Tactile Systems Tech (NASDAQ:TCMD) reported first-quarter financial results on Monday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
Tactile Systems Tech reported Q1 2026 revenue of $75.3 million, a 23% year-over-year increase, with lymphedema revenue at $62.2 million and airway clearance revenue at $13 million.
Gross margins improved by 250 basis points to 76.5%, and adjusted EBITDA rose to $3.7 million, indicating strong operational execution and margin expansion.
The company updated its full-year 2026 revenue guidance to $360-$368 million, reflecting confidence in commercial execution and the inclusion of revenue from the Lymphotek acquisition.
Tactile Systems Tech accelerated its AI platform for Medicare prior authorization, demonstrating operational agility and readiness for new Medicare requirements.
Management expressed confidence in strategic initiatives, such as the launch of next-generation AfloVest and integration of Lymphotek's technology, aimed at driving long-term growth.
Full Transcript
Sam Bensinger (Investor Relations)
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 Berkemeyer, 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 10K as well as our most recent 10Q 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 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)
Thanks. Good afternoon everyone and welcome to our first quarter 2026 earnings call. Here with me is Elaine Berkemeyer, our Chief Financial Officer.
Elaine Berkemeyer (Chief Financial Officer)
Thanks, Sherry. 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, Nimble and lymphotex systems, increased $11.7 million, or 23% to $62.2 million, and sales of our airway clearance products, which includes our AfloVest 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 and L Gross margin was 76.5% of revenue compared to 74% in the first quarter of 2025. The increase in gross margin was attributable to 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 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased to $3.7 million compared to an adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) loss of $0.3 million in the prior year, with margin expanding to 4.9% from negative 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 review of our 2026 outlook for the full year 2026, we are raising our guidance and now expect total revenue in the range of 360 to $368 million, representing growth of approximately 9% to 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 three primary factors. First, we continue to expect strength in the commercial execution across the business. Second, we have included the contribution from lymphoteg. 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 2026, we expect our GAAP gross margins to be 76% to 77%, our GAAP operating expenses to increase 10 to 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 to 23 million shares. We continue to expect to generate adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of approximately 49 to $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 Earnings Before Interest, Taxes, Depreciation, and Amortization (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 cost of $1.3 million. With that, I'll turn the call back to Sherri for some closing remarks. Sherry thank you Elaine.
Sherry Dodd (Chief Executive Officer)
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 a question,sk a question, 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 and our first question will come from Ryan Zimmerman with btig.
Ryan Zimmerman (Equity Analyst)
Good afternoon and congrats on a nice start to the year here. I want to ask about some of the dynamics that are starting to occur in second quarter. Sherry, I think you called out some pull forward dynamic with lymphedema sales ahead of 2Q. And so one I think if I look at the beat versus where you're raising guidance came in, there's about a $1.7 million difference there. I just want to understand if that was the pull forward effect. And then just anecdotally kind of what you're seeing with the Macs in 2Q, how they're responding to this, how physicians are responding to this, 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 because you've historically seen kind of 1Q step up or excuse me, 2Q step up from 1Q. So is there a bit of a pause or dynamic in the market we need to Think about for 2Q? Sorry for the multi part question there.
Sherry Dodd (Chief Executive Officer)
No, that's okay. Let's take it kind of layer by layer here. So 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. And so 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. So I wouldn't characterize it necessarily as a pull forward. But 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. So very pleased with that. So 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. And again Ryan, we're only three 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. And so there shouldn't be variability between the MACs. If you are in one state, you're a Medicare patient and you have the exact same criteria. You shouldn't be denied based on where you live. And so 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. So 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 longstanding. 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, we'll have a lot more confidence. So from a guidance standpoint we did pull through what would be the lymphatec revenue went into there as well as some of our overall business deliver confidence and then 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 off process looks like again more from the Mac side than on our side. I think I answered majority of your questions but anything that I forgot or Elaine, do you want to weigh in on anything? I did a great job.
Elaine Berkemeyer (Chief Financial Officer)
Yeah, I think Brian, you had a question a little bit on sequencing and kind of Q2 Q3. So we do continue to expect to see growth in Q2 for 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. So I would say collectively those two quarters are going to be the same but there will be a little bit of a difference between the two.
