Tactile Medical Q1 2026 Earnings Call - Strong Revenue Growth Driven by Lymphedema and Airway Clearance, Raised Full-Year Guidance to $360M-$368M

Operator: Welcome, ladies and gentlemen, to the first quarter 2026 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 Bentzinger, Investor Relations at Gilmartin Group, for a few introductory comments. Please go ahead.

Sam Bentzinger, Investor Relations, Gilmartin Group: Good afternoon, and thank you for joining the call today. With me from Tactile’s management team are Sheri Dodd, Chief Executive Officer, and Elaine Birkemeyer, Chief Financial Officer. Before we begin, I’d 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-K, 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 Sheri.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Thanks, Sam. Good afternoon, everyone. Welcome to our 1st quarter 2026 earnings call. Here with me is Elaine Birkemeyer, our Chief Financial Officer. We are pleased to report a strong start to 2026, with 1st quarter results reflecting focused execution of our 3 strategic priorities, continued strength and durability of our commercial action plan, and operational excellence, including preparing for recent changes regarding the introduction of prior authorization for Medicare fee-for-service patients. Specifically, in Q1, we delivered total revenue of $75.3 million, representing growth of 23% year-over-year. By business line, lymphedema revenue grew 23% year-over-year to $62.2 million, and airway clearance revenue increased 22% year-over-year to $13 million. Q1 results include a minimal contribution from our recent acquisition, LymphaTech. Our revenue performance reflects continued strategy and execution against key revenue drivers.

Our phase technology and people go-to-market investments, which drive referrals and market share. NCD-related tailwinds, which drive favorable advanced pump product mix. Depth and breadth of our DME relationships, which drive market expansion and share, and not to be understated, disciplined operational execution across the enterprise. Further, top-line strength drove meaningful margin expansion. Gross margins increased 250 basis points to 76.5%, and Adjusted EBITDA increased $4 million year-over-year to $3.7 million. We ended the first quarter with approximately $75 million in cash, maintaining substantial financial flexibility as we continue to invest for long-term growth. For 2026, we are updating our full year revenue guidance to a range of $360 million-$368 million.

This update reflects the inclusion of LymphaTech and our increased confidence in commercial execution while maintaining a disciplined approach as prior authorization outcomes under new Medicare requirement for our category continue to mature. For the remaining of the call, I will review our Q1 performance by business line and then provide updates on our ongoing strategic priorities. Elaine will follow with a review of our first full quarter financial results and an update on our outlook for 2026. Turning first to lymphedema. Revenue grew 23% year-over-year in Q1. We are pleased to see the significant growth compared to last year, which was expected given the momentum of our field and back-office strategy execution. Our go-to-market investments are delivering. Our sales organization is fully resourced with broad geographic coverage and a well-balanced staffing model of approximately one account manager for every product specialist.

With those resources in place, we are shifting our focus from capacity investment and onboarding to productivity and operating leverage. Territory productivity increased meaningfully in Q1 year-over-year. Robust CRM utilization, combined with continued enhancements, including workflow tools, is increasingly supporting referral management, prioritization, and account development. We expect continued territory optimization and sustained productivity gains over time. From a products perspective, overall lymphedema growth in the quarter was supported by both Nimbl and Flexitouch, with Flexitouch growth outpacing Nimbl. As expected, this dynamic was largely tied to our decision in October of 2025 to align our advanced pump documentation criteria with the Medicare NCD. While this alignment had always been planned, the timing reflected our increasing confidence that the MACs administration of the NCD had stabilized.

Importantly, the NCD has created a more direct and clinically aligned pathway for patients who require advanced pump therapy compared to the prior LCD policy. This will continue to be a tailwind for Flexitouch volume as we continue to educate providers on the policy change and drive the right patient, right pump messaging. Notably, the NCD policy language also allows for advanced pump coverage for patients with head and neck lymphedema, and we are pleased to see increasing clinical adoption of Flexitouch for these underserved patients who have no other pneumatic or non-pneumatic compression device options. This NCD-driven Flexitouch strength was also evident in our Q1 payer mix, with sales in our Medicare channel growing 40% year-over-year. To a smaller extent, Medicare strength also reflects some order acceleration ahead of the April 13th effective date for the new prior authorization requirement for PCDs billed under traditional Medicare fee-for-service.

