Tactile Systems at Oppenheimer Conference: Strategic Growth and Innovation

On Tuesday, 18 March 2025, Tactile Systems Technology Inc (NASDAQ: TCMD) presented at the Oppenheimer 35th Annual Health Care MedTech and Services Conference. The company highlighted its robust business fundamentals and strategic initiatives, while also acknowledging challenges in the lymphedema and bronchiectasis markets. The session underscored Tactile Systems’ commitment to innovation and market expansion.

Key Takeaways

• Tactile Systems reported $293 million in revenue for 2024 with a 74% gross margin.
• The company launched Nimble, a platform for lymphedema treatment, enhancing patient engagement.
• Focus on expanding access to care and increasing lifetime customer value.
• Addressable market for lymphedema and bronchiectasis estimated at $10 billion.
• No significant impact from VA or Medicare cuts anticipated.

Financial Results

• 2024 Revenue: $293 million
• Gross Margins: 74%
• Adjusted EBITDA: $37.1 million
• Cash Flow: $40 million
• Compound Annual Growth Rate (CAGR): 16%

Operational Updates

• Nimble Launch:

- Introduced in February for lower extremities

- Features a smaller, lighter, and portable design

• Kylie App:

- Enhances patient engagement by tracking symptoms and therapy progress

- Facilitates communication between patients and providers

• Sales Organization:

- Investments in sales specialists to streamline processes and documentation

Future Outlook

• Strategic Focus:

- Increasing access to care by removing barriers through education and favorable policies

- Expanding treatment options with innovative product designs

- Enhancing lifetime customer value with ongoing patient support

• Total Addressable Market (TAM):

- Lymphedema and bronchiectasis combined market potential: $10 billion

• 2025 Guidance:

- Expected growth in line with 16% CAGR

Q&A Highlights

• VA Cuts:

- No significant impact due to product listing on the prosthesis list

• Same Store vs. New Store Growth:

- Opportunities for growth within existing and new prescribers

• Medicare Cuts:

- No anticipated reimbursement cuts due to the Lymphedema Treatment Act

In conclusion, Tactile Systems’ strategic initiatives and market positioning indicate a promising outlook. For more detailed insights, refer to the full transcript below.

Full transcript - Oppenheimer 35th Annual Health Care MedTech and Services Conference:

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Suraj Kolbe, a senior medical device analyst at Oppenheimer. Pleased to have with us this afternoon Sherry Dodd, CEO, and Elaine Bergmeier, CFO of Tactile Medical. And I know a lot of you guys on the call and those who will be listening to the replay, you know, Tactile comes up in a lot of conversations in terms of how new management is shaping the company given everything from the past and and current macro level. So, it’s a timely conversation. And, Sherry, I’ll let you take the floor.

I’ll resurface, like, five minutes towards the end and, you know, present any client questions. And I I I certainly have a question or two. Thank you so much, ladies.

Sherry Dodd, CEO, Tactile Medical: Thank you. Thank you very much, Suraj. Looking forward to being here. So, I’m gonna start with, probably one of my our favorite starting places to really kind of talk about the business. And and the basis of this really is, if you think about any business at all, what are the business fundamentals and what gets you most excited?

The question that I’ve been getting a lot since joining as CEO. And I think what boils down to to an external assessment of a healthy business is, are you able to address unmet needs? Do you actually have innovative solutions? Is there a specific, patient population that, is particularly attractive to you? And then what is the commercial viability of the business.

And I think this as a dashboard really highlights all of those. So when we think about the population, over twenty five million patients are currently not diagnosed, with the very condition of which we can help, patients, improve their quality of life, and this would include both lymphedema and bronchiectasis. So twenty five million patients are currently undiagnosed, and we’re just talking about The US alone. Of those, about two point five million patients are diagnosed, and yet a smaller proportion of those actually currently have access to therapy. So an amazing opportunity in terms of a market that clearly has an unmet need.

Current TAM, 10,000,000,000. We, served over 79,000 patients in 2024. And we do this on a basis in that commercial viability standpoint of, you know, are you able to generate revenue? Indeed. So about $293,000,000 was our 2024.

