cash equivalents - end of period	61,033	21,929	28,229
Supplemental cash flow disclosure
Cash paid for interest	4,560	2,186	130
Cash paid for taxes	5,815	44	1,593
Capital expenditures incurred but not yet paid	$ 528	$ 38	$ 23

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit).	Total
Balances at the beginning at Dec. 31, 2020	$ 19	$ 104,675	$ 20,056	$ 124,750
Balances at the beginning (in shares) at Dec. 31, 2020	19,492,718
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		10,173		10,173
Exercise of common stock options and vesting of performance and restricted stock units	$ 1	3,975		3,976
Exercise of common stock options and vesting of performance and restricted stock units (in shares)	333,763
Taxes paid for net share settlement of restricted stock units		(1,173)		(1,173)
Taxes paid for net share settlement of restricted stock units (in shares)	(22,357)
Common shares issued for employee stock purchase plan		2,312		2,312
Common shares issued for employee stock purchase plan (in shares)	73,662
Net income (loss) for the period			(11,811)	(11,811)
Balances at the end at Dec. 31, 2021	$ 20	119,962	8,245	128,227
Balances at the end (in shares) at Dec. 31, 2021	19,877,786
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		9,600		9,600
Exercise of common stock options and vesting of performance and restricted stock units		153		153
Exercise of common stock options and vesting of performance and restricted stock units (in shares)	225,282
Common shares issued for employee stock purchase plan		1,286		1,286
Common shares issued for employee stock purchase plan (in shares)	149,609
Net income (loss) for the period			(17,866)	(17,866)
Balances at the end at Dec. 31, 2022	$ 20	131,001	(9,621)	121,400
Balances at the end (in shares) at Dec. 31, 2022	20,252,677
Increase (Decrease) in Stockholders' Equity
Stock-based compensation		7,547		7,547
Exercise of common stock options and vesting of performance and restricted stock units	$ 1	13		14
Exercise of common stock options and vesting of performance and restricted stock units (in shares)	283,624
Sale of common stock from follow-on public offering, net of offering expenses	$ 3	34,622		34,625
Sale of common stock from follow-on public offering, net of offering expenses (in shares)	2,875,000
Common shares issued for employee stock purchase plan		1,541		1,541
Common shares issued for employee stock purchase plan (in shares)	189,283
Net income (loss) for the period			28,515	28,515
Balances at the end at Dec. 31, 2023	$ 24	$ 174,724	$ 18,894	$ 193,642
Balances at the end (in shares) at Dec. 31, 2023	23,600,584

Commitments and Contingencies - Lease Obligations (Details)	12 Months Ended
	Dec. 31, 2023 item	Dec. 31, 2019 ft²	Dec. 31, 2018 ft²	Oct. 31, 2018 ft²
Commitments and Contingencies
Number of vehicles with agreements within the initial, noncancelable lease term \| item	2
Minimum
Commitments and Contingencies
Lease terms	12 months
Building \| Minimum
Commitments and Contingencies
Lease terms	1 year
Building \| Maximum
Commitments and Contingencies
Lease terms	8 years
Vehicles
Commitments and Contingencies
Lease terms	367 days
Equipment
Commitments and Contingencies
Option to renew	true
Equipment \| Minimum
Commitments and Contingencies
Lease terms	1 year
Equipment \| Maximum
Commitments and Contingencies
Lease terms	4 years
Initial lease
Commitments and Contingencies
Area of office space				80,000
Second lease
Commitments and Contingencies
Area of office space			29,000
Additional office space added to the lease		4,000
Third lease
Commitments and Contingencies
Additional office space added to the lease		37,000

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2023	Dec. 31, 2022
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	23,600,584	20,252,677
Common stock, shares, outstanding	23,600,584	20,252,677

Property and Equipment

12 Months Ended

Dec. 31, 2023

Property and Equipment

Property and Equipment

Note 7. Property and Equipment

Property and equipment consisted of the following:


	At December 31,
(In thousands)	2023		2022
Equipment	$	4,459	$	8,274
Tooling		4,555		3,390
Furniture and fixtures		2,068		2,087
Leasehold improvements		1,529		1,493
Demonstration equipment		896		1,012
Construction in progress		1,271		606
Subtotal		14,778		16,862
Less: accumulated depreciation		(8,583)		(10,785)
Property and equipment, net	$	6,195	$	6,077

Depreciation expense was $2.7 million, $2.5 million and $2.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 15. Income Taxes

The (benefit) provision for income tax expense consisted of the following:


	Year Ended December 31,
(In thousands)	2023		2022		2021
Current income taxes, Federal	$	5,045	$	1,838	$	(1,274)
Current income taxes, State		1,440		637		214
		6,485		2,475		(1,060)

Deferred income taxes, Federal		(19,046)		(32)		7,874
Deferred income taxes, State		(332)		—		2,356
		(19,378)		(32)		10,230

Unrecognized tax benefit, Federal		148		(50)		348
Unrecognized tax benefit, State		—		—		—
		148		(50)		348

Total (benefit) provision for income taxes	$	(12,745)	$	2,393	$	9,518

The components of our deferred tax assets and liabilities were as follows:


	At December 31,
(In thousands)	2023		2022
Deferred tax assets:
Operating lease liability	$	5,394	$	5,945
Net operating loss carryforwards		50		179
Accounts receivable and inventory reserves		7,065		6,013
Stock-based compensation		5,144		4,886
Accrued liabilities		2,056		1,914
Warranty reserves		1,025		1,071
Intangible assets		1,645		2,947
Business credits		630		536
R&D expenses		2,189		1,103
Other		309		183
Total deferred tax assets		25,507		24,777

Deferred tax liabilities:
Right-of-use asset		(4,799)		(5,425)
Fixed assets		(975)		(1,080)
Prepaid expenses		(232)		(251)
Other		(123)		(186)
Total deferred tax liabilities		(6,129)		(6,942)

Valuation allowance		—		(17,835)

Net deferred tax assets	$	19,378	$	—

A reconciliation of income tax (benefit) expense to the statutory federal tax rate is as follows:


	Year Ended December 31,
	2023		2022		2021
Tax expense at statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	5.2		4.1		(1.1)
Executive compensation	0.9		—		(14.2)
Meals and entertainment	2.1		—		—
Employee Stock Purchase Plan	0.9		(1.0)		(7.5)
Federal business credits	(1.5)		1.6		10.9
Valuation allowance	(113.3)		(37.4)		(525.0)
Return to provision	0.5		(0.2)		(6.5)
Research and development credits	—		—		60.2
Deferred reprice - state	0.2		0.9		3.3
Unrecognized tax benefits	0.3		(0.3)		(2.2)
Excess benefit on non-qualified stock options and RSUs	2.3		(3.7)		47.2
Interest and penalties	0.1		—		(0.7)
162(m) write down	1.6		—		—
Other	(1.1)		(0.5)		(0.5)
Net effective rate	(80.8)	%	(15.5)	%	(415.1)	%

A reconciliation of unrecognized tax benefits (“UTB”) is as follows:


	December 31,
(In thousands)	2023		2022		2021
Balance beginning of the year	$	612	$	522	$	—
Gross change — tax positions in prior year		90		90		522
Balance end of the year	$	702	$	612	$	522

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.