Importantly, underlying demand remains healthy, and as the new prior authorization process settles, we expect quarterly ordering patterns to normalize. As a reminder, the inclusion of the prior authorization process for basic and advanced PCDs for Medicare patients was announced in January of 2026 and aligns with Medicare’s prior authorization decisions in other growing DME categories. During our Q4 call, we discussed our expectation that this new requirement will add additional steps to the order process, such as assembling and submitting a prior authorization documentation packet and checking the status of each submission in order to process the claim. These new requirements require patients to have face-to-face clinical visit with a treating physician, not just therapist, to establish and document medical necessity.

To be ready for the go-live date, we accelerated the prior authorization module in our AI portfolio, which had originally been planned for launch in 2027. In the weeks leading up to April 13th, we demonstrated operational agility in validating the technology and systems, training and staffing our teams, and successfully deploying a new process on schedule. The Medicare PCD prior authorization requirement has been in place for just 3 weeks. We are actively managing early transition dynamics as both we and the MACs adjust our respective processes. As an industry leader and a DME provider with extensive experience operating in other prior authorization environments across Medicare Advantage and commercial plans, we believe we are well-positioned to support patients through this transition. Turning to our other payer channels, our commercial business remains healthy and is demonstrating quarter-over-quarter consistency.

In the VA channel, performance reflects a different operating and growth profile than Medicare and commercial. Unlike those channels where reimbursement policies are more dynamic and have driven more pronounced year-over-year comparisons, the VA reimbursement environment is notably more stable, which naturally results in less quarter-to-quarter volatility. From a commercial execution standpoint, the VA call point spans a diverse set of specialties, including vascular, oncology, and therapy practices, with success driven by sustained relationship-based engagement and navigation of local VA systems. As our recently expanded field organization continues to deepen engagement, establish workflows, and build trusted relationships within these accounts, we expect the VA to become a more meaningful contributor over time. We view the VA as a strategic long-term opportunity that is well-aligned with our evolving portfolio and an incremental growth contributor alongside our Medicare and commercial channels, with growth unfolding in a deliberate and durable manner.

Turning now to airway clearance. Sales of AfloVest increased 22% year-over-year in the first quarter. The key drivers of our robust performance remain consistent with what I have shared previously. Our relationships with the top respiratory DMEs remain strong, including at the C-suite, and AfloVest continues to be well-placed across these accounts. There are additional opportunities to deepen engagement within our top 10 DME partners, given the breadth and scale of their national footprints and alignment of individual branch performance goals. We are committed to delivering high-quality medical education and training for providers and DME staff, supporting sales skills of AfloVest and airway clearance therapies at the DME national and area sales meetings, manufacturing a superior airway clearance product, and providing AfloVest account manager continuity to our DME partners, all of which we believe are critical inputs to driving consistent growth and valued partner status.

As the market leader in airway clearance therapy, we remain focused on serving the millions of diagnosed and undiagnosed bronchiectasis patients in the U.S. We expect our commercial strategy, clinical education efforts, and strong DME partnerships to continue driving growth throughout the year, in addition to the launch of our next generation AffloVest product, which I’ll touch on shortly. We are committed to evolving our lymphedema strategy for growth from that of a product company to an integrated solutions leader for lymphatic dysfunction, and the acquisition of LymphaTech is an important milestone in this exciting evolution. LymphaTech fits squarely within our strategy to support patients across the full continuum of care, which begins with getting an accurate, timely, and objective lymphedema diagnosis. LymphaTech’s 3D measurement and monitoring platform addresses this need directly, replacing traditional manual measurement methods that are time-consuming, highly variable, and dependent on clinician technique.

Currently, the LymphaTech platform is FDA-cleared and commercially available as a SaaS-based solution. As we shared last quarter, a key element of this acquisition is broadening our R&D capabilities to support next-generation approaches to disease assessment and treatment. We look forward to sharing updates on our progress in the quarters ahead. The integration is progressing as planned since closing in February. The LymphaTech co-founders and team are actively contributing to both the go-to-market commercialization strategy, as well as helping to identify the capabilities and integration points across the diagnostic and therapy product development roadmaps. We are being deliberate and strategic in our approach to maximizing the provider, clinician, and patient experience. Beyond the team and the technology, LymphaTech also recently earned selection as a funding recipient under a new federal research program focused on lymphatic disease.

Specifically, the Advanced Research Projects Agency for Health recently announced two landmark programs, LIGHT and GUIDE, committing a combined more than $290 million across all awardees over 5 years to advance lymphatic diagnosis and therapeutics. LymphaTech was selected as one of 7 GUIDE funding recipients and is focusing its research on the development of a new responsive garment using bioimpedance feedback to deliver adaptive compression with Bluetooth-enabled remote monitoring. We believe this program has the potential to extend personalized treatment to millions of diagnosed patients. Along with the first U.S. Clinical Practice Guidelines for Lower Extremity Lymphedema presented in March, which validated PCD therapy, we believe awareness of lymphatic disease and evidence-supported therapies is reaching a historic inflection point for the category.

