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TS

TACTILE SYSTEMS TECHNOLOGY INC (TCMD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue grew 0.3% year over year to $61.3M, while diluted EPS was a loss of $0.13; gross margin expanded 290 bps to 74%, but operating loss and adjusted EBITDA deteriorated due to deliberate sales-force optimization and CRM implementation .
  • Guidance was lowered: FY25 revenue to $309–$315M (from $316–$322M) and adjusted EBITDA to $32–$34M (from $35–$37M), citing temporary productivity headwinds and a slower sales hiring ramp; Q2 revenue guided to $73–$76M .
  • Mix shifted: lymphedema declined 3% YoY to $50.6M, while airway clearance rose 22% YoY to $10.7M on prioritized DME placement and partner alignment; Nimbl adoption is accelerating (lower extremity launch in Feb) with ~25% of orders via e‑prescribing .
  • Consensus comparison: TCMD missed Q1 revenue ($61.3M vs $63.5M*) and EPS (−$0.11* vs −$0.07*), and missed EBITDA (−$0.26M vs $0.62M*) as the CRM rollout and vacancies weighed on lymphedema growth; AffloVest strength partially offset . Values retrieved from S&P Global.
  • Near-term stock reaction catalysts: lowered FY25 guide; temporary productivity drag from CRM and headcount optimization; airway clearance outperformance and Nimbl momentum; $10M buyback executed in Q1 .

What Went Well and What Went Wrong

What Went Well

  • Airway clearance momentum: AffloVest sales +22% YoY; management cited prioritized placement agreements with top DMEs and stronger partner alignment as drivers .
  • Nimbl expansion and adoption: lower extremity launch completed in February; ~25% of Nimbl orders flow through Parachute e‑prescribing, improving workflow and ease of selling .
  • Margin improvement and cash strength: gross margin rose to 74% (from 71%); ended Q1 with $83.6M cash and executed $10.0M of share repurchases, maintaining financial flexibility .
    Quote: “These transformational actions are essential to positioning Tactile for consistent, long-term growth… our underlying business fundamentals remain firmly in place” — CEO Sheri Dodd .

What Went Wrong

  • Lymphedema softness: −3% YoY to $50.6M, attributed to reduced field sales headcount and temporary CRM-related productivity learning curve .
  • Profitability pressure: operating loss widened to $4.5M and adjusted EBITDA fell to −$0.3M versus +$1.0M last year due to strategic tech investments and sales organization optimization .
  • Guidance cut: FY25 revenue and adjusted EBITDA targets lowered; CFO also flagged tariff risk (COGS impact < $5M in 2025, ~$1M included in guidance), adding macro uncertainty .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$73.093 $85.585 $61.268
Diluted EPS ($USD)$0.21 $0.40 $(0.13)
Gross Margin %75.0% 75.2% 74%
Operating Income (Loss) ($USD Millions)$6.781 $12.515 $(4.542)
Adjusted EBITDA ($USD Millions)$10.721 $16.216 $(0.259)

Segment breakdown (Q1 2025):

SegmentQ1 2025 Revenue ($USD Millions)YoY ChangeMix
Lymphedema products$50.554 −3% 83%
Airway clearance products$10.714 +22% 17%
Total$61.268 —100%

KPIs (selected balance sheet and financing):

KPIQ3 2024Q4 2024Q1 2025
Cash and equivalents ($USD Millions)$82.146 $94.367 $83.619
Outstanding borrowings ($USD Millions)$27.0 $26.3 $25.5
Share repurchases ($USD Millions)—$3.5 $10.018
Weighted avg diluted shares (millions)24.254 24.474 23.711

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Millions)FY 2025$316–$322 $309–$315 Lowered
Adjusted EBITDA ($USD Millions)FY 2025$35–$37 $32–$34 Lowered
GAAP Gross Margin %FY 2025N/A (not disclosed)~74% New detail
GAAP OpEx growthFY 2025N/A+9% to +11% YoY New detail
Net interest income ($USD Millions)FY 2025N/A~$2.4 New detail
Tax rateFY 2025N/A~28% New detail
Fully diluted shares (millions)FY 2025N/A~24 New detail
Lymphedema product-line growthFY 2025~8%–10% (prior) 4%–5% Lowered
Airway clearance product-line growthFY 2025~6%–9% (prior) 20%–23% Raised
Tariff impact to COGSFY 2025N/A<$5M; ~$1M included New detail
Total Revenue ($USD Millions)Q2 2025N/A$73–$76 New detail

