Earnings call transcript: Tactile Systems Q2 2025 misses EPS, beats revenue

Tactile Systems Technology Inc (TCMD) reported its Q2 2025 earnings, revealing a mixed financial performance. The company posted an earnings per share (EPS) of $0.14, falling short of the $0.17 forecast, marking a 17.65% miss. However, revenue reached $78.9 million, surpassing expectations by 6.72%. The stock declined by 0.52% in aftermarket trading, reflecting investor concerns over the earnings miss. According to InvestingPro data, TCMD has experienced a significant 43.6% decline over the past six months, though analysis suggests the stock may be undervalued at current levels.

Key Takeaways

• Tactile Systems missed its EPS forecast by 17.65%, but revenue exceeded expectations.
• The stock fell by 0.52% in aftermarket trading, nearing its 52-week low.
• Revenue from airway clearance products surged by 51.6% year-over-year.

Company Performance

Tactile Systems Technology showed robust revenue growth, particularly in its airway clearance segment, which increased by 51.6% year-over-year. While the EPS miss indicates potential challenges in managing operational costs, InvestingPro analysis reveals strong fundamentals with a current ratio of 4.52 and more cash than debt on its balance sheet. The company maintains its leadership in lymphedema pneumatic compression devices, supported by an impressive gross margin of 74.57% and healthy cash flows that sufficiently cover interest payments.

Financial Highlights

• Revenue: $78.9 million, up 7.8% year-over-year
• Earnings per share: $0.14, down from the forecast of $0.17
• Gross margin increased by 60 basis points to 74.5%
• Adjusted EBITDA decreased by 15% to $7.7 million

Earnings vs. Forecast

Tactile Systems reported an EPS of $0.14 against a forecast of $0.17, resulting in a 17.65% miss. In contrast, the company exceeded its revenue forecast, achieving $78.9 million compared to the expected $73.93 million, a 6.72% surprise.

Market Reaction

Following the earnings release, Tactile Systems’ stock decreased by 0.52% in aftermarket trading, dropping to $9.6. This decline reflects investor concerns over the EPS miss, despite revenue exceeding expectations. The stock trades at a P/E ratio of 14.6x and an EV/EBITDA multiple of 6.7x, levels that InvestingPro analysis suggests may represent an attractive entry point. Get access to 10 additional ProTips and comprehensive valuation metrics with an InvestingPro subscription.

Outlook & Guidance

For 2025, Tactile Systems projects total revenue between $310 million and $350 million, representing 6-8% growth. The company expects significant growth in its airway clearance product line, with a forecasted increase of 40-43%. Adjusted EBITDA is anticipated to be between $33 million and $35 million. While management expresses confidence in returning to double-digit growth, InvestingPro data shows that two analysts have recently revised their earnings expectations downward for the upcoming period.

Executive Commentary

CEO Sherry Dodd expressed optimism, stating, "We are confident that Tactile can return to double-digit growth." CFO Elaine Burkermeyer highlighted policy pivots aimed at ensuring patients receive the right products, emphasizing the company’s commitment to improving patient outcomes.

Risks and Challenges

• The EPS miss suggests potential cost management issues.
• The decline in adjusted EBITDA raises concerns about profitability.
• The stock’s proximity to its 52-week low may reflect investor apprehension.
• Market saturation in the lymphedema segment could limit growth.
• Macroeconomic pressures and reimbursement policy changes could impact future performance.

Q&A

During the earnings call, analysts inquired about the progress of the head and neck lymphedema clinical trial and revenue growth dynamics. Executives also addressed improvements in reimbursement policies and strategies to increase market share.

Full transcript - Tactile Systems Technology Inc (TCMD) Q2 2025:

Conference Call Operator: Welcome, ladies and gentlemen, to the Second Quarter twenty twenty five Earnings Conference Call for Tactile Medical. At this time, all participants have been placed in a listen only mode. At the end of the company’s prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company’s website for replay shortly. I would now like to turn the call over to Sam Bensinger, Investor Relations at Gilmartin Group for a few introductory comments.

Please go ahead.