As the industry leader, Tactile Medical is well-positioned at the center of this momentum, further bolstered by our three ongoing strategic priorities focused on improving access to care, expanding treatment options, and enhancing lifetime patient value. Let me now provide a few updates on each of these. Beginning with improving access to care, where we are focused on several internal and external-facing initiatives. Internally, we continue to transform each step of the order process with new technology infrastructure and more efficient workflows. AI-enabled technology is playing an increasingly meaningful role in our back-office transformation. Over the past several months, we have been leveraging AI capabilities in our order intake processes and parts of our medical record review and have been pleased with both the technology performance and the enhanced workflow efficiencies it’s enabling.

As I shared earlier, this quarter, we successfully accelerated and launched the prior authorization component of our AI platform for Medicare fee-for-service orders ahead of the April 13th deadline. Looking ahead, we remain on track to further expand the use of AI capabilities across the entire order process, including patient eligibility and verification of benefits and full medical record review. With the rollout of these expanded features, we believe we will accelerate speed to therapy, reduce revenue impacting human errors, and improve operational efficiency, each of which should support margin expansion over time. Externally, improving market access conditions is supported by clinical evidence generation, guideline dissemination, and engagement with government and commercial payers. For commercial payers, we continue to make steady progress on head and neck coverage and are working to align certain commercial policies to the NCD rather than their current alignment to the retired LCD.

As part of that work, our head and neck clinical evidence program continues to advance, with data progressing through the peer-reviewed and publication process. Payer engagement is a continued patient advocacy commitment we make for all patients, operationalized through payer education, appealing denials, and activating clinical support with medical directors as needed. On expanding treatment options. We are excited to share we recently received FDA 510(k) clearance for our next-generation AffloVest product. Key enhancements with this next-generation device are focused on improving the patient experience and include further weight reduction, new digital connectivity, and improved size adjustability to allow for a more customized fit. The clearance maintains our indication for use across the full patient age spectrum, from pediatrics through geriatric populations, reinforcing AffloVest’s position as a versatile airway clearance solution for bronchiectasis patients at every stage of life.

We remain on track for commercial launch this year to ensure the product is available for the 2026 through 2027 winter respiratory season, and we look forward to sharing more updates with respect to timing as we get closer. Our second innovation area is focused on the advanced pump category. As we shared last quarter, our product roadmap includes the introduction of incremental features and product enhancements for Flexitouch focused on the patient experience. These include a new controller, reduced external housing, and remote control functionality through our Kylee patient engagement application. We anticipate go-to-market readiness in 2027 for these features. Beyond these innovation updates, we are also focused on identifying integration points across the combined LymphaTech and Tactile product development portfolios.

While it’s too early to share specific details of a LymphaTech integrated product portfolio, we are excited by the expansion of diagnostic and therapy delivery opportunities. Our third strategic priority of enhancing the lifetime patient value, which encompasses more efficient and personalized engagement before, during, and after the order and delivery process. As we shared last quarter, we are continuing to focus on targeted care navigation pilots designed to provide clearer guidance to patients earlier in the process and reduce administrative friction. Results to date continue to support our thesis that patients value clear communication and guidance earlier in the process. We are refining these pilots to optimize touch points, we are evaluating how to expand their impact in a measured and scalable way.

We believe this work will reduce patient leakage, enhance the patient experience, and over time, decrease the need for sales rep involvement in the order process, supporting both growth and operating leverage. Taken together, our progress across these strategic priorities reinforces our confidence in the durability of our commercial momentum. Our Q1 results reflect strong execution across both business lines, meaningful progress and agility in our operation transformation initiatives, and the expected return on our go-to-market people and technology investments. Intentionality and discipline are key constructs in the way we are operationalizing our strategy. As a result, the business performance is there. This approach is supported by a strong balance sheet and a thoughtful capital allocation strategy that balances growth investments with shareholder returns. We are confident in the trajectory of our business and the multiple catalysts ahead as we move through 2026 and beyond.

With that, I’ll now have Elaine review our Q1 financial results in more detail and provide an update on our outlook for 2026.