Are you able to do it profitably? Absolutely. 74%, on our gross margins. Our adjusted EBITDA at $37,100,000 and then a cash, flow at 40,000,000 is where we ended, the year and and and and it’s growing. So really, really healthy business fundamentals in terms of the unmet need, and we’ll talk about the innovative products that we have.

But certainly, this commercial viability is, is is very clear for us. And again, it’s a great market to be in. We think about where we’ve been investing. And so knowing that this is a great market, this is again what makes it attractive for us to win and really comes in this unique assets, area. We have a very rich body of clinical evidence that supports the value of our therapy in this underserved population.

We have an incredibly large distribution reach. So not only in our Salesforce, but these patients show up in different channels. They are gonna be in the oncology channel, or they’re gonna be in a therapist channel, or they’re gonna be in the vein clinic channel, or in vascular channel, and they’re in the VA. So we have an opportunity of finding the patients, where they are, and have a sales force that can support that. We have an incredible and very scalable revenue cycle management team and tools.

And so it’s not just the bodies we’re able to put on this, but we’re investing in the technology that helps make the revenue cycle management, scalable, and simplified. And this shows up when you look actually at our balance sheet and and long AR. Over the past several years, we’ve been able to demonstrate that not only do we have a great product that’s in demand and being used by patients, but we’re able to get paid. And so that revenue cycle management is ensuring, that the claims can be submitted, accepted, and and processed for for revenue, in collections on our side. Multi pronged product development.

So we just launched Nimble, and I’ll talk about that. But we just launched a new product, at the end of last year and this year, completely reimagining what a basic pump could look like for our patients, and it’s been incredibly well received by both patients and providers. And we will continue to look at the way digital strategies are gonna play out, not only in our marketing campaigns, but in our patient engagement and provider value. All of this is underpinned by this value creation. So being a profitable market leader, posed for scale, poised for scale, sorry, gross margins over 70%, and being in a really strong cash position again makes, not just this year, but our future years incredibly bright.

So here’s a graphic of what I talked about on the very first slide where you have this, underdiagnosed population and this diagnosed population. And what’s interesting is both in the lymphedema category as well as the bronchiectasis, it’s the same story. So from a market standpoint of being in large and underpenetrated populations as well as, this care journey for these patients is extremely protracted and it’s very complicated from the point where they have symptoms to getting diagnosed to getting on appropriate therapy. There’s a lot of similarities between the lymphedema and the bronchiectasis patients. And this is where we believe we’ve got core capabilities, and competencies to help support them.

So let me because these are under diagnosed populations, there’s many that are confused in terms of, well, actually, what is this condition? And I think part of our job is not just to sell on the product innovation that we have, which certainly is an easy sell. The harder sell is actually on the diagnosis, because it is not entirely clear, when a patient has lymphedema and when they don’t. And the one of the challenges is is because it’s hard to see. Although I guarantee you, if you’re to go to a grocery store, a church, an airport, a shopping mall, or in any place where you’re gonna have people and you start looking at people’s limbs, you will see someone that has lymphedema.

And you may not know and you may think that maybe it’s an obesity issue or something else is going on, but it’s quite likely these patients have lymphedema. And while I don’t encourage you to ask them if they do, there’s a strong likelihood that they may or may not have even been diagnosed yet. So what is it? The lymphatic system enables the transportation of fluids that have these white blood cells, and they help get rid of toxins and waste throughout the body. When those the lymphatic system is damaged either from cancer treatment, surgical, or radiation, or if you have chronic vein insufficiency and you’ve you’re overloading, your limbs, this system is going to be damaged.

And once it’s damaged, it cannot be re repaired. It’s a chronic progressive disease, and it causes for swelling and infection and discomfort. And it gets to a point where then some of you have seen more of these extreme cases of elephantiasis or we actually have weeping wounds. And this is because the skin degradation has happened with all this buildup of fluid that has actually changed the skin and its ability to keep the fluid, inside and starts sweeping out. So it’s typically a secondary condition.