Sam Bensinger, Investor Relations, Gilmartin Group, Gilmartin Group: Good afternoon and thank you for joining the call today. With me from Tactile’s management team are Sherry Dodd, Chief Executive Officer and Elaine Burkermeyer, Chief Financial Officer. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties. These could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our annual report on Form 10 ks, as well as our most recent 10 Q filing to be filed with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website.

We undertake no obligation to publicly update or revise our forward looking statements as a result of new information, future events or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. We generally refer to these as non GAAP financial measures. Reconciliations of those non GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. With that, I’ll now turn the call over to Sherry.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Thanks, Sam. Good afternoon, everyone, and welcome to our second quarter twenty twenty five earnings call. Here with me is Elaine Burkermeyer, our Chief Financial Officer. We delivered a strong performance this quarter, marked by total revenue growth of 7.8% year over year to $78,900,000 ahead of our previously stated Q2 expectations. By business line, lymphedema revenue increased 2% year over year to $66,000,000 and airway clearance revenue increased 51.6% year over year to $12,900,000 Q2 gross margins increased 60 basis points year over year to 74.5%.

On the bottom line, adjusted EBITDA of $7,700,000 was down 15% year over year, as expected, due to our planned technology and sales headcount investments. From a balance sheet perspective, we ended Q2 with $81,500,000 after accounting for additional stock buyback under our recently completed stock repurchase program. We have moved past the early disruptive stages of our Q1 CRM implementation and Salesforce Rebalance and Optimization Plan. Our growth and leverage strategies are in their execution phase, and we are increasingly confident in our ability to drive consistently improving results. Elaine will elaborate on our full second quarter results as well as provide an update on our financial guidance for 2025.

I will focus the rest of my remarks on a review of our individual business line performances and share progress on our key 2025 strategic priorities: improving access to care, expanding treatment options for lymphedema patients, and enhancing the lifetime patient value. Beginning with the Q2 review of our lymphedema business line, lymphedema revenue grew 2% year over year and over 30% sequentially. Our performance reflects focused execution of our go to market commercial strategy and including strong adoption of Nimble. From a field perspective, our Q1 sales force rebalance and optimization process provided us with a strategic investment roadmap for the right roles in the right geographic locations to meet and drive demand across our lymphedema business. Specific to headcount, we ended the quarter with two ninety three total reps, split between 161 account managers and 132 product specialists.

This is an 11% increase compared to our sales headcount at the end of Q1. We continue to experience manageable attrition, and our goal for 2025 remains to employ over 300 total reps by year end. We are pleased with the pace of our talent acquisition and the caliber of our recent hired reps. Their time to productivity is enhanced by a well designed CRM and a structured onboarding plan that exposes them to all channel call points, which includes vascular, oncology, therapists, and the VA. For newer reps in particular, the combination of Nimble and our e prescribing tool, in addition to well established vascular call points, has positively influenced their initial selling activity.

We are confident that all channels are healthy, and with more capacity and feet on the street moving forward, we expect to see continued growth in all channels over time. As a reminder, each of our channels has a different inherent product mix, and based on those demographics, a different payer mix. With increased and strategically placed field resources, coupled with the CRM module enhancements and developing proficiency, we expect rep productivity, as measured by referrals per territory, to incrementally improve over the year. Compared to where we were in Q1, we are very pleased with the momentum and remain committed to our 2025 go to market plan. We also remain confident in the attractive fundamentals of the broader lymphedema market.

We estimate there are approximately one hundred and forty five thousand patients in The U. S. That are diagnosed with lymphedema and currently being treated with either a pneumatic compression device or a non pneumatic compression device. We estimate this patient population is growing at ten percent annually. Then there are approximately two million U.

S. Patients who are diagnosed with lymphedema and not currently receiving a PCD or non PCD treatment. Further penetration into this patient population represents our near term commercial focus. Finally, there are approximately twenty million U. S.

Patients with lymphedema who are undiagnosed, and an even larger population beyond that of patients who fall within our product indication. This represents our mid to long term commercial focus, and we are eager to build out those strategies. From a reimbursement perspective, we continue to see favorable near term payer policy environment following last year’s challenging Medicare coverage dynamics. Through successful claims adjudication and direct engagement with the MACs, we are gaining more clarity on the interpretation of the unique characteristics requirements. We believe the coverage landscape is becoming more supportive for patients that need advanced pump therapy.