Elaine Birkemeyer, Chief Financial Officer, Tactile Medical: Thanks, Shari. Unless noted otherwise, all references to first quarter financial results are on a GAAP and year-over-year basis. Total revenue in the first quarter increased by $14 million or 23% to $75.3 million. By product line, sales and rentals of lymphedema products, which includes our Flexitouch, Entre, Nimbl, and LymphaTech systems, increased $11.7 million or 23% to $62.2 million. Sales of our airway clearance products, which includes our AffloVest system, increased $2.3 million or 22% to $13 million. Growth was broad-based and reflected strength across both volume and revenue per unit, including higher shipments, strong collections, and a favorable mix across payer and product categories. Continuing down the P&L. Gross margin was 76.5% of revenue compared with 74% in the first quarter of 2025.

The increase in gross margin was attributable primarily to lower manufacturing costs, stronger collections, and favorable product and payer mix reflected in our revenue. Importantly, these improvements reflect structural enhancements in the business rather than temporary cost actions. First quarter operating expenses increased $9.3 million or 19% to $59.1 million. The change in GAAP operating expenses reflected a $5.2 million increase in sales and marketing expenses, a $1 million increase in research and development expenses, and a $3 million increase in reimbursement, general, and administrative expenses. As we discussed previously, we are annualizing investments made in 2025 while continuing to invest in IT infrastructure and automation to support long-term growth. Despite these ongoing investments, operating loss decreased $3 million to 66% to $1.5 million.

Interest income decreased $0.2 million or 26% to $0.7 million due to our decreased cash position. Interest expense decreased $0.4 million or 93% to $28,000. Income tax expense was $0.9 million compared to an income tax benefit of $1.1 million. Net loss decreased to $1.2 million or 41% to $1.8 million or $0.08 per diluted share, compared to $3 million or $0.13 per diluted share. Adjusted EBITDA increased to $3.7 million compared to an Adjusted EBITDA loss of $0.3 million in the prior year, with margin expanding to 4.9% from -0.4%, reflecting a meaningful improvement in operating leverage.

With respect to our balance sheet, we had $75 million in cash and cash equivalents and no outstanding borrowings at quarter-end. This compares to $83.4 million in cash and no outstanding borrowings as of December 31, 2025. The change in cash during the quarter primarily reflects the LymphaTech acquisition, share repurchases, and normal seasonal items such as bonus payments. We continue to see improvement in working capital efficiency, including a meaningful reduction in days sales outstanding. Turning to a review of our 2026 outlook. For the full year of 2026, we are raising our guidance and now expect total revenue in the range of $360 million-$368 million, representing growth of approximately 9%-12% year-over-year.

This guidance assumes both our lymphedema and airway clearance businesses will grow in a similar overall range, with airway clearance growing modestly faster. The increase in guidance is driven by 3 primary factors. First, we continue to expect strength in the commercial execution across the business. Second, we have included the contribution from LymphaTech. Third, we have incremental early confidence in how the MACs are navigating the new prior authorization requirements we discussed on our last call. More broadly, we believe underlying demand remains durable, and our tools and processes designed to support prior authorizations are tracking well against plan. While prior authorization approval data is still early and continuing to take shape, our outlook appropriately reflects discipline until we have a longer track record of consistent outcomes.

For modeling purposes, for the full year of 2026, we expect our GAAP gross margins to be 76%-77%. Our GAAP operating expenses to increase 10%-12% year-over-year. The increase relative to our prior outlook reflects one-time acquisition and legal related costs. Net interest income of approximately $3 million, a tax rate of 28%, and a fully diluted weighted average share count of approximately 22 million-23 million shares. We continue to expect to generate Adjusted EBITDA of approximately $49 million-$51 million in 2026. This outlook reflects the annualization of 2025 investments and continued strategic investments in 2026, which we believe are important to support long-term growth and operating leverage.

Our Adjusted EBITDA expectation assumes certain non-cash items, including a stock compensation expense of approximately $9 million, intangible amortization of approximately $3.6 million, depreciation expense of approximately $3.2 million, litigation-related expenses of approximately $1 million, and one-time acquisition-related and integration costs of $1.3 million. With that, I’ll turn the call back to Sheri for some closing remarks. Sheri?

Sheri Dodd, Chief Executive Officer, Tactile Medical: Thank you, Elaine. We are encouraged by a strong, balanced start to the year and the trajectory of our business. Our Q1 results demonstrated broad-based performance and reflect disciplined execution, improving productivity from a fully built commercial organization, and the increasing benefits from investments we have made in technology and infrastructure. As we look ahead, our focus remains on the fundamentals that matter most: expanding access to care, innovating across our product portfolio, and enhancing lifetime patient value. While we remain mindful of near-term adjustments related to Medicare prior authorization, ultimately, we believe this change reinforces our emphasis on clinical rigor, access durability, and long-term reimbursement stability, and we are well-positioned to navigate it. We are operating from a position of strength, supported by a resilient balance sheet, multiple growth levers in motion, and a clear strategy to translate consistent execution into sustained growth over time.