Ryan Zimmerman (Equity Analyst)
Okay, very helpful. And then I'm going to sneak one more in and I'll get back in queue because I probably have asked too many now but just on the lymphatec contribution. So I appreciate you guys calling that out. When do you expect that to be meaningful in the year number one, so how should we think about when it really starts to contribute? And then two, as we think about what it can do over time how are you thinking about what Lymphatec can offer in terms of a contribution to the business as we look out further into 27 and beyond? Thanks for taking the question.
Sherry Dodd (Chief Executive Officer)
Yes, you bet. So on the Lymphatec. So the grants that we discussed, super excited about the delight and the guide grants that actually comes through as revenue, which is why now it's in the overall guidance that we put forward. But prior to that when we did our original guidance, we did not see any real growth happening from lymphotek or any big contribution. So 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 and D capabilities that LymphaTech will be a big part of how we're thinking about our go forward. Not just as a flexi touch next gen, but if you think about therapy in general and when you kind of see the details and as I described 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 what that RD 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 LymphaTechh 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. So that is going to take a little bit of time. But on the here and now, super excited to have the federal funded government grants helping support the R and D efforts that we know are going to fit directly into our future portfolio.
Ryan Zimmerman (Equity Analyst)
Thank you.
Sherry Dodd (Chief Executive Officer)
The last thing I say you had a great question but I kind of want to bookend it about the guidance and the flow through and it's a great question, but 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. And so everything we're doing now is really based on precedent, what we've done before and it worked well. And 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. So it's a real thing. But we don't sit here with a lot of concern. We just want more time to be able to fully articulate what that benefit will be. So the question you didn't ask, but I wanted to kind of bookend it based on the questions that you did ask.
Ryan Zimmerman (Equity Analyst)
Thank you. Yep. Thanks.
OPERATOR
And our next question comes from Brandon Vasquez with William Blair.
Brandon Vasquez (Equity Analyst)
Hi, everyone. Thanks for taking the question. Congrats on a nice quarter. I hate to do this, but 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. So 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 sales from Q2.
Sherry Dodd (Chief Executive Officer)
Yep. So 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 do this for the patient benefit. So that is those patients that had an order in process, if they didn't clear the order by that April 13 date, it would have had to go all the way back and be resubmitted into a prior op. So 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. So we put extra resources to help make sure that that order went through. But we weren't taking an order from Q2 in order to book the revenue into Q1.
Brandon Vasquez (Equity Analyst)
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? So maybe just talk to us about what inning we are in, some of these more meaningful commercial investments. Thanks.
Sherry Dodd (Chief Executive Officer)
Yeah, certainly. So we're really pleased at where we sit right now in terms of our headcount. And as I stated in the prepared remarks, we're moving from capacity building and onboarding to true productivity. And so we now feel that we're at a place where we have fully resourced, fully resourced sales organization on that one to one ratio of our territory managers to our account specialists. So 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 and we expect that revenue per rep year on year growth to turn positive as we progress throughout the year. So I think net net we're certainly transitioning from what was billed and bring the tool to actually having a fully resourced field organization. That productivity is stepping up and continues to step up. And so we are seeing that increase in overall referrals per rep and feel in a really good place with that.
OPERATOR
And as a reminder, that is Star One if you'd like to ask a question. And we'll go next to Adam Nader with Piper Sandler.
Kyle
Yeah, hi, this is Kyle. I'm for Adam. Thanks for taking the questions and congrats on a good start to the year. Maybe I'll ask on the ebitda guidance. The Q1 result beat expectations and then you raised revenue guidance. So just trying to kind of help 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 and I noticed the uplift in OPEX spend for the year. So 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 and D pipeline? Can you just help us a little bit there? Yeah. In terms of that I think there's probably two factors. I think one is a portion of the increases due to Lympha Tech. Now Sherry mentioned that is really related to the grant what 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
Elaine Berkemeyer (Chief Financial Officer)
our revenue this year. And so that's one of the reasons why. And then secondarily as you said, we did have some in period, you know, one time cost as far as in our OPEX as well. But I would say the biggest driver of that is really just the type of revenue lift that is coming from Lympha Tech and just the nature of that revenue.