As of December 31, 2023, the Company had approximately $50 thousand of state net operating loss ("NOL") carryforwards. A portion of the state NOL carry forward amounts have begun to expire in the current year. The state NOL carryforward amounts expire beginning in tax years 2027 if not utilized.

The Company is 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 2019 are closed to examination. 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 Consolidated Statement of Operations. The Company is not under exam in any jurisdictions.

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 the 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.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. As of December 31, 2023, in part because in the current year we achieved three years of cumulative pretax income in the U.S. federal tax jurisdiction, management determined that there was sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes of $19.4 million are realizable. We therefore reduced the valuation allowance related to the future realization of deferred tax assets accordingly.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Income Taxes
Current income taxes, Federal	$ 5,045	$ 1,838	$ (1,274)
Current income taxes, State	1,440	637	214
Current income taxes	6,485	2,475	(1,060)
Deferred income taxes, Federal	(19,046)	(32)	7,874
Deferred income taxes, State	(332)		2,356
Deferred income taxes	(19,378)	(32)	10,230
Unrecognized tax benefit	148	(50)	348
Total (benefit) provision for income taxes	(12,745)	2,393	$ 9,518
Additional deferred taxes	19,400
Components of Deferred Tax Assets
Operating lease liability	5,394	5,945
Net operating loss carryforwards	50	179
Accounts receivable and inventory reserves	7,065	6,013
Stock-based compensation	5,144	4,886
Accrued liabilities	2,056	1,914
Warranty reserves	1,025	1,071
Intangible assets	1,645	2,947
Business credits	630	536
R&D expenses	2,189	1,103
Other	309	183
Total deferred tax assets	25,507	24,777
Deferred tax liabilities:
Right-of-use asset	(4,799)	(5,425)
Fixed assets	(975)	(1,080)
Prepaid expenses	(232)	(251)
Other	(123)	(186)
Total deferred tax liabilities	(6,129)	(6,942)
Valuation allowance		$ (17,835)
Net deferred tax assets	$ 19,378
Effective Income Tax Rate Reconciliation, Percent
Tax expense at statutory rate	21.00%	21.00%	21.00%
State income taxes, net of federal benefit	5.20%	4.10%	(1.10%)
Executive compensation	0.90%		(14.20%)
Meals and entertainment	2.10%
Employee Stock Purchase Plan	0.90%	(1.00%)	(7.50%)
Federal business credits	(1.50%)	1.60%	10.90%
Valuation allowance	(113.30%)	(37.40%)	(525.00%)
Return to provision	0.50%	(0.20%)	(6.50%)
Research and development credits			60.20%
Deferred reprice - state	0.20%	0.90%	3.30%
Unrecognized tax benefits	0.30%	(0.30%)	(2.20%)
Excess benefit on non-qualified stock options and RSUs	2.30%	(3.70%)	47.20%
Interest and penalties	0.10%		(0.70%)
162M write down	1.60%
Other	(1.10%)	(0.50%)	(0.50%)
Net effective rate	(80.80%)	(15.50%)	(415.10%)
Reconciliation of unrecognized tax benefits
Balance beginning of the year	$ 612	$ 522
Gross change - tax positions in prior year	90	90	$ 522
Balance end of the year	702	612	522
U.S. federal
Income Taxes
Unrecognized tax benefit	148	$ (50)	$ 348
State
Components of Deferred Tax Assets
Net operating loss carryforwards	$ 50,000

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2023	Feb. 16, 2024	Jun. 30, 2023
Document and Entity Information
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2023
Document Transition Report	false
Entity File Number	001-37799
Entity Registrant Name	Tactile Systems Technology, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	41-1801204
Entity Address, Address Line One	3701 Wayzata Blvd, Suite 300
Entity Address, City or Town	Minneapolis
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55416
City Area Code	612
Local Phone Number	355-5100
Title of 12(b) Security	Common Stock, Par Value $0.001 Per Share
Trading Symbol	TCMD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
ICFR Auditor Attestation Flag	true
Document Financial Statement Error Correction [Flag]	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		23,600,584
Auditor Name	GRANT THORNTON LLP
Auditor Firm ID	248
Auditor Location	Minneapolis, Minnesota
Entity Central Index Key	0001027838
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	FY
Amendment Flag	false
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Public Float			$ 581,529,146

Stockholders' Equity - Stock-Based Compensation (Details) $ / shares in Units, $ in Thousands			12 Months Ended
	Feb. 27, 2023 USD ($) $ / shares shares	Aug. 02, 2016 USD ($) shares	Dec. 31, 2023 USD ($) shares	Dec. 31, 2022 USD ($)	Dec. 31, 2021 USD ($)
Stock-based compensation
Compensation expense			$ 7,547	$ 9,600	$ 10,173
Net proceeds received after deducting underwriting discounts, commissions, and offering expenses			34,625
Conversion of preferred stock to common stock (in shares) \| 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 \| shares		2,354,323
Follow-On Public Offering
Stock-based compensation
Sale of common stock from follow-on public offering, net of offering expenses (in shares) \| shares	2,875,000
Stock price \| $ / shares	$ 13.00
Net proceeds received after deducting underwriting discounts, commissions, and offering expenses	$ 34,600
Series B Preferred Stock
Stock-based compensation
Preferred stock to common stock conversion ratio		1
Number of new stock issued to pay accrued stock dividends relating to initial offering price \| shares		956,842
Series A Preferred Stock
Stock-based compensation
Preferred stock to common stock conversion ratio		1.03
Payment of dividends		$ 100
Cumulative accrued dividends		$ 8,200
Cost of revenue.
Stock-based compensation
Compensation expense			420	367	433
Sales and marketing expenses
Stock-based compensation
Compensation expense			2,985	4,060	4,069
Research and development expenses
Stock-based compensation
Compensation expense			133	226	314
Reimbursement, general and administrative expenses
Stock-based compensation
Compensation expense			$ 4,009	$ 4,947	$ 5,357
2016 Plan
Stock-based compensation
Number of shares authorized \| shares			4,800,000
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 \| shares			2,500,000
Shares available for future issuance \| shares			5,809,744

Net Income (Loss) Per Common Share - Antidilutive Securities Excluded From Computation of Earnings Per Share (Details) - shares	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	743,823	1,461,973	1,269,966
Restricted stock units
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	337,202	590,542	265,616
Common stock options
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	389,229	615,307	915,224
Performance stock units
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share	17,392	155,618	54,317
Employee stock purchase plan
Net Income (Loss) Per Common Share
Antidilutive securities excluded from computation of earnings per share		100,506	34,809

Acquisitions - Allocation of Purchase Price (Details) - USD ($) $ in Thousands	Sep. 08, 2021	Dec. 31, 2023	Dec. 31, 2022
Acquisitions
Finite lived intangible assets, Allocated Fair Value		$ 36,733	$ 40,420
Indefinite lived intangible assets excluding goodwill, Allocated fair value		56,259	56,103
Total intangible assets (Net)	$ 53,500	46,724	50,375
Weighted average amortization period	12 years 3 months 18 days
AffloVest APA
Acquisitions
Total intangible assets (Net)	$ 53,500
Customer relationships
Acquisitions
Finite lived intangible assets, Allocated Fair Value	$ 31,000	25,489	27,873
Estimated Useful Life	13 years
Developed technology
Acquisitions
Finite lived intangible assets, Allocated Fair Value	$ 13,000	$ 10,269	$ 11,450
Estimated Useful Life	11 years
Tradenames
Acquisitions
Indefinite lived intangible assets excluding goodwill, Allocated fair value	$ 9,500