Earnings Call Themes & Trends

TopicQ3 2024 (Prev)Q4 2024 (Prev)Q1 2025 (Current)Trend
CRM rollout / workflow modernizationCited technology modernization in front/back-office “Deployed new workflow-related tools” Salesforce CRM launched mid‑Feb; temporary productivity impact; training ongoing Short‑term headwind; improving
Sales headcount optimization—Sales leadership change Reps fell to 264 at Q1 end from 280; 277 currently; >285 by Q2; ~300 by YE25 Rebalance; ramp through 2025
Nimbl platformUpper extremity launch Lower extremity expansion (Feb 4) Adoption strong; ~25% orders via Parachute; ease of selling Accelerating
Reimbursement / MACs “unique characteristics”CMS coverage conditions “on near horizon” —MAC interpretations supportive; advanced pump placement environment improving Improving clarity
Airway clearance / DME partnersDME buying pattern headwinds —Priority placement with top DMEs; strong #2 share; +22% YoY Strengthening
Tariffs/macro——<$5M COGS impact expected in 2025; mitigations underway Watch item
AI/order automation——Pilot of AI‑based tool for non‑e‑prescribed orders planned over next 2 quarters Emerging
Patient engagement (Kylee)——~50k profiles and ~1M check‑ins approaching; data to inform outcomes Growing
Clinical evidenceVA lymphedema positive data —Head & neck lymphedema data at ASCO/MASCC in June; 6‑month analysis underway Building evidence

Management Commentary

  • Strategy execution: “We launched Nimbl for lower extremity lymphedema, completed efforts to optimize our sales organization… and implemented a new CRM tool… While these efforts have had a temporary impact on sales force productivity, we firmly believe these transformational actions are essential” — CEO Sheri Dodd .
  • Near-term outlook: “We project revenue in the second quarter to be in the range of $73 million to $76 million and the full year revenue to now be in the range of $309 million to $315 million” — CEO Sheri Dodd .
  • Guidance framework and drivers: “Our 2025 total revenue guidance assumes lymphedema growth of 4%–5% and airway clearance 20%–23%… GAAP gross margin ~74%, OpEx +9%–11%, net interest income ~$2.4M, tax rate 28%, diluted shares ~24M; adjusted EBITDA $32M–$34M” — CFO Elaine Birkemeyer .
  • Tariffs: “Adjusted EBITDA guidance also includes a $1M cost of goods sold impact related to tariffs… expect total tariff impact… less than $5M; pursuing mitigation” — CFO Elaine Birkemeyer .

Q&A Highlights

  • Guidance sensitivities: High/low range driven by hiring speed and CRM proficiency; Parachute expansion to Flexitouch and back‑office AI expected to add momentum in H2 .
  • 2026 leverage trajectory: As sales team ramps (6–9 months) and tech investments normalize, management expects OpEx leverage to improve; details to come later in 2025 .
  • Product-line guidance specifics: Lymphedema 4%–5% vs prior ~8%–10%; airway clearance 20%–23% vs prior ~6%–9% .
  • Nimbl commercialization: Strong feedback; manufacturing capacity adequate; ~25% orders via Parachute; lower extremity launch on time .
  • Airway clearance sustainability: Priority DME agreements, capital allocation alignment, patient/physician preference underpin growth and share gains .

Estimates Context

MetricQ3 2024 ActualQ3 2024 Consensus*Q4 2024 ActualQ4 2024 Consensus*Q1 2025 ActualQ1 2025 Consensus*
Revenue ($USD)$73,093,000 $76,007,800*$85,585,000 $85,387,800*$61,268,000 $63,483,000*
Primary EPS ($USD)$0.2461*$0.1780*$0.4012*$0.3140*$(0.1103)*$(0.0740)*
EBITDA ($USD)$8,515,000*$9,610,670*$14,228,000*$13,965,000*$(281,6000)*$622,670*

Beat/miss vs consensus:

  • Q3 2024: Revenue miss; EPS beat; EBITDA miss. Values retrieved from S&P Global.
  • Q4 2024: Revenue beat (slight); EPS beat; EBITDA beat. Values retrieved from S&P Global.
  • Q1 2025: Revenue miss; EPS miss; EBITDA miss. Values retrieved from S&P Global.

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Short-term: Expect near-term lymphedema growth softness as CRM proficiency and hiring ramp through Q2; airway clearance strength and Nimbl momentum partially offset .
  • Guidance reset: FY25 revenue and EBITDA reduced; watch Q2 delivery ($73–$76M) and H2 sequential acceleration path (low double‑digit Q3 sequential growth expected) .
  • Execution milestones: Monitor sales headcount trajectory (>285 by Q2; ~300 by YE25), CRM adoption, Parachute expansion to Flexitouch, and AI pilot outcomes for order process efficiency .
  • Margin durability: Gross margin at ~74% for FY25 despite tariffs; watch mitigation execution and operating expense discipline as tech spend transitions from implementation to run‑rate .
  • Segment dynamics: AffloVest/DME partnerships driving outsized airway growth; Nimbl’s lower extremity launch expands TAM and supports Medicare channel strength .
  • Capital allocation: Ongoing buyback ($10.0M in Q1; $16.5M remaining authorization) offers downside support while maintaining balance sheet flexibility .
  • Regulatory and clinical: Improving MAC interpretations of “unique characteristics” and upcoming head & neck lymphedema data at ASCO/MASCC could be catalysts for advanced pump adoption and policy evolution .