These patients now have a clearer path to receive the right product that meets their clinical needs at the right time. Turning now to our airway clearance business line. Sales of Aflovest increased 52% year over year and 21% sequentially in Q2, demonstrating sustained momentum following our strong start to the year. The key drivers of performance are consistent with what we had previously shared. We are executing well against secured partnerships across top 10 respiratory DMEs and see growing demand due to increased awareness of bronchiectasis.

Our product priority position with leading DMEs is also supported by training and education events for providers and hospital care coordinators and respiratory DMEs, including their sales, trainers, and operations staff. In the first half of this year, our team educated nearly 1,200 respiratory DME partners and clinical customers on bronchiectasis and the role of Aflovest in its care. We expect broader awareness of bronchiectasis and available treatment options, including Ashloves, to benefit our market share, and we remain focused on fortifying relationships with each of our top DME partners and penetrating deeper within these accounts to continue our strong growth throughout the rest of 2025. Continued commercial acceleration in this area will pull us closer to being the number one market shareholder in the space, and as a result, help introduce Aflavest to the five million diagnosed and undiagnosed bronchiectasis patients in The U. S.

Earlier this year, I shared our three strategic priorities for 2025: to unlock the lymphedema TAM and enable scalable, profitable growth. Similar to Q1, I will share progress updates on each of these priorities. Beginning first with our goal to improve access to care. We are working diligently to remove the longstanding training and education policy and evidence barriers that prevent more lymphedema patients from accessing the right treatment options that best fit their clinical condition. Our target and associated investments are focused on increasing PCD therapy adoption in the diagnosed population.

One area of focus is simplifying the workflow process of patient identification, patient referral, and order processing. This is a foundational investment for scale, and we expect it to support both top and bottom line growth through increased referrals as well as operating expense leverage. An example is the CRM tool, helps our sales and marketing teams identify where new patient identification opportunities are within our existing channels, and it supports sales effectiveness during those prescriber interactions. A second key investment in workflow process improvement is in our e prescribing tool, Parachute, designed to streamline the order process by more efficiently collecting the required patient documentation. Since its full launch late last year, we have been growing adoption, resulting in over 25% of Nimble orders to date being generated through Parachute.

We are building the required interfaces to support expansion of Parachute and Flexitouch orders and plan to launch this functionality for both providers and clinicians later this year. E prescribing solves for the order processing speed and increased accuracy, but we know that not all clinicians will adopt this type of technology. Our third workflow improvement investment is embedding an AI based technology to support speed, accuracy, and leverage in our order intake and medical record review processes for traditional non e prescribed orders. For order intake, the AI tool can quickly analyze patient referrals and extract required information, regardless of whether that referral comes via fax, e portal, or email. For context, we receive roughly 1,000 faxes per day as part of the order intake alone.

Similarly, the tool is trained to scan patient medical records, which can range from a few pages to over 100. This medical record review step is currently done manually, and it identifies if the payer required medical necessity criteria is documented. With AI, this process will be faster and will provide an early initial assessment of patient eligibility. To ensure accuracy, our team would then validate this assessment by reviewing the required or missing information flagged by the tool. From a P and L perspective, we expect the top line to benefit from faster referrals to order conversion, which should help mitigate patient leakage due to a historically protracted onboarding experience.

On the bottom line, increased automation translates to leveraged operating expense by decreasing manual data entry tasks and increasing accuracy to minimize human error. We will start with the pilot of the AI tool over the next few months so that we can learn and ensure seamless integration with our other IT systems and change management of our order operations team. Clinical evidence is another element of improving access to care, and in the second quarter, we delivered tangible progress on this front with the presentation of two month data from our head and neck lymphedema randomized control trial at the American Society of Clinical Oncology’s annual meeting in June. As a reminder, this trial examines the effectiveness of Flexitouch Plus compared to usual care in treating lymphedema among head and neck cancer survivors. Current modalities for managing head and neck cancer related lymphedema include therapist guided lymphedema treatment and lifelong home based self care.