Warranty Reserves (Tables)

12 Months Ended

Dec. 31, 2023

Warranty Reserves

Schedule of warranty reserves


	Year Ended
	December 31,
(In thousands)	2023		2022			2021
Beginning balance	$	4,212	$	4,959	$	4,841
Warranty provision		4,611		2,047		2,606
Processed warranty claims		(4,785)		(2,794)		(2,488)
Ending balance	$	4,038	$	4,212	$	4,959

Accrued warranty reserve, current	$	2,357	$	2,005	$	1,851
Accrued warranty reserve, non-current		1,681		2,207		3,108
Total accrued warranty reserve	$	4,038	$	4,212	$	4,959

Summary of Significant Accounting Policies - Segment (Details)	12 Months Ended
	Dec. 31, 2023 segment
Summary of Significant Accounting Policies
Number of operating segment	1
Number of reportable segment	1

Accounts Receivable (Details) - item	12 Months Ended
Accounts Receivable (Details) - item	Dec. 31, 2023	Dec. 31, 2022
Accounts Receivable
Number of insurers	2	2
Insurer One \| Customer Concentration Risk \| Accounts Receivable
Accounts Receivable
Percentage of concentration	36.00%	45.00%
Insurer One \| Customer Concentration Risk \| Revenue
Accounts Receivable
Percentage of concentration	24.00%	19.00%
Insurer Two \| Customer Concentration Risk \| Accounts Receivable
Accounts Receivable
Percentage of concentration	14.00%	21.00%
Insurer Two \| Customer Concentration Risk \| Revenue
Accounts Receivable
Percentage of concentration	1.00%	6.00%

Revenue (Tables)

12 Months Ended

Dec. 31, 2023

Revenue.

Summary of revenue disaggregated by product


	Year Ended
	December 31,
(In thousands)	2023		2022		2021
Revenue
Lymphedema products	$	241,721	$	212,266	$	202,913
Airway clearance products		32,702		34,519		5,144
Total	$	274,423	$	246,785	$	208,057

Percentage of total revenue
Lymphedema products		88%		86%		98%
Airway clearance products		12%		14%		2%
Total		100%		100%		100%

Summary of revenue by channel


	Year Ended
	December 31,
(In thousands)	2023		2022		2021
Private insurers and other payers	$	148,901	$	139,087	$	141,377
Veterans Administration		27,003		25,507		25,654
Medicare		65,817		47,672		35,882
Durable medical equipment distributors		32,702		34,519		5,144
Total	$	274,423	$	246,785	$	208,057

Sales-type lease revenue and the associated cost of goods sold


	Year Ended December 31,
(In thousands)	2023		2022		2021
Sales-type lease revenue	$	34,930	$	35,440	$	30,143
Cost of sales-type lease revenue		12,577		11,190		9,622
Gross profit	$	22,353	$	24,250	$	20,521

Property and Equipment (Details) - USD ($) $ in Thousands	12 Months Ended
Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Property and Equipment
Subtotal	$ 14,778	$ 16,862
Less: accumulated depreciation	(8,583)	(10,785)
Property and equipment, net	6,195	6,077
Depreciation expense	2,700	2,500	$ 2,300
Equipment
Property and Equipment
Subtotal	4,459	8,274
Tooling
Property and Equipment
Subtotal	4,555	3,390
Furniture and Fixtures
Property and Equipment
Subtotal	2,068	2,087
Leasehold improvements
Property and Equipment
Subtotal	1,529	1,493
Demonstration equipment
Property and Equipment
Subtotal	896	1,012
Construction in progress
Property and Equipment
Subtotal	$ 1,271	$ 606

Commitments and Contingencies - Purchase Commitments (Details) $ in Millions	Dec. 31, 2023 USD ($)
Purchase commitments
Purchase orders issued	$ 24.3

Credit Agreement

12 Months Ended

Dec. 31, 2023

Credit Agreement

Credit Agreement

Note 11. Credit Agreement

On April 30, 2021, we entered into an Amended and Restated Credit Agreement (the “Restated Credit Agreement”) with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as Administrative Agent. The Restated Credit Agreement amended and restated in its entirety our prior credit agreement.

On September 8, 2021, we entered into a First Amendment Agreement (the “Amendment”), which amended the Restated Credit Agreement (as amended by the Amendment, the “Credit Agreement”) with the lenders from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent. The Amendment, among other things, added a $30.0 million incremental term loan to the $25.0 million revolving credit facility provided by the Restated Credit Agreement. The term loan is reflected on our consolidated financial statements as a note payable. The Credit Agreement provides that, subject to satisfaction of certain conditions, we may increase the amount of the revolving loans available under the Credit Agreement and/or add one or more term loan facilities in an amount not to exceed $25.0 million in the aggregate, such that the total aggregate principal amount of loans available under the Credit Agreement (including under the revolving credit facility) does not exceed $80.0 million.

On September 8, 2021, in connection with the closing of the AffloVest Acquisition, we borrowed the $30.0 million term loan and utilized that borrowing, together with a draw of $25.0 million under the revolving credit facility and cash on hand, to fund the purchase price.

On February 22, 2022, we entered into a Second Amendment Agreement (the “Second Amendment”), which further amended the Credit Agreement. The Second Amendment modified the maximum leverage ratio, the minimum fixed charge coverage ratio and the minimum consolidated EBITDA covenants under the Credit Agreement, and added a minimum liquidity covenant, through the quarter ended June 30, 2023. The Second Amendment also increased the applicable margin for LIBOR rate loans under the Credit Agreement during the period commencing on the date of the Second Amendment and ending on the last day of the fiscal quarter ending June 30, 2023. Pursuant to the Second Amendment, we made a mandatory principal prepayment of the term loan of $3.0 million on February 22, 2022.

On June 21, 2023, we entered into a Third Amendment Agreement (the “Third Amendment”) that replaced the interest rate benchmark under the Credit Agreement from LIBOR to the term Secured Overnight Financing Rate (“SOFR”). All tenors of term SOFR are subject to a credit spread adjustment of 0.10% (“Adjusted Term SOFR”).

Following the Third Amendment, the term loan and amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) Adjusted Term SOFR for a one-month tenor plus 1% (the “Base Rate”) plus an applicable margin or (b) Adjusted Term SOFR for an interest period of one, three or six months, at our option, plus the applicable margin. The applicable margin is 0.75% to 2.25% on loans bearing interest at the Base Rate and 1.75% to 3.25% on loans bearing interest at Adjusted Term SOFR, in each case depending on our consolidated total leverage ratio; except that, pursuant to the Second Amendment and the Third Amendment, during the period commencing on February 22, 2022 and ending on the last day of the fiscal quarter ending June 30, 2023, the applicable margin for LIBOR rate loans and Adjusted Term SOFR loans, as applicable, was 3.50%. At December 31, 2023, all outstanding borrowings were subject to interest at a rate calculated at Adjusted Term SOFR plus an applicable margin, for an interest rate of 7.73%.

