TACTILE SYSTEMS TECHNOLOGY INC Q3 FY2026 earnings call

• Lymphedema Growth Drivers:
  • Medicare revenue returned to growth (up 11% YoY) as prior authorization processes stabilized following April implementation.
  • Commercial revenue grew approximately 17% YoY.
  • Clinic visits increased 19% YoY, with referring clinics growing >10% YTD.
  • Medical education team educated >13,000 clinicians in 2026 (25% more than all of 2025).
  • Established a dedicated strategic accounts team to deepen engagement with large health systems and IDNs.
• Operational Efficiency & Organization:
  • Gross margin expanded 90 basis points YoY to 76.7%, marking the 12th consecutive quarter of expansion.
  • Implemented organizational changes to strengthen order-to-shipment conversion, including hiring an executive leader for order operations.
  • AI-enabled order management platform reduced medical record review time by approximately 50%.
• Strategic Priorities Execution:
  • Expanding Access: Lymphatec 3D scanner received FDA 510(k) clearance for expanded indications; AHRQ application submitted for Category 3 CPT code.
  • Creating Value: Focus on reducing friction in documentation and order processes to improve referral-to-shipment conversion.
  • Expanding Options: Filed 510(k) for FlexiTouch Pro (targeting H2 2027 launch); preparing Myosleeve US pilot via Elastomed partnership in late Q4.
  • Payer progress: Small number of commercial payers removed restrictive designations for FlexiTouch therapy for head and neck cancer-related lymphedema based on RCT results.

• Lymphedema: Revenue was $81.8 million, representing a 13% year-over-year increase and an 11% sequential growth. This segment accounted for approximately 89% of total revenue.
• Airway Clearance: Revenue was $10 million, a 25% year-over-year decline driven by DME inventory transitions ahead of the AfloVest next-generation launch. This segment accounted for approximately 11% of total revenue.

• Full-Year 2026 Revenue: Maintained at $360 million to $366 million (approx. 9-11% YoY growth).
• Full-Year 2026 Adjusted EBITDA: Raised to $50 million to $52 million (previously implied ~$44.8M baseline, now expecting ~12-16% growth vs 2025).
• Lymphedema Outlook: Expect low double-digit growth for the full year; Q4 expected to show strong sequential growth but moderated YoY growth due to high prior year base from NCD alignment.
• Airway Clearance Outlook: Revised to expect mid-to-high single-digit full-year revenue decline (previously flat), as DME inventory normalization is slower than anticipated; sequential improvement expected in Q4.
• FY2026 Financial Assumptions: Gross margin approx. 76.5%; OpEx growth 10-12%; Net interest income approx. $2.4M; Effective tax rate approx. 28%; Diluted shares approx. 23 million.

• Airway Clearance Inventory Risk: DME customers are working through excess inventory longer than expected during the transition to the next-generation AfloVest system, causing a temporary revenue decline not reflective of underlying patient demand.
• Reimbursement and Regulatory Delays: Progress on Lymphatec reimbursement (Category 3 CPT) and broader payer coverage expansions is gradual and subject to policy changes; no immediate revenue impact expected.
• Market Penetration Pace: Despite diagnostic tools like Lymphatec, significant barriers remain in diagnosis and referral conversion; growth is expected to be durable but not exponential (

Q: Analyst asked about 2027 outlook, specifically if lymphedema growth could accelerate due to new products like FlexiTouch Pro and Lymphatec, and how airway clearance might normalize. / A: Management confirmed no reason to expect a slowdown in lymphedema, citing durable market fundamentals and favorable policies. They tempered expectations for 2027, noting that while new products will contribute, growth will be steady rather than a 'hockey stick' spike, as market development takes time. For airway clearance, they expect sequential improvement in Q4 as inventory burns down, though the pace is slower than initially forecasted.