We are very pleased with the two month data as it validates FlexiPatch Plus as a clinically supported alternative to usual care. We are proud to have these results accepted for presentation at a total of three different clinical conferences. Our next study deliverable is finalization of the six month analysis and then manuscript submission in early Q4. In the meantime, we continue active discussions with commercial payers regarding their current experimental and investigational policy language for head and neck lymphedema, and we aim to influence those policies going forward. Our second strategic priority is aimed at ensuring diagnosed patients have appropriate treatment options available to them based on their individual condition, symptoms, and needs.

Nimble is a notable example of our strategy to expand treatment options. Strong adoption of NIMBLE continued through the second quarter, driven by both patient and provider preferences for the product given its unique features and capability. We believe this sustained demand since its initial rollout last fall is helping grow the overall market for lymphedema PCD, particularly as Nimble so far is outpacing broader market growth. Among our lymphedema PCD offerings, Nimble is also growing faster than Flexitouch. While Flexitouch still represents the majority of our lymphedema revenue, we are pleased with Nimble’s success to date and believe it is a testament to our ability to serve the broad lymphedema market needs across both basic and advanced pumps, which we now enjoy a market leading position in both categories.

We remain committed to new product innovation and are not stopping with Nimble. Development of our next generation advanced lymphedema pump is underway and progressing in line with scope, budget, and timelines, and our product roadmap also includes further nimble enhancements. Finally, our third strategic priority is focused on enhancing the lifetime patient value. We believe there is an opportunity for us to support lymphedema patients more efficiently over a longer duration as they manage their disease symptoms and treatments, both prior to and during the order and shipment process. There are several ways we are approaching this.

Last quarter, we established a patient services organization, which centralized our patient education consultants, or PECS, and back office patient support team into one consolidated function. These teams within patient services interface most directly and frequently with our patients, and we will now benefit from a consistent approach when engaging with patients pre, during, and post shipment. The PEC team specifically supports in home patient product demo and training. This workforce has been a vital resource for our sales team since its inception in 2023. We ended Q2 with 60.5% of patient demos performed by PACS, up from 52% at the end of Q4.

Looking ahead, we envision staffing our large well developed territories with dedicated PEC resources rather than shared. This will help ensure our account managers and product specialists can allocate even more of their time to engaging with clinicians and hand off the patient support requirements to the PEC. We are also looking at new ways we can support patients at the front end of the order process. Given the dynamic payer nuances in the order process, including medical necessity documentation and prior authorization, this portion of the patient journey is often the most complex and drawn out. We recently launched a care navigation pilot designed to proactively reach out to patients earlier and more consistently throughout the order process.

During the pilot and subsequent expansion, we will gain insight into the moments that matter most for patients to receive more information and solidify their engagement in the process. This is important because many times the order progression requires the patient to do something, such as follow-up with their clinician post four weeks of conservative therapy, or to be available for a product demo and initial treatment. At scale, care navigation should further reduce the need for the sales rep involvement in the order process, help mitigate patient leakage, and enhance the overall patient support connectivity and experience. We are also utilizing our patient engagement tool, Kylie, as a means to enhance overall patient connectivity. At the June, we hit over 53,000 individual patient profiles registered with Kiley and 1,100,000 total check ins.

We plan to further increase utilization by introducing Kiley at the onset of the patient care journey, which can be supported through our care navigation evolution and with our PEC team. Regardless of how patients are introduced to Kiley, we have a digitally connected platform that can support order progress visibility, symptoms, measurements and therapy treatment tracking, product training and disease education, warranty submissions, e commerce, troubleshooting, and product support, as well as sharing patient reported data and photos with clinicians. Kiley enables a more connected care pathway and provides our organization with more insights into opportunities to help support patients with products and service innovation. With that, I will now have Elaine review our Q2 financial results in more detail and provide an update on our guidance for 2025.