On August 1, 2023, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”), which further amends the Credit Agreement. The Fourth Amendment, among other things, decreased the commitment fees payable under the revolving credit facility under the Credit Agreement such that the undrawn portions of the revolving credit facility are subject to an unused line fee at a rate per annum from 0.125% to 0.200%, depending on our consolidated leverage ratio, and eliminated the language providing that the applicable margin for Adjusted Term SOFR loans was 3.50%, such that the interest rates are in effect as set forth in the above paragraph. The Fourth Amendment also eliminated the liquidity financial covenant and modified the remaining financial covenants to reflect the termination of the temporary covenant relief period that was in place until June 30, 2023 pursuant to the Second Amendment, such that the financial covenants now include a maximum consolidated total leverage ratio covenant, a minimum consolidated EBITDA covenant and a minimum fixed charge coverage ratio covenant. In addition, the Fourth Amendment provided for an additional term loan in the amount of $8.25 million, which we used for a paydown of the revolving credit facility. The Fourth Amendment also extended the maturity date of the term loans and revolving credit facility under the Credit Agreement from September 8, 2024, to August 1, 2026.

On December 21, 2023, we made a payment of $16.8 million to repay in full the outstanding balance on the revolving credit facility.

As of December 31, 2023, we had outstanding borrowings of $29.3 million under the Credit Agreement, comprised entirely of the term loan. The principal of the term loan is required to be repaid in quarterly installments of $750,000. Maturities of the term loan for the next three years as of December 31, 2023, were as follows:


(In thousands)	Amount
2024		3,000
2025		3,000
2026		23,250
Total	$	29,250
Less: Deferred Financing Fees		(118)
Net Note Payable		29,132
Less: Current portion of note payable		(2,956)
Non-current portion of note payable	$	26,176

Our obligations under the Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary. As of December 31, 2023, the Credit Agreement contained a number of restrictions and covenants, including that we maintain compliance with a maximum total leverage ratio, a minimum fixed charge coverage ratio and a minimum consolidated EBITDA covenant. As of December 31, 2023, we were in compliance with all financial covenants under the Credit Agreement.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 470
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//470/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1C
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1E
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1I
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I

+ Details

Credit Agreement (Tables)

12 Months Ended

Dec. 31, 2023

Credit Agreement

Schedule of maturities of the term note payable


(In thousands)	Amount
2024		3,000
2025		3,000
2026		23,250
Total	$	29,250
Less: Deferred Financing Fees		(118)
Net Note Payable		29,132
Less: Current portion of note payable		(2,956)
Non-current portion of note payable	$	26,176

Commitments and Contingencies - Undiscounted cash flows (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022
Undiscounted cash flows
2024	$ 3,539
2025	3,644
2026	3,715
2027	3,210
2028	3,185
Thereafter	6,939
Total minimum lease payments	24,232
Less: Amount of lease payments representing interest	(2,989)
Present value of future minimum lease payments	21,243	$ 23,366
Less: Current obligations under operating lease liabilities	(2,807)	(2,500)
Non-current obligations under operating lease liabilities	$ 18,436	$ 20,866

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Note 8. Goodwill and Intangible Assets

Goodwill

In the third quarter of fiscal 2021, we completed the AffloVest Acquisition. The purchase price of the AffloVest business exceeded the net acquisition-date estimated fair value amounts of the identifiable assets acquired and the liabilities assumed by $31.1 million, which was assigned to goodwill.

Intangible Assets

Our patents and other intangible assets are summarized as follows:


	Weighted-	At December 31, 2023
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	1,018	$	248	$	770
Defensive intangible assets	1 year		1,125		920		205
Customer accounts	—		125		125		—
Customer relationships	11 years		31,000		5,511		25,489
Developed technology	9 years		13,000		2,731		10,269
Subtotal			46,268		9,535		36,733
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			491		—		491
Total intangible assets		$	56,259	$	9,535	$	46,724


	Weighted-	At December 31, 2022
	Average	Gross
	Amortization	Carrying		Accumulated		Net
(In thousands)	Period	Amount		Amortization		Amount
Definite-lived intangible assets:
Patents	12 years	$	897	$	173	$	724
Defensive intangible assets	2 years		1,126		764		362
Customer accounts	< 1 year		125		114		11
Customer relationships	12 years		31,000		3,127		27,873
Developed technology	10 years		13,000		1,550		11,450
Subtotal			46,148		5,728		40,420
Unamortized intangible assets:
Tradenames			9,500		—		9,500
Patents pending			455		—		455
Total intangible assets		$	56,103	$	5,728	$	50,375

Amortization expense was $3.8 million, $3.8 million, and $1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. Future amortization expenses are expected as follows:


(In thousands)
2024	$	3,793
2025		3,704
2026		3,640
2027		3,631
2028		3,628
Thereafter		18,337
Total	$	36,733

The weighted-average remaining amortization period for these intangible assets was 10.1 years as of December 31, 2023.

Pay vs Performance Disclosure - USD ($) $ in Thousands	12 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Pay vs Performance Disclosure
Net Income (Loss)	$ 28,515	$ (17,866)	$ (11,811)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Acquisitions (Tables)

12 Months Ended

Dec. 31, 2023

Acquisitions

Summary of purchase price allocation


(In millions)	Allocated Fair Value
Inventories	$	1.6
Property and equipment⁽¹⁾		—
Intangible assets		53.5
Goodwill		31.1
Purchase price	$	86.2

(1)	The purchase price included less than $0.1 million of property and equipment.

Schedule of allocation of the purchase price



(In millions)	Allocated Fair Value		Estimated Useful Life
Customer relationships	$	31.0	13 years
Developed technology		13.0	11 years
Tradenames		9.5	Indefinite
Total intangible assets	$	53.5

Schedule of condensed consolidated statements of operations reflect AffoVest operations


	Year Ended
	December 31,
(In thousands)	2021
Total revenue	$	219,414
Net (loss) income	$	(7,633)

Commitments and Contingencies - Major Vendors (Details) - Vendor One - item	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Commitments and Contingencies
Number of vendors	1	1
Purchases \| Vendor
Commitments and Contingencies
Total purchases (in percentage)	25.00%	18.00%

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2023

Fair Value Measurements

Schedule of changes in the earn-out liability


(In thousands)
Earn-out liability at December 31, 2022	$	13,050
Payments on earn-out		(10,575)
Fair value adjustments		(2,475)
Earn-out liability at December 31, 2023	$	—


(In thousands)
Earn-out liability at December 31, 2021	$	6,200
Payment on earn-out		(5,000)
Fair value adjustments		11,850
Earn-out liability at December 31, 2022	$	13,050

Schedule of fair value measurements for our earn-out liability, cash equivalents and marketable securities


	At December 31, 2022
	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:
Earn-out liability	$	—	$	—	$	8,050	$	8,050
Total	$	—	$	—	$	8,050	$	8,050

Acquisitions - Consolidated Statements of Operations Reflect AffloVest Operations (Details) - AffloVest APA $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Asset Acquisition [Line Items]
Total revenue	$ 219,414
Net (loss) income	$ (7,633)