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

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Again, that is star one to ask a question. Our first question will come from Ryan Zimmerman with BTIG.

Ryan Zimmerman, Analyst, BTIG: Good afternoon, congrats on a nice start to the year here. You know, wanna ask about some of the dynamics that are starting to occur in second quarter. You know, Sheri, I think you called out, you know, some pull-forward dynamic with, you know, lymphedema sales ahead of 2Q. You know, one, I think if I look at the beat versus kind of where your raising guidance came in, you know, there’s about a $1.7 million difference there. I just wanna understand if that was the pull-forward effect. Just anecdotally, kind of what you’re seeing with the MACs in 2Q, you know, how they’re responding to this, how physicians are responding to this. You know, the cadence of sales we should think about.

I apologize, there’s a lot here, but the cadence of sales we should think about over the balance of the year, ’cause you’ve historically seen, you know, kind of 1Q step up or excuse me, 2Q step up from 1Q. You know, is there a bit of a pause or a dynamic in the market we need to think about for 2Q? Sorry for the multi-part question there.

Sheri Dodd, Chief Executive Officer, Tactile Medical: No, that’s okay. Let’s take it kind of layer by layer here. What I’ll first say is I want to kind of reorient this kind of concept of a pull forward, because it wasn’t really a pull forward. What we did is we had patients that their orders were in process, and if they were not all the way completed by that date, they would have been exposed to an overall denial. What we did is a little bit of an acceleration of that, but not necessarily stealing orders, if you will, from Q2 and shipments from Q2 into Q1. I wouldn’t characterize it necessarily as a pull forward. What we have been doing and what we have been seeing truly is great on our side in terms of our systems and our processes are working really pleased.

We accelerated what we were going to do next year and got it all in place by that go-live date. Very pleased with that. What you’re seeing in terms of our positioning on the prior authorization doesn’t have anything to do with our readiness. It really has to do with some early variability that we’re seeing within the MACs. Again, Ryan, we’re only 3 weeks into this entire process, so it’s still new. Orders are flowing through. We’re seeing what those denial and approval rates are, but we are seeing some difference between the MACs. There shouldn’t be variability between the MACs. If you are in 1 state and you’re a Medicare patient, and you have the exact same criteria, you shouldn’t be denied based on where you live. We’re seeing a little bit of variability.

This is not uncommon because MACs are trying to make sure their interpretation is the same, that their how the data and information is rolling through on their side, training and education. Everything we’re seeing, we don’t think is anything other than administrative, and we’re going to have an opportunity of talking to the MACs about this. We also don’t see any of this as being long-standing. We believe we’re going to be able to adjust and with more experience in the prior authorization. We believe that our confidence in what that true process time is as well as those approval rates will have a lot more confidence. From a guidance standpoint, we did pull through what would be the LymphaTech revenue went into there as well as some of our overall business confidence.

We are going to hold a little bit until we have a few more weeks, you know, it’s not going to be the full year until we start to see what that prior auth process looks like, again, more from the MACs side than on our side.

Ryan Zimmerman, Analyst, BTIG: Yeah.

Sheri Dodd, Chief Executive Officer, Tactile Medical: I think I answered majority of your questions, but anything that I forgot or Elaine, do you want to weigh in?

Ryan Zimmerman, Analyst, BTIG: You did a great job.

Elaine Birkemeyer, Chief Financial Officer, Tactile Medical: Ryan, I think the only other, I think, Ryan, you had a question a little bit on sequencing and kind of Q2, Q3. You know, we do continue to expect to see growth in Q2 over Q1 like we always have. I will say kind of the Q2, Q3 this year will look a little bit different. I think together those two quarters will be the same, but I would say we’ll see a little bit of a lighter step up in Q2 than some of the years past, and probably a bigger step up in Q3 as it starts to normalize. Just as that went into effect, it just created a little bit of a delay as that prior auth, we had to wait for those responses and for this whole new process to get going.

I would say collectively, those two quarters are going to be the same, but there’ll be a little bit of a difference between the two.