Elaine Burkermeyer, Chief Financial Officer, Tactile Medical: Thanks, Sherry. Unless noted otherwise, all references to second quarter financial results are on a GAAP and year over year basis. Total revenue in the second quarter increased by $5,700,000 or 7.8% to $78,900,000 By product lines, sales and rentals of lymphedema products, which includes our Flexitouch, Entre, and Nimble systems, increased $1,300,000 or 2% to $66,000,000 and sales of our AIRID clearance product, which includes our Athlodest system, increased $4,400,000 or 52% to $12,900,000 Continuing down the P and L, Gross margin was 74.5% of revenue compared to 73.9% in the 2024. The increase in gross margin was attributable primarily to lower manufacturing and warranty costs, reflecting enhancements in product design and stronger collections reflected in our revenue. Second quarter operating expenses increased $6,500,000 or 13% to $54,700,000 The change in GAAP operating expenses reflected a $1,400,000 increase in sales and marketing expenses, a $200,000 decrease in research and development expenses, and a $5,300,000 increase in reimbursement, general and administrative expenses, including and primarily driven by strategic technology investments.

Operating income decreased $1,800,000 or 30% to $4,100,000 Interest income increased $100,000 or 13% to $900,000 due to increased cash position. Interest expense decreased $100,000 or 22% to $400,000 Income tax expense decreased $500,000 or 26% year over year to $1,300,000 Net income decreased $1,100,000 or 25% to $3,200,000 or $0.14 per diluted share compared to $4,300,000 or $0.18 per diluted share. Adjusted EBITDA decreased as expected to $7,700,000 compared to $9,100,000 With respect to our balance sheet, we had $81,500,000 in cash and cash equivalents and $24,800,000 of outstanding borrowings at quarter end. This compares to $94,400,000 in cash and $26,300,000 of outstanding borrowings as of 12/31/2024. We also completed an additional $16,500,000 of stock buyback, which concludes the current stock repurchase program.

Subsequent to the quarter, we retired our $24,000,000 term loan and refinanced our revolving credit facility, increasing the capacity from 25,000,000 to $40,000,000 Turning to a review of our 2025 outlook. For the full year 2025, we now expect total revenue in the range of $310,000,000 to $350,000,000 representing growth of approximately 6% to 8% year over year. This reflects the sales vacancy and the impact of the CRM launch on sales rep productivity in the lymphedema business during the first half of the year, along with the strength in the airway clearance business. Our 2025 total revenue guidance range assumes that growth for our lymphedema product line will be 1.5% to 3%, and growth for our airway clearance product line will be 40% to 43%. For modeling purposes, for the full year 2025, we now expect our GAAP gross margin to be approximately 75%, our GAAP operating expenses to increase 10% to 11% year over year as we invest in our sales organization and advance our tech related investments throughout the year, net interest income of approximately $1,800,000 a tax rate of 28% and a fully diluted weighted average share count of approximately 23,000,000 to 24,000,000 shares.

As a result of our stronger than expected gross margin, we now expect to generate adjusted EBITDA of approximately $33,000,000 to $35,000,000 in 2025. Our adjusted EBITDA expectation assumes certain noncash items, including stock compensation expense of approximately $8,100,000 intangible amortization of approximately 1,300,000 and depreciation expense of approximately $5,300,000 We have successfully implemented a range of tariff mitigation strategies, including reshoring manufacturing, enforcing supplier compliance, and leveraging exemption policies, which have significantly reduced our exposure. As a result, we now expect the full year tariff impact to be approximately 1,000,000 to $1,500,000 Looking ahead, if no further changes occur, we anticipate an ongoing annual impact beyond 2025 of roughly half this amount. With that, I’ll turn the call back to Sherri for some closing remarks. Sherri?

Sherry Dodd, Chief Executive Officer, Tactile Medical: Thank you, Elaine. In sum, we are pleased with our second quarter performance. We delivered on our Q2 expectations across the P and L for lymphedema and airway clearance, reflecting solid execution in both business lines. We have moved past the early disruption from our CRM implementation and sales force optimization. As we look ahead to the 2025, we are focused on driving operational and financial performance and are confident in our ability to sustain this momentum and believe our strategic initiatives will position us well ahead into 2026 and beyond.

With that, operator, we’ll now open the call for questions.

Conference Call Operator: Thank you. We will now be conducting a question and answer session. You may press 2 if you would like to remove your question from the queue. And our first question will come from Adam Mader with Piper Sandler.