Nature of Business and Operations (Details) - USD ($) $ / shares in Units, $ in Millions	Feb. 27, 2023	Aug. 02, 2016
IPO
Nature of Business and Operations
Number of shares of common stock sold	2,875,000	4,120,000
IPO price per share (in dollars per share)	$ 13.00	$ 10.00
Net proceeds from the initial public offering	$ 34.6	$ 35.4
Expense Relating To Initial Public Offering		$ 2.9
Follow-On Public Offering
Nature of Business and Operations
Number of shares of common stock sold	2,875,000
Stock price	$ 13.00

Revenue (Details) - USD ($) $ in Thousands	12 Months Ended
Revenue (Details) - USD ($) $ in Thousands	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Revenue
Revenue	$ 274,423	$ 246,785	$ 208,057
Percentage of total revenue (in percent)	100.00%	100.00%	100.00%
Revenue from sale type lease
Sales-type lease revenue	$ 34,930	$ 35,440	$ 30,143
Cost of sales-type lease revenue	12,577	11,190	9,622
Gross profit	$ 22,353	24,250	20,521
Minimum
Revenue from sale type lease
Rental period of rent-to-purchase arrangements	3 months
Maximum
Revenue from sale type lease
Rental period of rent-to-purchase arrangements	10 months
Private insurers and other payers
Revenue
Revenue	$ 148,901	139,087	141,377
Veterans Administration
Revenue
Revenue	27,003	25,507	25,654
Medicare
Revenue
Revenue	65,817	47,672	35,882
Durable medical equipment distributors
Revenue
Revenue	32,702	34,519	5,144
Lymphedema products
Revenue
Revenue	$ 241,721	$ 212,266	$ 202,913
Percentage of total revenue (in percent)	88.00%	86.00%	98.00%
Airway clearance products
Revenue
Revenue	$ 32,702	$ 34,519	$ 5,144
Percentage of total revenue (in percent)	12.00%	14.00%	2.00%

Inventories

12 Months Ended

Dec. 31, 2023

Inventories

Inventories

Note 6. Inventories

Inventories consisted of the following:


(In thousands)	At December 31, 2023		At December 31, 2022
Finished goods	$	7,979	$	5,100
Component parts and work-in-process		14,548		18,024
Total inventories	$	22,527	$	23,124

Revenue

12 Months Ended

Dec. 31, 2023

Revenue.

Revenue

Note 14. Revenue

We derive our revenue from the sale and rental of our products to our customers in the United States. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product:


	Year Ended
	December 31,
(In thousands)	2023		2022		2021
Revenue
Lymphedema products	$	241,721	$	212,266	$	202,913
Airway clearance products		32,702		34,519		5,144
Total	$	274,423	$	246,785	$	208,057

Percentage of total revenue
Lymphedema products		88%		86%		98%
Airway clearance products		12%		14%		2%
Total		100%		100%		100%

Our revenue by channel, inclusive of sales and rental revenue, for the years ended December 31, 2023, 2022 and 2021, are summarized in the following table:


	Year Ended
	December 31,
(In thousands)	2023		2022		2021
Private insurers and other payers	$	148,901	$	139,087	$	141,377
Veterans Administration		27,003		25,507		25,654
Medicare		65,817		47,672		35,882
Durable medical equipment distributors		32,702		34,519		5,144
Total	$	274,423	$	246,785	$	208,057

Our rental revenue is derived from rent-to-purchase arrangements that typically range from three to ten months. As title transfers to the patient, with whom we have the contract, upon the termination of the lease term and because collectability is probable, under ASC 842, these are recognized as sales-type leases. Each rental agreement contains two components, the controller and related garments, both of which are interdependent and recognized as one lease component.

The revenue and associated cost of revenue of sales-type leases are recognized on the lease commencement date and a net investment in leases is recorded on the Consolidated Balance Sheet. We bill the patients’ insurance payers monthly over the duration of the rental term. We record the net investment in leases and recognize revenue upon commencement of the lease in the amount of the expected consideration to be received through the monthly payments. Similar to our sales revenue, the transaction price is impacted by multiple factors, including the terms and conditions contracted by various third party payers. As the rental contract resides with the patients, we have elected the portfolio approach, at the payer level, to determine the expected consideration, which considers the impact of early terminations. While the contract is with the patient, in certain circumstances, the third party payer elects an initial rental period with an option to extend. We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably certain to be exercised. As the lease is short-term in nature, we anticipate collection of substantially all of the net investment within the first year of the lease agreement. Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.

Rental revenue for the years ended December 31, 2023, 2022 and 2021, was primarily from private insurers. Sales-type lease revenue and the associated cost of revenue for the years ended December 31, 2023, 2022 and 2021, was:


	Year Ended December 31,
(In thousands)	2023		2022		2021
Sales-type lease revenue	$	34,930	$	35,440	$	30,143
Cost of sales-type lease revenue		12,577		11,190		9,622
Gross profit	$	22,353	$	24,250	$	20,521

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 9
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-9

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 10
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-10

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 15
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-15

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 12
-Subparagraph (e)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-12

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 606
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479806/606-10-50-13

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Name Accounting Standards Codification
-Topic 606
-Publisher FASB
-URI https://asc.fasb.org//606/tableOfContent

+ Details

Net Income (Loss) Per Common Share

12 Months Ended

Dec. 31, 2023

Net Income (Loss) Per Common Share

Net Income (Loss) Per Common Share

Note 16. Net Income (Loss) Per Common Share

The following table sets forth the computation of our basic and diluted net income (loss) per share:


	Year Ended
	December 31,
(In thousands, except share and per share data)	2023		2022		2021
Net income (loss)	$	28,515	$	(17,866)	$	(11,811)
Weighted-average shares outstanding		22,925,497		20,067,969		19,719,485
Weighted-average shares used to compute diluted net loss per share		23,176,169		20,067,969		19,719,485
Net income (loss) per share - Basic	$	1.24	$	(0.89)	$	(0.60)
Net income (loss) per share - Diluted	$	1.23	$	(0.89)	$	(0.60)

The following common stock equivalents were excluded from the computation of diluted net income (loss) per common share for the periods presented because including them would have been anti-dilutive:


	Year Ended
	December 31,
	2023	2022	2021
Restricted stock units	337,202	590,542	265,616
Common stock options	389,229	615,307	915,224
Performance stock units	17,392	155,618	54,317
Employee stock purchase plan	—	100,506	34,809
Total	743,823	1,461,973	1,269,966

Fair Value Measurements - Fair Value Hierarchy (Details) - USD ($) $ in Thousands			12 Months Ended
	Nov. 28, 2023	May 25, 2023	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
Fair Value Measurements
Earn-out liability payment	$ 5,600	$ 5,000	$ 10,575	$ 5,000
Imputed interest payment		$ 250
Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Earn-out liability				13,050	$ 6,200
Earn-out liability payment			$ 10,575	5,000
Recurring
Fair Value Measurements
Earn-out liability				8,050
Total				8,050
Recurring \| Significant Unobservable Inputs (Level 3)
Fair Value Measurements
Earn-out liability				8,050
Total				$ 8,050