Ryan Zimmerman, Analyst, BTIG: Okay. Very helpful. I’m going to sneak one more in, and I’ll get back in queue because I probably have asked too many now. Just on the LymphaTech contribution. I appreciate you guys calling that out. When, when do you expect that to be, you know, meaningful in, in the year, number 1? How should we think about when it really starts to contribute? Then 2, you know, as we think about kind of what it can do over time, you know, how are you thinking about, you know, what LymphaTech can offer in terms of a contribution to the business, you know, as we look out further into 2027 and beyond? Thanks for taking the question.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Yes. You bet. On the LymphaTech, the grants that we discussed, super excited about both the LIGHT and the GUIDE grants, that actually comes through as revenue, which is why now it’s in the overall guidance that we put forward. Prior to that, when we did our original guidance, we did not see any real growth happening from LymphaTech or any big contributions. What you’re seeing now is really a result of the grants coming through as revenue. Where we’re most excited about LymphaTech is not going to transpire this year. I mean, we did the acquisition on multiple fronts, but that ability of the R&D capabilities that LymphaTech brings will be a big part of how we’re thinking about our go forward, not just as a Flexitouch next gen, but if you think about therapy in general.

When you kind of see the details and as I describe the details of that GUIDE, actually looking at garments that are using bioimpedance and delivering on a personalized care, we’re very excited about that. Just can’t share any timelines on when-- what that R&D portfolio looks like right now, but we’ll be able to share that much more in the quarters to come as that gets further defined in our overall strategy for therapy delivery. On the diagnostic side, one of the big drivers we know from LymphaTech is actually getting the FDA approval for more of that diagnostic indication and then getting through the CPT codes that actually enable a payment for the diagnostic. That is going to take a little bit of time.

On the here and now, super excited to have the federal funded government grants helping to support the R&D efforts, that we know are going to fit directly into our, our future portfolio.

Ryan Zimmerman, Analyst, BTIG: Thank you.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Hey, Ryan, the last thing I say, you had a great question, but I kind of want to bookend it about, you know, the guidance and the flow through. It’s a great question. Our approach to how we’re thinking about it, again, we said it’s only three weeks in, but we saw and we held on the NCD when it converted from the LCD to the NCD, because we knew there were going to be changes in interpretation and time needed to get progressing before we felt super confident about what we could do to lean into that. Everything we’re doing now is really based on precedent and what we’ve done before, and it worked well.

We’re super confident that this administrative pieces in this early days of the prior auth will flow through, and we’re in the best position to handle it. It’s a real thing, but we don’t sit here in with a lot of concern. We just want more time to be able to fully articulate what that benefit will be. The question you didn’t ask, but I wanted to kind of bookend it based on the questions that you did ask.

Ryan Zimmerman, Analyst, BTIG: Thank you.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Yep. Thanks.

Operator: Our next question comes from Brandon Vazquez with William Blair.

Elaine Birkemeyer, Chief Financial Officer, Tactile Medical: Hi, everyone. Thanks for taking the question. Congrats on a nice quarter. I hate to do this, can we stick for a second on this concept of the pull forward versus accelerated? I’m not sure I fully understand it, and I want to make sure it’s clear because I think it’ll be important to understand kind of, one, the strength in the quarter and, two, the sequential changes from here. Maybe just spend a second specifically on the nuances between why a pull forward isn’t, or sorry, why accelerated sales isn’t necessarily a pull forward of sales from Q2.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Yep. We did the order acceleration for patient benefit, not to cover revenue. I would say that typically a pull forward is because you’re trying to cover revenue. You’re trying to accelerate what you would have received in revenue in the next quarter, and you try to bring it into this quarter. When we talk about order acceleration, we really did this for the patient benefit. i.e. those patients that had an order in process, if they didn’t clear the order by that April 13th date, it would have had to go all the way back and be resubmitted into a prior auth. We had some orders, this is not a material amount. We had some orders that were going to fall on that kind of magic date of April 13th. We put extra resources to help make sure that that order went through.

We weren’t taking an order from Q2 in order to book the revenue into Q1.

Brandon Vazquez, Analyst, William Blair: Okay, got it. That’s clear. Thank you. Maybe follow up here a little bit of a broader picture. There’s a lot of commercial investments you guys have that have gone through 2025 and are ramping into this year. Maybe help characterize where some of these are in terms of maturing. Should the benefits still be growing? Are we kind of reaching maturity for some of them, like the commercial team, things like that? Maybe just talk to us about what inning we are in some of these real more meaningful commercial investments. Thanks.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Yeah, certainly. We’re really pleased at where we sit right now in terms of our head count. As I stated in the prepared remarks, we’re moving from capacity building and onboarding to true productivity. We now feel that we’re at a place where we have fully resourced sales organization on that 1-to-1 ratio of our territory managers to our account specialists. We feel in a really good place. As far as our CRM tool, our reps are continuing to use that tool, including workflow tools that really help support their activity, and that is also going very well. We expect that revenue per rep year-on-year growth to turn positive as we progress throughout the year.