It’s caused again, as I said, by the various conditions here, but it can also be caused by trauma or surgery or overall infection. Ninety percent of patients with head and neck cancer are going to have lymphedema. Ninety. So more than likely, if you have a head and neck, cancer and you are a survivor, you are going to then be living with the condition of lymphedema, which may impact your ability to swallow, speak, and range of motion. And we have a therapy that can help you.

Breast cancer patients, forty percent of survivors are going to have lymphedema. Again, if you’ve survived the cancer, now you have the secondary condition that is causing you, impact on quality of life. And this we have a treatment, that can help you. So the populations are there and there definitely is a need. Here’s a bit of a patient view of of the patients that end up with, lymphedema.

As I said, you’re likely to to know someone or to have, seen someone, that likely has this condition. And again, a lot of patients and why this journey is so complicated is because they have the symptoms, but they don’t actually know what’s happening to them. And so they have to typically go through seeing a primary care physician who doesn’t necessarily know, may prescribe a diuretic, then they’re gonna potentially wanna rule out heart failure and what this edema is coming from. So it takes a while for them to finally get to a physician that can say you have lymphedema. And then from there, how do you go about getting the appropriate therapy?

For bronchiectasis, it’s also common in that you have a large proportion of populations that are having symptoms, but not necessarily have a diagnosis yet. And so bronchiectasis is this respiratory disease that causes the airways to become widened, inflamed, and scarred, which is a permanent damage, also not reversible, and can be very progressive. And so when you have a damaged airway, you can no longer clear mucus, so you get bacteria. So then you have a cough, so you have mucus, but then you’re unable to actually move that mucus out. And so it stays in this progressive cycle of infection and mucus and inflammation.

And this bronchiectasis is often in, in fact, forty two percent of patients with COPD, and in one to four percent of overall smokers. And so, again, it’s a bit of a rule out what’s going on with the patient. They’ve had multiple admissions. They’re having chronic pneumonia. They’re coming back in.

Also, typically, a secondary condition to something else. Although some patients, like with cystic fibrosis, could be more of a of a of a primary, therapy for them. But majority of these patients do have have bronchiectasis. Similar to lymphedema, bronchiectasis is routinely misdiagnosed and left untreated. These patients also suffer with a lot of hospitalization visits.

And again, maybe trying other therapies like huff, coughing, and PEP devices. The challenges is with bronchiectasis, typically, they can’t get enough of the of the push, through their diaphragm to actually cough. So you can try to cough, but you don’t have enough of the, of the, dysfunctional diaphragm could actually be presenting preventing you from having a full cough. And so there’s way too many patients with this condition that are not receiving access to to to our product, which is a, an airway clearance vest, and and I’ll talk about that. So again, really disappointing and, and not a great position to be in as patients.

But as a business, clearly, unmet need, where innovative solutions are gonna make an impact. So when we think about the build of the lymphedema patient, you know, potential of 5,000,000,000 of addressable market and a 5,000,000,000 on bronchiectasis gets us to the math that I showed you earlier for a $10,000,000,000 TAM, for this population. And again, when we think about parts of the body, we’re covering it all from the lower body to the upper body, which is both lymphedema and chest, as well as the head and neck, which would be exclusive to the lymphedema and head and neck cancer patients. When we think about what needs to happen then to unlock this TAM, it isn’t magic. In fact, many businesses before have been in this very same situation where you had unmet needs and you had a technology, but you had this, you know, big opportunity, this addressable TAM that really starts with getting the undiagnosed to a diagnosed state.

And so for us, when we think about how we go addressing this access to care, it really is going to require pretty bread and butter type of market development activities. It’s the patient and provider education. It’s gonna be making sure you have the, a favorable reimbursement environment of which we do, for coding and for payment. The coverage is one that we’re we’re we’re continuing to work on. That you have evidence that actually supports the value of the technology.

That you can process the identification from patient being identified with diagnosis to them getting the product in a way that is simplified. And then having solutions on those innovative solutions and that connectivity that really allow the patient to get the benefit of the therapy. So, again, it’s not magic what needs to happen here. It can’t go fast enough from my standpoint about how we go after, addressing these barriers, but we have very solid plans on how to do this. And we are seeing, the benefit of our place in the market as well as our technology and our core capabilities to be able to go after and unlock this huge market.