Acquisitions - Purchase Price Allocation (Details) - USD ($) $ in Thousands	Sep. 08, 2021	Dec. 31, 2023	Dec. 31, 2022	Sep. 30, 2021
Purchase price allocation
Inventories		$ 22,527	$ 23,124
Property, plant and equipment		6,195	6,077
Intangible assets	$ 53,500	46,724	50,375
Goodwill		$ 31,063	$ 31,063
Amortization period for tax purposes	15 years
AffloVest APA
Purchase price allocation
Inventories	$ 1,600
Intangible assets	53,500
Goodwill	31,100			$ 31,100
Purchase price	86,200
AffloVest APA \| Maximum
Purchase price allocation
Property, plant and equipment	$ 100

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Acquisitions

12 Months Ended

Dec. 31, 2023

Acquisitions

Acquisitions

Note 4. Acquisitions

On September 8, 2021, we entered into an Asset Purchase Agreement (“AffloVest APA”) to acquire the AffloVest therapy business from International Biophysics Corporation (“IBC”). Under the terms of the AffloVest APA, we agreed to pay IBC a total of up to $100.0 million for the purchase of substantially all of the assets related to its branded high frequency chest wall oscillation vest therapy business, other than specifically identified excluded assets. We acquired AffloVest to further expand our position as a leader in treating patients with underserved chronic conditions in the home. The acquired assets included inventory, tooling, intellectual property, permits and approvals, data and records, and customer and supplier information. At closing, $80.0 million of the purchase price was paid, of which a total of $0.5 million was deposited into an escrow account at closing for purposes of satisfying certain post-closing purchase price adjustments and indemnification claims. Subsequent to closing, $0.2 million was returned to us as a result of working capital adjustments and the remaining $0.3 million was released to IBC. The AffloVest acquisition was funded through a combination of cash on hand and proceeds from borrowings.

On November 4, 2022, we entered into an Amendment to the AffloVest APA, the “Amendment” with IBC, which modifies the terms of the earn-out arrangement under the AffloVest APA, as follows:

●

Initial Earn-Out: The AffloVest APA provided for an initial earn-out equal to 1.5 times the amount by which the AffloVest U.S. revenues in the period from October 1, 2021 to September 30, 2022 (the “Initial Earn-Out Period”) exceed a specified amount; provided that in no event will the payment exceed $10.0 million.

o

The APA Amendment provides that the calculated amount of the initial earn-out payment is $10.0 million, of which the Company paid $5.0 million on November 28, 2022, and $5.0 million, plus an imputed interest payment of $250,000, on May 25, 2023.

●

Second Earn-Out: The AffloVest APA provided for a second earn-out equal to 1.5 times the amount by which the AffloVest U.S. revenues in the period from October 1, 2022 to September 30, 2023 exceed the revenues recognized during the Initial Earn-Out Period; provided that in no event will the payment exceed $10.0 million.

o

The APA Amendment changes the 1.5 times multiplier to 3.0 times, but still provides that in no event will the second earn-out payment exceed $10.0 million.

o

Subsequent to September 30, 2023, it was determined that the calculated amount of the second earn-out payment was $5.6 million, which was paid by the Company on November 28, 2023 (see Note 17 – “Fair Value Measurements”).

The fair value of the earn-out as of the acquisition date was $6.4 million. The fair value of the earn-out, reflecting management’s estimate of the likelihood of achieving these targets, was determined by employing a Monte Carlo Simulation model. This amount and the current versus non-current allocation was remeasured at the end of each reporting period until the payment requirement ended, with any adjustments reported in income from operations (see Note 17 – “Fair Value Measurements”).

On the date of AffloVest Acquisition, we allocated the assets acquired based on an estimate of their fair values. The following table summarizes the purchase price allocation:


(In millions)	Allocated Fair Value
Inventories	$	1.6
Property and equipment⁽¹⁾		—
Intangible assets		53.5
Goodwill		31.1
Purchase price	$	86.2

(1)	The purchase price included less than $0.1 million of property and equipment.

The goodwill reflects expected synergies of combining the acquired products and customer information with our existing operations and is deductible for tax purposes over 15 years.

The following table reflects the allocation of purchase price to the acquired intangible assets and related estimated useful lives:



(In millions)	Allocated Fair Value		Estimated Useful Life
Customer relationships	$	31.0	13 years
Developed technology		13.0	11 years
Tradenames		9.5	Indefinite
Total intangible assets	$	53.5

The weighted-average amortization period of the acquired intangible assets was 12.3 years.

The fair market valuations associated with the assets acquired fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our due diligence models, most recent operational budgets, long-range strategic plans and other estimates.

Transaction costs, such as legal and other costs, related to the acquisition aggregated approximately $0.8 million. These costs have been expensed as incurred and are included in reimbursement, general and administrative expenses in our Consolidated Statements of Operations for the year ended December 31, 2021.

The Consolidated Statements of Operations reflect the AffloVest operations beginning September 9, 2021. As the AffloVest business has been integrated with our existing operations, we are unable to determine the amount of AffloVest earnings from the acquisition date that is included in the Consolidated Statements of Operations. The following unaudited pro forma information for the year ended December 31, 2021 presents the revenue and net income assuming the acquisition of AffloVest had occurred as of January 1, 2021. This

information has been prepared for comparative purposes only and is not indicative of what actual results would have been if the acquisition had taken place at the beginning of fiscal 2021, or of future results.


	Year Ended
	December 31,
(In thousands)	2021
Total revenue	$	219,414
Net (loss) income	$	(7,633)

These pro forma results include certain adjustments, primarily due to increases in amortization expense due to fair value adjustments of intangible assets, increases in interest expense due to additional borrowings incurred to finance the acquisition and amortization of debt issuance costs incurred to finance the transaction, acquisition related costs including transaction costs such as legal, accounting, valuation and other professional services, and related tax effects.

Credit Agreement (Details) - USD ($)					12 Months Ended
Credit Agreement (Details) - USD ($)	Aug. 01, 2023	Jun. 21, 2023	Feb. 22, 2022	Sep. 08, 2021	Dec. 31, 2023	Dec. 23, 2023	Dec. 31, 2022
Credit Agreement
Basis spread (as a percent)		0.10%
Credit facility outstanding amount				$ 25,000,000.0			$ 24,916,000
Line of credit, threshold contingent increase in borrowing capacity				25,000,000.0
Credit agreement, total aggregate principal amount				80,000,000.0
Long-term debt						$ 16,800,000
SOFR
Credit Agreement
Basis spread (as a percent)		3.50%
Revolving credit facility
Credit Agreement
Line of credit				25,000,000.0
Revolving credit facility \| Federal Funds
Credit Agreement
Basis spread (as a percent)		0.50%
Revolving credit facility \| Base Rate
Credit Agreement
Basis spread (as a percent)		1.00%
Revolving credit facility \| SOFR
Credit Agreement
Basis spread (as a percent)	3.50%				7.73%
Revolving credit facility \| Maximum
Credit Agreement
Unused line fee (as a percent)	0.125%
Revolving credit facility \| Maximum \| Base Rate
Credit Agreement
Basis spread (as a percent)		2.25%
Revolving credit facility \| Maximum \| SOFR
Credit Agreement
Basis spread (as a percent)		3.25%
Revolving credit facility \| Minimum
Credit Agreement
Unused line fee (as a percent)	0.20%
Revolving credit facility \| Minimum \| Base Rate
Credit Agreement
Basis spread (as a percent)		0.75%
Revolving credit facility \| Minimum \| SOFR
Credit Agreement
Basis spread (as a percent)		1.75%
Term Loan
Credit Agreement
Increase in term debt	$ 8,250,000
Debt instrument face amount				30,000,000.0
Long-term debt				$ 30,000,000.0	$ 29,132,000
Debt instrument periodic payment					$ 750,000
Debt instrument frequency of periodic payment					quarterly
Principal prepayment of term loan			$ 3,000,000.0

Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of allocation of total stock-based compensation expense


	Year Ended
	December 31,
(In thousands)	2023		2022		2021
Cost of revenue	$	420	$	367	$	433
Sales and marketing expenses		2,985		4,060		4,069
Research and development expenses		133		226		314
Reimbursement, general and administrative expenses		4,009		4,947		5,357
Total stock-based compensation expense	$	7,547	$	9,600	$	10,173

Schedule of estimated fair values and assumptions for stock options granted


	2022	2021
Expected term	4.5 years	4.5 years
Expected volatility	59.2%	45.0 - 52.3%
Risk-free interest rate	4.3%	0.6 - 1.1%
Expected dividend yield	0%	0%
Fair value on the date of grant	$ 8.11	$ 13.04 - $ 22.90

Schedule of stock option activity


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except options and per share data)	Outstanding	Per Share ⁽¹⁾		Contractual Life	Value ⁽²⁾
Balance at December 31, 2020	1,039,709	$	36.43	5.6 years	$	13,381
Granted	188,748	$	49.33
Exercised	(175,516)	$	22.65		$	4,901
Forfeited	(92,773)	$	49.77
Cancelled/Expired	(44,944)	$	57.78
Balance at December 31, 2021	915,224	$	39.33	5.0 years	$	2,068
Granted	47,280	$	6.17
Exercised	(90,878)	$	1.68		$	916
Forfeited	(92,981)	$	36.28
Cancelled/Expired	(163,338)	$	37.65
Balance at December 31, 2022	615,307	$	43.25	4.7 years	$	164
Exercised	(4,625)	$	2.97		$	98
Forfeited	(25,045)	$	47.54
Cancelled/Expired	(155,677)	$	50.72
Balance at December 31, 2023	429,960	$	40.74	3.8 years	$	223

Options exercisable at December 31, 2023	386,457	$	41.53	3.7 years	$	125

(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
	December 31,
Number of:	2023		2022
Non-vested options, beginning of the year		179,944		397,908
Non-vested options, end of the year		43,503		179,944
Vested options, end of the year		386,457		435,363


	Year Ended
	December 31,
Weighted-average grant date fair value of:	2023		2022
Non-vested options, beginning of the year	$	16.24	$	18.02
Non-vested options, end of the year		13.57		16.24
Vested options, end of the year		16.51		17.53
Forfeited options, during the year		18.36		14.73

Time-Based Restricted Stock Units

Schedule of stock-settled restricted stock unit activity


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2020	211,469	$	48.29	$	9,503
Granted	189,762	$	40.31
Vested	(106,521)	$	47.43
Cancelled	(35,563)	$	51.76
Balance at December 31, 2021	259,147	$	42.32	$	4,932
Granted	539,525	$	15.03
Vested	(123,528)	$	43.20
Cancelled	(84,602)	$	26.91
Balance at December 31, 2022	590,542	$	19.42	$	6,779
Granted	398,698	$	15.52
Vested	(270,651)	$	20.18
Cancelled	(129,447)	$	19.79
Balance at December 31, 2023	589,142	$	16.35	$	8,425

(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.

Performance-based stock-settled restricted stock units

Schedule of stock-settled restricted stock unit activity


		Weighted-
		Average Grant		Aggregate
	PSUs	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2020	79,303	$	47.83	$	3,564
Granted	39,419	$	51.82
Vested	(34,159)	$	33.98
Cancelled	(30,246)	$	64.39
Balance at December 31, 2021	54,317	$	50.22	$	1,034
Granted	131,710	$	18.54
Vested	(4,407)	$	12.31
Cancelled	(26,002)	$	42.53
Balance at December 31, 2022	155,618	$	25.05	$	1,786
Granted	123,575	$	15.28
Vested	(13,842)	$	42.70
Cancelled	(67,119)	$	21.50
Balance at December 31, 2023	198,232	$	18.93	$	2,785

(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

Commitments and Contingencies - Retirement Plan (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2021
401(k)
Retirement Plan
Discretionary contributions	$ 1.5	$ 1.5	$ 1.2

Stockholders' Equity

12 Months Ended

Dec. 31, 2023

Stockholders' Equity

Stockholders' Equity

Note 13. 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. On February 27, 2023, we closed on a public offering of 2,875,000 shares of our common stock at a public offering price of $13.00 per share. We received net proceeds from this offering of $34.6 million after deducting underwriting discounts, commissions, and offering expenses.

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, 1,180,019 shares were added as available for issuance thereunder on January 1, 2024. Our Board of Directors exercised its prerogative to forego the automatic increase on each of January 1, 2023 and 2022. As of December 31, 2023, 5,809,744 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 total stock-based compensation expense of $7.5 million, $9.6 million and $10.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. This expense was allocated as follows:


	Year Ended
	December 31,
(In thousands)	2023		2022		2021
Cost of revenue	$	420	$	367	$	433
Sales and marketing expenses		2,985		4,060		4,069
Research and development expenses		133		226		314
Reimbursement, general and administrative expenses		4,009		4,947		5,357
Total stock-based compensation expense	$	7,547	$	9,600	$	10,173

Stock Options

Stock options issued to participants other than non-employees typically vest over three or four years and typically have a contractual term of seven or ten years. Stock-based compensation expense included in our Consolidated Statements of Operations for stock options was $0.9 million, $2.5 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively. The total grant date fair value of options vested during the year was $1.9 million, $3.3 million and $4.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

At December 31, 2023, there was approximately $0.2 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 0.9 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 for grants issued in and prior to the first fiscal quarter of 2021 was estimated using the average historical volatility of public companies of similar size and industry over a similar period as the expected term assumption used for our options. Beginning in the second fiscal quarter of 2021, we had sufficient historical data to transition to utilizing our average historical volatility over a similar period as the expected term assumption used for our options as the expected volatility. 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.

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:


	2022	2021
Expected term	4.5 years	4.5 years
Expected volatility	59.2%	45.0 - 52.3%
Risk-free interest rate	4.3%	0.6 - 1.1%
Expected dividend yield	0%	0%
Fair value on the date of grant	$ 8.11	$ 13.04 - $ 22.90

Our stock option activity for the three years ended December 31, 2023, 2022 and 2021, was as follows:


		Weighted-		Weighted-
		Average		Average	Aggregate
	Options	Exercise Price		Remaining	Intrinsic
(In thousands except options and per share data)	Outstanding	Per Share ⁽¹⁾		Contractual Life	Value ⁽²⁾
Balance at December 31, 2020	1,039,709	$	36.43	5.6 years	$	13,381
Granted	188,748	$	49.33
Exercised	(175,516)	$	22.65		$	4,901
Forfeited	(92,773)	$	49.77
Cancelled/Expired	(44,944)	$	57.78
Balance at December 31, 2021	915,224	$	39.33	5.0 years	$	2,068
Granted	47,280	$	6.17
Exercised	(90,878)	$	1.68		$	916
Forfeited	(92,981)	$	36.28
Cancelled/Expired	(163,338)	$	37.65
Balance at December 31, 2022	615,307	$	43.25	4.7 years	$	164
Exercised	(4,625)	$	2.97		$	98
Forfeited	(25,045)	$	47.54
Cancelled/Expired	(155,677)	$	50.72
Balance at December 31, 2023	429,960	$	40.74	3.8 years	$	223

Options exercisable at December 31, 2023	386,457	$	41.53	3.7 years	$	125

(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)

Options exercisable of 435,363 at December 31, 2022, and 517,316 at December 31, 2021 had weighted average exercise prices of $43.83 and $32.60, respectively.