Kyle Winborne, Analyst, Piper Sandler: Yes, great. Hi, this is Kyle Winborne on for Adam. Congrats on a good quarter and thanks for taking the question. I guess maybe to start if I could just push a little bit on the guidance. I’m seeing that you guys beat Street numbers by about $5,000,000 but then raised the full year guidance by about $1,000,000 at the midpoint.

I was just kind of curious if you could walk us through some of the components here and maybe why more of the Q2 upside wasn’t pushed through for the full year.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Yes, thanks Kyle for joining. This is Sherry. And you know, we were really excited to exceed expectations in Q2 and we took a really thoughtful approach as we thought about the back half of the year. You know, our Q2 performance gave us the confidence to raise our bottom end of the guidance up by 1,000,000. You know, The positive momentum that we’ve had with the sales reps that we brought on actually exceeding our two eighty five target, the stronger CRM adoption and proficiency and this market share growth in nimble and in AffloVest you know, us a lot of confidence and we also know that there’s some realities of scaling our commercial organization.

So we had some lessons learned with our CRM rollout in Q1, which showed that, you know, even when you’ve made the investment and you have a well managed plan and implementation, can still get some short term disruption. So knowing that we’re going be launching AI tools in the second half, we just thought to be really thoughtful about our approach to all this and hedge a little bit against some short term variability. But all that being said we’re really excited about the momentum that we have and put forward the very best guidance based on the information that we have and we expect to deliver on that.

Kyle Winborne, Analyst, Piper Sandler: Great. That’s helpful. Thanks for the color there. Maybe just on the head and neck data that it was good to hear that still on track for the six month data released later this year. And I think I heard Q4, early Q4 specifically if I got that right.

And then so how quickly do you think that you could get payers on board thereafter? And then kind of, you know, what can we expect to see when can we expect to see impacts on the P and L? Thanks.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Sure. Yes, we are really excited about that head and neck data. Again, as I said in my prepared remarks, we’ve had that two month data presented now, it’ll be in three different conferences. And the manuscript submission will go in in Q4. Obviously, it’s very contingent on the journal and how fast they are to actually publishing but it is our intention to get that in in early Q4.

As it relates to full commercialization, just wanna put a little bit of context around this. I just wanna remind you and everyone else that we already have the indication for head and neck. So it’s not about a new indication, it is really is around coverage and the fact that currently commercial plans tend to see head and neck, lymphedema with PCD as being experimental and investigational. We are already engaging in conversations with our commercial payers and they understand and have more awareness now that their policies may not reflect what is now we’re going to be able to show more of a standard of care being able to use pumps but that does take time. They have to review their policies.

They typically have a cadence of where they update policies that is not our timelines but it will be their timelines. But it will certainly manuscript, it helps to have the posters and the abstract. And we know that ninety percent of patients with head and neck cancer are going to have lymphedema. So the fact is this is a patient population that is likely going to be at risk and getting on to earlier therapy is going to be better. So it’ll take some time.

We’re driving as much as we can right now and we’ve definitely had some inroads with the commercial payers. As it relates to Medicare, the NCD does allow a path for patients with unique characteristics, which is things like having lymphedema in the head and neck area to go directly to a pump. And so we are engaging and continue to have conversations with the MACs about this and are looking forward to seeing that expanded patient population have better coverage. So we expect this to continue to move forward in 2025 but probably have a bigger impact in 2026 and beyond obviously.

Kyle Winborne, Analyst, Piper Sandler: Super helpful. Thanks, Sherry.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Yes, you bet. Thank you, Kyle.

Conference Call Operator: Our next question comes from Ryan Zimmerman with BTIG.

Ryan Zimmerman, Analyst, BTIG: Thank you. Thanks for taking my questions and congrats on the quarter. Sherry, I want to ask, you gave some good stats I think on the market and you talked about 145,000 patients I think being treated. I’m curious if you can kind of give us your thoughts on where you think your share estimate is there. I put it at about a third maybe of that market.

But given the market is growing at 10%, as you said, given where your lymphedema business has been growing, I’m curious kind of how to reconcile that with the plans to kind of get back to that market growth rate over time? And do you think that that 10% is kind of the right long term growth rate to think of for Tactile over the long term?