So let’s think about how we do this with our product standpoint. So first of all, we have in the lymphedema space, there is two types of, technologies that we have. One is called a basic device or a basic pump. It’s also we we call it by its, reimbursement code name of an EO six fifty one. And then we have an advanced device, an EO six fifty two.

And so these are different devices meant for different patient types. And so there’s a segmentation that happens, for these patients. The first in that basic pump, was called the Entree Plus. And so very convenient at home treatment for patients, that have limb swelling, so upper body or lower limb swelling. And the advanced pump has different features and functionality that uses an intermittent compression, but it also has coverage for chest and trunk as well as head and neck for those patients that have swelling in areas that the basic pump does not cover.

So this has been areas where we participate in the market for these two types of populations that have different needs. We recently launched a new technology called Nimble, which is our next generation platform. We launched lower extremity in February of this year. So now we have a full system for, upper limbs as well as lower. This technology and the controller is smaller.

It’s lighter. It’s portable, and a huge decrease in the amount of hosing, that goes from the garments into the controller. So we’re very excited. We’ve seen amazing adoption by both, providers as well as patients, really appreciating the smaller, lighter, portable aspect of the nimble, platform. This very platform of having the smaller, lighter, and portable will be the thinking as we go into developing what is our next generation advanced pump.

So again, meeting the patients where they are, in their care continuum, make sure that they have a product that is very patient centric. Speaking of patient centric, I don’t know anyone who launches a product anymore that doesn’t have an app. So apps are everywhere and largely undifferentiated. What I wanna call out about ours, and I don’t even like calling it an app, I think about it as a patient engagement, product. And so the nice thing about Kylie is that it’s not even specific to our product.

We’re finding that therapists are asking patients, massage therapists, lymphatic, therapists, and are asking patients to download Kylie as they’re starting their manual therapy. It’s a great tool that allows the patient to take pictures of their limb. They can put in their symptoms, and they can track their therapy. When patients have a way of doing this and have their own engagement, it makes that connection with their provider or their clinician, like a therapist, much tighter because now you’re looking at shared goals and you’re looking at progress. So the Kylie, app truly is for us a patient engagement, platform.

It allows for that learning education. The patient can learn more about their conditions. They can track what’s going on, and then they can share that information with their care team. It also allows us to push messages into the app for patients. And so it’s a great, one and two way, actually kind of three way with the provider patient, as well as if we wanna provide updates, engagement with the patient.

And so we’re continuing to invest in that platform and see that as key to our longer term strategies. I talked before around evidence. So how do you differentiate your product and what creates a compelling value proposition? Evidence does. And so you see here a number of data points that should support the value of our therapy in terms of clinical symptom reduction as well as patient satisfaction as well as compliance.

So we don’t have a problem with therapy benefit. Therapy benefit is very clear, is supported by the evidence, and it’s supported by patients continuing to use the therapy in home because they’re getting that immediate benefit. So when we look at where we’re going and how overall, you know, this is placed, we’re feeling very positive and very confident that we have an opportunity of really owning the space in lymphedema solutions that can improve patients’ lives. Again, a $5,000,000,000 addressable market. We’re number one in the market share, total between the basic and the advanced pumps, and patients are being served and benefited from the therapy.

It’s a great business to be in and it’s one that we’re feeling very, very, confident we have an ability to grow. In our bronchiectasis treatment plan, again, a lot of evidence that supports our product. And as we sit as number two in market share that patients, prefer our our product to bladder style vest. That ninety percent of patients, say that they would be compliant, with the therapy once a day and that the product actually fits their lifestyle. You can see it’s portable.

It’s not tethered. The patient can use it as they’re going about, their day. They typically wear it for about an hour, but it allows for a lot of patient, fit to the patient’s lifestyle. And again, a great product and one that we’re we’re really proud of. So as we think about this market, again, total $5,000,000,000 TAM, this portable design, the fact that we are currently indirect.

And so for us, it makes a lot of sense. We partner directly with the respiratory DME reps that are in the hospitals working directly with the physicians that see these patients. They have a portfolio of products. They can help identify the patient that is currently failing on oxygen or a nebulizer or noninvasive vents and help identify what is the right patient potentially for the vest. And we believe that this is, again, a great category for us, again, with very strong reimbursement and a great value proposition, not just to patients, but also to our DME channels.

