Brandon Vasquez

Brandon Vasquez asked for more color on the Medicare prior authorization process, specifically how it might lengthen the process for CMS patients and if the 2026 guidance embeds a market contraction for a quarter or two. He also inquired about the drivers of Tactile Medical's strong Q4 EBITDA margin and where additional leverage opportunities exist within the P&L.

Answer

CFO Elaine Birkemeyer explained that the prior authorization process involves creating a comprehensive package of specific payer information and supporting medical records, which elongates the process compared to previous Medicare claims. She suggested that the guidance reflects a short-term industry slowdown as both Medicare and the industry adapt to the new process, but Tactile Medical is well-positioned to navigate it. Regarding EBITDA margin, Ms. Birkemeyer attributed the Q4 strength to disciplined cost management and benefits from ongoing investments, including AI tools. She noted that 2026 guidance reflects a more modest margin expansion due to annualizing sales force investments and continuing strategic initiatives, with expectations for faster gross margin growth longer term.

Brandon Vasquez asked for more detail on the Medicare prior authorization process, comparing it to commercial prior authorizations, and how much it might lengthen the process for CMS patients. He also asked if the 2026 guidance embeds a market contraction for a quarter or two. Additionally, he inquired about the drivers of the company's strong EBITDA margin in Q4 2025 and future opportunities for leverage.

Answer

Elaine Birkemeyer, Chief Financial Officer, clarified that the Medicare prior authorization process will involve creating a package with specific payer information and supporting medical records, similar to commercial processes. She noted that while it will elongate the process, Tactile's experience and new technology position them well to navigate it efficiently, expecting a short-term industry slowdown rather than a significant long-term headwind. Regarding EBITDA, Elaine Birkemeyer attributed the strong Q4 performance to cost discipline and benefits from ongoing investments, including AI tools. She indicated that 2026 guidance reflects a more modest margin expansion due to annualizing sales force investments and continuing strategic initiatives, with expectations for faster gross margin growth longer term.

Brandon Vasquez questioned the impetus behind KKR's increased stake in Henry Schein and whether this partnership will become more 'intimate,' leading to more significant strategic changes for the company.

Answer

Stanley Bergman, Chairman and CEO, explained that KKR initiated the request to increase its stake, driven by their appreciation for Henry Schein and the dental market. The board approved the increase to 19.9% based on KKR's perceived value. He highlighted KKR's Capstone Group's input on value creation initiatives, best practices, and indirect spending, describing the relationship as 'very good' with active board members.

Brandon Vasquez of William Blair & Company questioned the drivers behind Simparica Trio's strong performance and market share gains amid rising competition, and asked for a breakdown of price versus volume for the companion animal business.

Answer

CEO Kristin Peck attributed Trio's success to its first-to-market advantage, comprehensive coverage, and strong customer partnerships, noting its 35% share in new puppies indicates future strength. CFO Wetteny Joseph specified that the company's 14% operational growth was driven by 8% volume and 6% price. For Trio specifically, growth was balanced with slightly more volume, aided by more targeted promotions and better price realization.

Brandon Vasquez of William Blair asked for details on the implant business's turnaround, specifically which investments are paying off. He also inquired about the relative performance of premium (Nobel) versus value implants in North America.

Answer

CEO Paul Keel detailed a three-tiered investment approach: immediate-term commercial investments, medium-term clinical education, and long-term new product development. He confirmed that value implants have seen three straight quarters of growth and that Nobel's quarter-over-quarter growth in North America has accelerated, narrowing the gap to the market.