Sherry Dodd, Chief Executive Officer, Tactile Medical: Yes. Thanks for your question, Ryan. We definitely believe that Tactile can return to double digit growth and we’re headed that way. When I think about the drivers, I want to break them down into market, as you mentioned, market share product mix, which is closely tied to channel strategy and then kind of streamlining the back office. So for market, the lymphedema market continues to expand and the number of patients treated with both PCDs and non pneumatic compression devices appears to be growing at a ten percent CAGR and we expect this momentum to continue.

Less than ten percent of diagnosed lymphedema patients get treatment at all. So as a market leader we are well positioned to influence this through clinical education, patient engagement tools like Kylie etcetera. So nothing has changed in that market fundamentals and we think it’s gonna continue to grow and we’re gonna be able to get into that with both diagnosed patients on the short term and undiagnosed over the longer term with them into undiagnosed diagnosed. From a market share and product mix, so we don’t report out specifically on our share by product, but we do know that growing this business to double digit will require deeper market penetration into both product categories. What we do know is that the the basic pump or for us nimble is growing faster than that total market CAGR.

So we are outperforming the market CAGR with with nimble. And that is, you know, been been great for great for us and and will continue to be really good for us. But that growth does have a muted, impact on revenue growth relative to unit growth. So as our mix stabilizes and we’re no longer lapping the shifting portfolio, we expect the revenue growth to more closely mirror unit growth as represented by the CAGR.

Ryan Zimmerman, Analyst, BTIG: That’s helpful, Shay. And just to push on that, when do you think you lap? I mean, you launched NIMBLE, I think maybe late last year, if I’m not mistaken. So is it fair to assume that by the end of this year that’s when you start to lap that?

Sherry Dodd, Chief Executive Officer, Tactile Medical: So Nimble launched lower extremity in late last year, or sorry upper extremity late last year launched lower extremity in February. So we’re not even in a full year of having full nimble, if you will. But what we have done is we’ve got Entre plus as well as nimble in that basic category and have been seeing that overall growing over time from that basic pump growth. We’ve been innovating in this area. We brought e prescribing in this area.

And so we’ve been putting a lot of focus in that basic pump growth area. As well as if I think about channel strategy for a minute, new reps coming in, it’s easier to sell Nimble and e prescribing than it is to walk into an oncology suite. And so the vascular channel for us is a really nice fit with nimble and a nice fit with e prescribing. But those reps as they get more comfortable on their learning curve, they’ll be in all channels. As that rep starts to season and we are able to execute our channel strategies, again we think that that’s going to have a big impact on more of this balanced portfolio between nimble and entree or or sorry.

Our basic pump as well as our advanced pump. And that, again, will reflect more of the market. Yeah. And then and, Ryan, I think, specifically, I know

Elaine Burkermeyer, Chief Financial Officer, Tactile Medical: you’re getting to kind of a timing. You know, I I think you you know that this has been a several year journey for us to really make a concerted effort to penetrate that basic pump space, which is, you know, why our growth has really accelerated there. We are

Sherry Dodd, Chief Executive Officer, Tactile Medical: through the plus. We now have the nimble.

Elaine Burkermeyer, Chief Financial Officer, Tactile Medical: We have parachute. And so I think what we’re saying is that while we’re starting to see kind of really good traction, hence now our product mix more closely representing the industry, that’s why we said we’re not quite there yet, but we’re getting closer to that. We’ll be able to share a bit more on timing as we get into early next year’s year, full 2026, but we wanted to at least kind of provide for that dynamic as to why temporarily our revenue growth has not quite matched the industry growth there.

Ryan Zimmerman, Analyst, BTIG: Yeah. All right. That’s helpful. I’ll hop back in queue. Thank you.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Yeah. Thanks, Ryan.

Conference Call Operator: Our next question comes from Brian Vasquez with William Blair.