Recent milestones of, when we look at both of these, you can see a building, base of evidence and kind of value over time from 2022 on to 2024, showing the evidence, showing the innovation, showing the way we’re simplifying our business, and super proud of the direction that was set in previous years, with the leadership before me and very excited about the direction that we’re going ourselves. And so when we look at our overall CAGR, a 16% CAGR over time, you see where our 2025 guidance is. And again, in some ways, I feel we’re just getting started, in this area. We’ve been at this for quite a while, but I believe that our current strategies, and the focus that we have on in in improving access to care and in looking at that expanded treatment options and that lifetime value are going to be the formula that will help us unlock value, again, for the external market, as well as helping us, think about it from a scale and leverage standpoint. So these are our three strategies.

We set these out on our last earning calls. There may seem kind of big and unwieldy, but for us, they’re incredibly clear. Increasing access to care really is around removing barriers, and that is in, again, in the education, making sure that the evidence supports the value, making sure we’ve got appropriate and favorable policies for both commercial and government payers, and how do we just make the process easier so we don’t end up with that patient leakage and fallout. You can’t be a business without having innovation. And so for us, innovation is key to where we’re going.

And so when we look at Nimble, as a platform and how we’re going to be advancing that patient centric design to patients in the advanced pump, as well as we’re looking even more broadly across what is the portfolio of products and services and offerings to help support patients, very much part of our strategy. And then as much as I talked about the long journey of patients finally coming to a place of diagnosis, once they get our pump, there’s a bit of a dropout, and we don’t necessarily have a means of bringing value or following that patients. When I think about unlocking, pure opportunity for value for all shareholders and stakeholders, it truly is elongating, that value proposition from not just at the time when they’re looking for a diagnosis, but even after they’re starting to get therapy, how can we continue to provide value? That’s gonna be with with our Kylie app as well as it might be with further product innovation. So I’m very excited.

We outlined these as strategies. These are our key strategies. We’re aligning our resources to these, and excited about the direction that we’re going. So let me end there and turn it over to you, Suraj. Oh, you’re on mute, Suraj.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Sorry about that. Sherry, a bunch of questions came in. I don’t know if I’ll be able to make all of them, but I’ll just kind of rattle through quickly. What are the impacts of VA cuts, from the current administration, if at all, on tactile?

Sherry Dodd, CEO, Tactile Medical: You know, we definitely know that, the VA has been nervous, about, you know, the cuts. Anytime you’re having cuts in staff, you potentially have some some some impact. We’re not seeing it directly in our business in a profound way right now. We do benefit from the fact that our product, sits on the prosthesis list. So from a funding perspective, when they talked about the credit cards being frozen, they’re not frozen for those products that are on the prosthetic list.

So that’s positive for us. I think, you know, anytime you’re not having headcount to do jobs, it could have an impact. So I’m I’m not saying it won’t have an impact. But for right now, we’re watching it carefully, and we’re helping to support the patients and the physicians that are looking to, you know, help the patients get diagnosed and onto the best therapy.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Got it. Sherry, I’m, Elaine, I’m abbreviating this question. Essentially, it’s same store, new store dynamics on the lymphedema side.

Sherry Dodd, CEO, Tactile Medical: Sorry. Same store? Same story?

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Same store, new store, like new, you know, existing customers within within a practice versus new customer. I I have abbreviated the question, but that’s what they are asking.

Sherry Dodd, CEO, Tactile Medical: Got Got it. Do you wanna take it, Elaine?

Elaine Bergmeier, CFO, Tactile Medical: Yeah. So I think, you know, we’re like many businesses, we’ve got high prescribers and we’ve got those that, you know, are kind of less frequent. And so, we continue just given the size of the tam to have the opportunity to continue to cultivate, find more patients within our existing prescriber base. So kind of get those lower prescribers to be high prescribers, as well as continue to engage with new prescribers. So, so I think our growth, we continue to have that opportunity just given, these patients are kind of, you know, coming through different channels there.