I think net-net, we’re certainly transitioning from what was build and bring the tools to actually having a fully resourced field organization. That productivity is stepping up and continues to step up. We are seeing that increase in overall referrals per rep, and feel in a really good place with that.

Operator: As a reminder, that is star 1 if you’d like to ask a question. We’ll go next to Adam Nader with Piper Sandler.

Kyle, Analyst, Piper Sandler: Hi, this is Kyle in for Adam. Thanks for taking the questions and congrats on a good start to the year. Maybe I’ll ask on the EBITDA guidance. You know, the Q1 results beat expectations. You raised revenue guidance. Just trying to kind of help, you know, understand or maybe you could help us unpack keeping the EBITDA guidance kind of where it is. I know you mentioned some of the acquisition costs and some of the one-time expenses there. I noticed the, you know, the uplift in OpEx spend for the year. Should we just understand a lot of that as kind of part of this acquisition, or is it more of this, you know, robust R&D pipeline? Can you just help us a little bit there?

Sheri Dodd, Chief Executive Officer, Tactile Medical: In terms of that, I think there’s probably two factors. I think one is a portion of the increase is due to LymphaTech, and as Sheri mentioned, that is really related to the grant work we’re doing, where it’s really service-based work that is on that lower margin side. Again, this is not the broader business model, but it happens to be in our revenue this year. That’s one of the reasons why. Secondarily, as you said, you know, we did have some in-period, you know, one-time costs, and, you know, as far as in our OpEx as well. I would say the biggest driver of that is really just the type of revenue lift that is coming from LymphaTech and just the nature of that revenue.

Kyle, Analyst, Piper Sandler: Okay. Got it. That’s helpful. Then, congrats on the clearance for the next gen AffloVest. I know that that was exciting to get through. Just wanted to ask on that specifically, it sounds like you will be able to have this launched for this winter season as you discussed. Just curious how we should think about that in terms of, you know, the growth with that product, with the next gen system, you know, with the advanced features. Is there very much of that baked into the guidance for the full year, maybe just a little bit towards the end of the year? Is it kind of just an upside lever at this point?

Sheri Dodd, Chief Executive Officer, Tactile Medical: Yes. Thanks for the question, we’re super excited to have gotten the FDA approval for this product and really excited to have these features that are going to help drive that patient experience. Just as a reminder, the reimbursement, the payment is exactly the same for our current generation as well as the AffloVest 6th generation. There’s no additional reimbursement that’s in place for that. It definitely will be available, and we’re currently going to be working with our DMEs on the timing of that to make sure that they pull down the inventory that they currently have on the Gen 5 and that the training and education is all done in time for that respiratory season at the end of this year and will come into the end next year.

From an overall guidance standpoint, our guidance assumes both lymphedema and airway clearance are gonna grow in a similar overall range, with airway clearance growing slightly faster. That’s already been built into our guide. We anticipated to have the product this year, with no incremental dollars out there on the reimbursement. It simply is a better patient experience, and, you know, we’ll continue to drive penetration and adoption within our DMEs.

Kyle, Analyst, Piper Sandler: That’s great. Thank you, guys.

Operator: Moving next to Ben Haner with Lake Street Capital.

Ben Haner, Analyst, Lake Street Capital: Good afternoon. Thanks for taking the questions. First off for me, wondering on the guidelines for lower limb, any more color you can kind of share there on what the initial reaction has been from clinicians? Then, you know, just maybe some commentary overall on mix of the lymphedema market is, you know, 52% of cases, lower limb, you know, any color you can provide and for investors there would be helpful?

Sheri Dodd, Chief Executive Officer, Tactile Medical: Sure. On the guidelines standpoint, we’re really pleased to have the guidelines presented at ABS in February, and it is anticipated that those guidelines will be published this summer. So as always been, it’s great to have the guidelines, in terms of the dissemination of the guidelines down and training clinicians. That’s something that our teams are gonna be prepared for and help with the overall education about that. What we’re really pleased about the guidelines is they specifically called out pneumatic compression devices as being part of, guideline-based care, which is differentiating from non-PCD products. Excited to have us, positioned well within the overall evidence-based care guidelines, and we’ll roll that out and help communicate that, yeah.