Brian Vasquez, Analyst, William Blair: Hi, everyone. Thanks for taking the question. I wanted to focus first, excuse me, on the composition of the guidance and the updated guidance. I think previously lymphedema sales were a little bit higher and airway clearance was a little bit lower and the positive here is obviously those two could offset each other, but maybe spend a minute on what’s going a little bit slower in the lymphedema side and what’s going really well on the airway clearance side to kind of switch the mix a little bit and increase the guidance a little.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Sure. So let me start with AFLO because it’s such a great story. And I think, but it may be a bit repetitive of everything that we said in Q1 because AFLO really does reflect execution of our strategy. We have the secured partnerships with the top 10 respiratory DMEs. This involves a preferred product placement for several of those top DMEs.

We have full alignment with their finance team, so they’re planning on the product volume, which, of course, resides on their respective balance sheets given that this product is a thirteen month cap rental. And we’re also seeing increased demand. So the 1,200 clinical education events that we’ve done along with just increasing awareness in the space is just driving up demand and we’re really pleased to have a great product. The only product that’s truly mobile and as it’s battery powered versus tethered is also the lightest weight product. And these are differentiating features for both providers and for patients.

So doing everything that we said we were going to do, have a great product, we are educating and then we’ve got these great secured partnerships, and this is gonna continue through 2025. And when it comes to the lymphedema, similar to what was shared with Ryan, where we’re seeing a disproportionate, we’re seeing just a different unit mix from our basic pump to our advanced pump. So Nimble is growing faster than the market and is growing faster than Flexitouch. But the assigned revenue for basic versus advanced pump is different. So that is really what you’re seeing up in terms of as a percentage growth of revenue and that’s really what’s contributing to it.

But we feel very confident with our strategies, commercial strategies which is both channel as well as go to market with our sales reps and putting the right reps. Looking at the right support systems around that we are feeling very confident that we will continue to take advantage of the growing market, continue to grow market share and then ultimately have our revenue reflect what is truly the product mix that you see in the CACRE on behalf of the broader market.

Brian Vasquez, Analyst, William Blair: Okay. And then one of the other kind of more positive updates, think you had made a comment about some of the unique characteristic requirements for reimbursement coming through a little more positive and or at least you’ve come away more positive on those developments. Maybe talk about what you are seeing in the underlying business when especially around that reimbursement update that is leaving you a little bit more comfortable. Thank you.

Sherry Dodd, Chief Executive Officer, Tactile Medical: Sure. And I’ll share this with Elaine. We said that and I believe we said this in our Q1 earnings call, maybe even in Q4, that the move from LCD to NCD was a great move for patients because what it does is it eliminates that need for a patient to have to go through a basic pump trial before they get to an advanced pump trial. And if I go back to head and neck, let’s think about that for a Medicare patient, a Medicare patient would have had to have a basic pump that did not even cover their head and neck starting place before they could get to an advanced pump. And unique characteristics allows for a patient to have documentation that shows that they have edema outside of the limb, so think about chest, trunk, head and neck, as well as potentially skin changes.

So it could be fibrosis or it could be hyperpigmentation or a number of things. And so that being part of the NCD unique characteristics, there is now a path for patients to move into an advanced pump if they meet the clinical requirements. In terms of what we’re seeing, I’ll turn that over to Elaine to give a little bit more real time color.

Elaine Burkermeyer, Chief Financial Officer, Tactile Medical: Yeah, think, you know, to tag on to what Sheri is saying, I think what we’re excited about is it’s really becoming clear to us that the pivot in policy is really meant to make sure patients get the right product for their clinical indication the first time. And there’s no real longer this kind of DD pathway that’s been in again for these Medicare patients. It also is really complementary to our strategy. We’ve been really focused on ensuring we’ve got that basic pump penetration so we can serve those patients well that really just help lymphedema confine to their limbs, and then really that other more distinct group who have more complex pieces where the lymphedema is extending to parts of their body like their chest, trunk, where they’ve got those skin conditions with nephelixity test. So we’ve got two great products, and we now have really good strong foothold in kind of both their segments.

So we feel like we’re well positioned to take advantage of this NCD approach of ensuring the right patient gets the right product.

Conference Call Operator: Moving next to Suraj Kalia with Oppenheimer.

Seamus, Analyst, Oppenheimer: Hi, Sherry and Elaine. This is Seamus on for Suraj. Congrats on the nice quarter. Just looking at revenue by channel, noticed a little bit of continued weakness on the commercial side.

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