Kyle
Okay, got it. That's, that's helpful. And then congrats on the clearance for the next gen afflow vest. I know that was exciting to get through. So 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. So just curious how we should think about that in terms of the growth with that product, with the next gen system, with the advanced features, and then 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, or is it kind of just an upside lever at this point?
Sherry Dodd (Chief Executive Officer)
Yes, thanks for the question. And 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, so the reimbursement, the payment is exactly the same for our current generation as well as the aflovet. So there's no additional reimbursement that's in place for that and 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, 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 going to grow in a similar overall range with airway clearance growing slightly faster. And so that's already been built into our guide. We anticipated to have the product this year and again with no incremental dollars out there on the reimbursement, it simply is a better patient experience and will continue to drive penetration and adoption within our DMEs.
Kyle
That's great. Thank you guys.
OPERATOR
And moving next to Ben Hahner with Lake Street Capital.
Ben Hahner
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 and then 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 for investors there would be helpful.
Sherry Dodd (Chief Executive Officer)
Sure. On the guidelines standpoint, we were really pleased to have the guidelines presented at ABS in February and we are. It is anticipated that those guidelines will be published this summer. So as always, Ben, 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 going to be prepared for and help with the overall education about that and 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. So excited to have us positioned well within the overall evidence based care guidelines and we'll roll that out and help communicate that gap.
Elaine Berkemeyer (Chief Financial Officer)
Yeah. And then in terms of kind of mix of kind of what is lower versus upper extremity, I think the best way to think about this is really what causes lymphedema for patients. So we've said about a third of patients get lymphedema due to cancer, while the remainder are different, other different causes, with a big one being cdi. 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, but that's where you tend to see the upper extremity, where the other drivers, typically cbi, happen to be lower extremity. So 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 of which is what causes where the area of lymphedema is in the body.
Ben Hahner
That's definitely helpful. And would you expect additional clinical guidelines to be forthcoming for upper extremities, upper areas of the body?
Sherry Dodd (Chief Executive Officer)
There certainly is. As Elaine said, that's largely in the oncology area. There are definitely some white papers positioned in this area and so 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, particular with therapists and oncology, is not, it's well understood, if you will, where lymphedema in the lower extremity, almost a process of elimination. You're looking for the secondary 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. So 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. So guidelines can be helpful, but it isn't as much of a disconnect, if you will, than we've seen in the lower extremity.
Elaine Berkemeyer (Chief Financial Officer)
So numerically you have not only more patients, but less penetration, if you will, amongst that group. So it's kind of a double whammy, theoretically, for you guys.
Sherry Dodd (Chief Executive Officer)
Can you say that again? I wasn't sure what you said was accurate.
Ben Hahner
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 as these guidelines get published and more clinicians are inclined to push patients towards PCDs.
Elaine Berkemeyer (Chief Financial Officer)
I think maybe. I think it's accurate that the lower extremity is the larger population. I think what Sherry is saying is that the guidelines are more meaningful for this population because there's not an obvious trigger to this lymphatic disruption. And so these guidelines really help it get discovered earlier versus an upper extremity. There is an obvious trigger, and so patients and clinicians are more likely to watch out for it in absence of guidelines.
Ben Hahner
Okay, I think we're on the same page. Perfect. And lastly, for me, if I could sneak in one more. Is there any color you could provide on this new pharmaceutical out there for bronchiectasis? Has there been any impact that you guys find notable on the airway clearance side of things?
Sherry Dodd (Chief Executive Officer)
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. So it's been a nice category. Lift the. The airway clearance, though, and they call it the vicious cycle, is that you have issues of inflammation and you've got mucus and then you have infection. And so what the pharmaceutical product does is it helps support inflammation, but inflammation is just one part of this whole vicious cycle associated with bronchiectasis. So there's still going to be inflammation, and with inflammation you're still going to have mucus, and with mucus you're still going to have opportunity for infection. So that need to actually clear the airway is still very relevant for this patient population. And this is what we're hearing from our clinicians, and 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. So, happy that it's helping grow awareness, happy that it's creating education around the disease of bronchiectasis, but not seeing this. Not only is 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 Hahner
Makes sense. Thanks for taking the questions. And congrats on the quarter.
Sherry Dodd (Chief Executive Officer)
Thank you.
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