The following summarizes additional information about our stock options:


	Year Ended
	December 31,
Number of:	2023		2022
Non-vested options, beginning of the year		179,944		397,908
Non-vested options, end of the year		43,503		179,944
Vested options, end of the year		386,457		435,363


	Year Ended
	December 31,
Weighted-average grant date fair value of:	2023		2022
Non-vested options, beginning of the year	$	16.24	$	18.02
Non-vested options, end of the year		13.57		16.24
Vested options, end of the year		16.51		17.53
Forfeited options, during the year		18.36		14.73

Time-Based Restricted Stock Units

We have granted time-based restricted stock units to certain participants under the 2016 Plan that are stock-settled with common shares. Time-based restricted stock units granted under the 2016 Plan vest over

one to three years. Stock-based compensation expense included in our Consolidated Statements of Operations for time-based restricted stock units was $5.1 million, $5.8 million and $4.9 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, there was approximately $6.3 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 1.7 years.

Our time-based restricted stock unit activity for the years ended December 31, 2023, 2022 and 2021 was as follows:


		Weighted-
		Average Grant		Aggregate
	Units	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2020	211,469	$	48.29	$	9,503
Granted	189,762	$	40.31
Vested	(106,521)	$	47.43
Cancelled	(35,563)	$	51.76
Balance at December 31, 2021	259,147	$	42.32	$	4,932
Granted	539,525	$	15.03
Vested	(123,528)	$	43.20
Cancelled	(84,602)	$	26.91
Balance at December 31, 2022	590,542	$	19.42	$	6,779
Granted	398,698	$	15.52
Vested	(270,651)	$	20.18
Cancelled	(129,447)	$	19.79
Balance at December 31, 2023	589,142	$	16.35	$	8,425

(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.

Performance-Based Restricted Stock Units

We have granted performance-based restricted stock units (“PSUs”) to certain participants under the 2016 Plan. These PSUs have both performance-based and time-based vesting features. The PSUs granted in 2020 were earned to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2021. The PSUs granted in 2021 were earned if and to the extent performance goals based on revenue and adjusted EBITDA were achieved in 2022. The PSUs granted in 2022 will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in 2023. The number of PSUs earned under these grants 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. The PSUs granted in 2023 have three separate performance periods, and one-third of each grant will be earned if and to the extent performance goals based on revenue change and adjusted EBITDA margin are achieved in each of 2023 and 2024 (ranging from 25% to 175% of target), and one-third will be earned if and to the extent performance goals to be established are achieved in 2025. 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 $0.9 million, $0.5 million and $0.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. The stock-based compensation expense for the year ended December 31, 2023 reflects an expense of $0.5 million related to the PSUs granted in 2023 and an expense of $0.4 million related to the PSUs granted in 2022. The stock-based compensation expense for the year ended December 31, 2022 reflects an expense of $0.6 million related to the PSUs granted in 2022. As of December 31, 2023, there was approximately $1.3 million of total unrecognized pre-tax compensation expense related to outstanding PSUs that is expected to be recognized over a weighted average period of 1.9 years.

Our performance-based restricted stock unit activity at the estimated payout of 100% of target for the years ended December 31, 2023, 2022 and 2021, was as follows:


		Weighted-
		Average Grant		Aggregate
	PSUs	Date Fair Value		Intrinsic
(In thousands except unit and per unit data)	Outstanding	Per Unit		Value ⁽¹⁾
Balance at December 31, 2020	79,303	$	47.83	$	3,564
Granted	39,419	$	51.82
Vested	(34,159)	$	33.98
Cancelled	(30,246)	$	64.39
Balance at December 31, 2021	54,317	$	50.22	$	1,034
Granted	131,710	$	18.54
Vested	(4,407)	$	12.31
Cancelled	(26,002)	$	42.53
Balance at December 31, 2022	155,618	$	25.05	$	1,786
Granted	123,575	$	15.28
Vested	(13,842)	$	42.70
Cancelled	(67,119)	$	21.50
Balance at December 31, 2023	198,232	$	18.93	$	2,785

(1)	The aggregate intrinsic value of performance-based restricted stock units outstanding was based on our closing stock price on the last trading day of the period

Employee Stock Purchase Plan

Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016, and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The ESPP is available to all of our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to 85% of the lower of the closing market price per share of our common stock on the first or last trading day of each stock purchase period. The ESPP provides for six-month purchase periods, beginning on May 16 and November 16 of each calendar year.

A total of 1,600,000 shares of common stock was initially reserved for issuance under the ESPP. This share reserve will automatically be supplemented each January 1, commencing in 2017 and ending on and including January 1, 2026, by an amount equal to the least of (a) 1% of the shares of our common stock outstanding on the immediately preceding December 31, (b) 500,000 shares or (c) such lesser amount as our Board of Directors may determine. Pursuant to the automatic increase feature of the ESPP, 236,003 shares were added as available for issuance thereunder on January 1, 2024. Our Board of Directors exercised its prerogative to forego the automatic increase on each of January 1, 2023 and 2022. As of December 31, 2023, 1,369,868 shares were available for future issuance under the ESPP. We recognized $0.6 million, $0.8 million and $0.8 million in stock-based compensation expense related to the ESPP for the years ended December 31, 2023, 2022 and 2021, respectively.

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2023

Commitments and Contingencies

Summary of lease-related assets and liabilities


(In thousands)	At December 31, 2023		At December 31, 2022
Right of use operating lease assets	$	19,128	$	21,322

Operating lease liabilities:
Current	$	2,807	$	2,500
Non-current		18,436		20,866
Total	$	21,243	$	23,366

Operating leases:
Weighted average remaining lease term		6.7 years		7.7 years
Weighted average discount rate		4.3%		4.2%

	Year Ended December 31,
	2023		2022
Supplemental cash flow information for our operating leases:
Cash paid for operating lease liabilities	$	3,453	$	3,575
Non-cash right of use assets obtained in exchange for new operating lease obligations	$	293	$	49

Summary of undiscounted cash flows


(In thousands)
2024	$	3,539
2025		3,644
2026		3,715
2027		3,210
2028		3,185
Thereafter		6,939
Total minimum lease payments		24,232
Less: Amount of lease payments representing interest		(2,989)
Present value of future minimum lease payments		21,243
Less: Current obligations under operating lease liabilities		(2,807)
Non-current obligations under operating lease liabilities	$	18,436