Elaine Birkemeyer, Chief Financial Officer, Tactile Medical: Yeah. In terms of mix of what is lower versus upper extremity, I think the best way to think about this is really what causes lymphedema for patients. We’ve said about a third of patients get lymphedema due to cancer, while the remainder are a lot of other different causes, with a big one being CVI. The cancer often can be upper body. If you think about breast cancer, head and neck cancer, there could still be some lower extremities with any type of pelvic cancer. That’s where you tend to see the upper extremity where the other drivers, typically CVI, happen to be lower extremity.

That probably gives you a little bit of a sense of that, but it really has to do with what is the underlying cause or driver, which is what causes where the area of lymphedema is in the body.

Ben Haner, Analyst, Lake Street Capital: That’s definitely helpful. Would you expect additional clinical guidelines to be forthcoming for, you know, upper extremities or upper areas of the body?

Sheri Dodd, Chief Executive Officer, Tactile Medical: There certainly is. You know, as Elaine said, that that’s largely in the oncology area. There are definitely some white papers positioned in this area, that could definitely transpire. I’m not aware of anything specifically that’s in the work on the upper extremity side, but we’re really pleased at how well-positioned and the adoption of pneumatic compression therapy in upper extremity patients, particularly with therapists and oncology, is not. It’s well understood, if you will, where lymphedema in the lower extremity, it’s almost a process of elimination. You’re looking for as a secondary. Certainly with patients that have cancer, you know that you have removed a lymph node, or you know that you’ve done something with the lymphatic system during a surgical procedure. That’s different than lower extremity.

We tend to see that in the oncology space and with lymphedema therapists, there’s more understanding of the lymphatic disruption that’s happened with a specific oncology intervention. Guidelines can be helpful, but it isn’t as much of a disconnect, if you will, than we’ve seen in the lower extremity.

Ben Haner, Analyst, Lake Street Capital: Numerically, you have not only more patients, but less penetration, if you will, amongst that group. It’s kind of a double whammy theoretically for you guys.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Can you say that again? I wasn’t sure.

Ben Haner, Analyst, Lake Street Capital: you-

Sheri Dodd, Chief Executive Officer, Tactile Medical: If what you said was accurate.

Ben Haner, Analyst, Lake Street Capital: There are more patients with lower limb lymphedema, but they’re also less penetrated, so it provides a bit of a double whammy for the benefit if, as these guidelines get published and more clinicians are inclined to push patients towards PCDs.

Elaine Birkemeyer, Chief Financial Officer, Tactile Medical: I think it’s, yeah, accurate that the lower extremity is the larger population. I think what Sheri is saying is that the guidelines are more meaningful for this population because there’s not an obvious trigger to this lymphatic disruption. These guidelines really help it get discovered earlier versus an upper extremity. There is an obvious trigger, patients and clinicians are more likely to watch out for it in absence of guidelines.

Ben Haner, Analyst, Lake Street Capital: Okay. I think we’re on the same page. Perfect. Lastly for me, if I could sneak in one more. Just, is there any color you can provide on, you know, this new pharmaceutical out there for bronchiectasis? Is there probably any impact that you guys find notable on the airway clearance side of the things?

Sheri Dodd, Chief Executive Officer, Tactile Medical: Certainly. I mean, we have said and believe that the introduction of the pharmaceutical products specifically for patients with bronchiectasis is helping awareness for the broader category. It’s been a nice category lift. The airway clearance, though, and they call it the vicious vortex, is that you have issues of inflammation, and you’ve got mucus, and then you have infection. What the pharmaceutical product does is it helps support inflammation, but inflammation is just one part of this whole vicious vortex associated with bronchiectasis. There’s still gonna be inflammation, and with inflammation, you’re still gonna have mucus, and with mucus, you’re still going to have opportunity for infection. That need to actually clear the airway is still very relevant for this patient population.

This is what we’re hearing from our clinicians, this is the positioning with the product as well, is not to say it replaces airway clearance. It’s actually alongside, could be used alongside and adjacent to, but it is not one versus the other. Happy that it’s helping grow awareness. Happy that it’s creating education around the disease of bronchiectasis, but not seeing this not only as the product portfolio and properties allowing for it to change the actual care pathway for these patients. It’s just an option to be used alongside of an airway clearance product.

Ben Haner, Analyst, Lake Street Capital: Good. Makes sense. Thanks for taking the questions, and congrats on the quarter.

Elaine Birkemeyer, Chief Financial Officer, Tactile Medical: Thank you.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Thank you.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.

Sheri Dodd, Chief Executive Officer, Tactile Medical: Thank you.