And so, that that is, both I would say both the same store and new store are both continued growth drivers for us.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Fair enough. And guys, sorry, I’m just trying to squeeze as many in. Challenges in how do you unlock undiagnosed patients?

Sherry Dodd, CEO, Tactile Medical: So it definitely comes from awareness. And so it’s both patient awareness and physician awareness. You know, we’ve thought, you know, you could do a huge campaign on on patient awareness. You know, pharmaceutical companies have done this with, you know, diseases that aren’t necessarily super common. And so you have a bunch of patients that are flooding to physicians.

But if the physicians aren’t aware of the disease, you’re not really helping. You’re creating another kind of, bottleneck and barrier. So we need to do both at the same time. So we are looking at the patient campaigns and we’ll continue to do that, and we’re very committed and happened to the physician education. And so we continue to do that, and that’s maybe same store, new store.

How do you get more physicians aware? Literally, the slide that I showed you on lymphedema, you know more now about lymphedema than many physicians get in medical school. So there’s a lot of work to be done, and we continue to have the training and education through professional societies as well as our own programs. We’ll continue to do that, and we’re expanding those education footprints, this year and we’ll continue to.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Fair enough. Medicare cuts, any bodies from that? Again, folks, sorry, I’m just abbreviating. I’m trying to squeeze in as much.

Sherry Dodd, CEO, Tactile Medical: I think on the Medicare cuts, so certainly, we are not we have not seen and don’t expect to see cuts in the actual reimbursement. We are benefiting from member of congressional act passed for the Lymphedema Treatment Act. It’s hard to imagine that they’re gonna turn a congressional act and go after lymphedema right now. I don’t think that that’s gonna be the administration’s priority. Certainly, if there’s less staff, that could slow down the administrative reviews on max and these type of things.

But the good news, you know, for us is that the patients are there. And the easier we make the process and the better we make sure that the physicians are putting in the right documentation and we’re able to streamline that, we expect that that will, you know, will weather that will weather that storm through both people, knowledge as well as technology.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Sherry, rapid fire. How do you capitalize on your large distribution reach? Any additional color on head and neck adoption? Guys, I fit everything in.

Sherry Dodd, CEO, Tactile Medical: Yeah. So on the head and neck, so just quick. So we, have, our two month data has been reviewed, submitted for manuscript, or submitted for publication, as well as some meeting abstracts at some cancer meetings. We have not yet heard if those have been accepted. But I definitely expect to see we’ll be able to share more of the data both two months and hopefully six months by the end of the year.

Those data are gonna be very impactful in helping us, particularly with commercial payers that see the, medic that see head and neck as being experimental. The good news is with the new NCD, that unique characteristics could definitely include head and neck. And so we believe that that’s not gonna be a huge barrier on the coverage standpoint. We’re working on the coding specifically for head and neck, and we have a good strategy here. And, again, great IP.

I’m feeling very bullish on our head and neck. It’s just gonna take some it’s gonna take some time to have all of the, access to care pieces in place. Your other question was on leverage of our sales organization. Was that right?

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Distribution reach. That’s what they Yeah.

Sherry Dodd, CEO, Tactile Medical: Distribution reach. So, you know, as we shared in our q four earnings call, we are investing this year in our in more in our sales organization. We specifically called out more of those specialists that are helping to get the documentation. So top of license, our reps are out in the field selling, to the clinicians, helping with identification, product awareness. So we are making those investments.

And then as we see technology coming on that helps either eliminate the documentation or make it more streamlined, we can throttle those resources up and down that are on the specialists, and that will be our leverage as technology takes hold and makes it, our ability to scale on the back of technology, not just on adding people. I hope that I hope that met the question.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: We’re up on time, Sherry. You managed to figure out the answers and Sure. Sherry Lane. I and my apologies for squeezing in as much, as I could

Sherry Dodd, CEO, Tactile Medical: It’s all good. Those were great questions and glad glad we were able to answer it. Appreciate the opportunity, Suraj.

Suraj Kolbe, Senior Medical Device Analyst, Oppenheimer: Thank you. And congrats on all the progress.

Sherry Dodd, CEO, Tactile Medical: I appreciate it. Thank you very much. Bye bye.

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