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TS

TACTILE SYSTEMS TECHNOLOGY INC (TCMD)·Q3 2025 Earnings Summary

Executive Summary

  • Solid beat and raise: Revenue grew 17% YoY to $85.8M and diluted EPS was $0.36; both beat S&P Global consensus by ~$6.45M on revenue and ~$0.19 on EPS. Management raised FY25 revenue guidance to $317–$321M and adjusted EBITDA to $38–$39.5M, citing momentum across both businesses and policy tailwinds.* *
  • Mix improving and margins expanding: Gross margin rose 80 bps YoY to 76% on lower manufacturing/warranty costs and stronger collections; operating income rose to ~$11.0M and adjusted EBITDA to $14.4M (+34% YoY).
  • Airway clearance outperformance and lymphedema recovery: AffloVest revenue +71% YoY on DME partnerships and rising bronchiectasis awareness; lymphedema +11% YoY and +10% QoQ as field rebuild/CRM roll-out lift productivity.
  • Capital allocation catalyst: New $25M share repurchase authorization through Nov 3, 2027; term loan fully repaid July 31, 2025.

What Went Well and What Went Wrong

  • What Went Well

    • Airway clearance acceleration: AffloVest +71% YoY; management believes it is “very close to achieving a market‑leading position” driven by preferred placement across top 10 DMEs, education, and product differentiation. “We have a differentiated product, and we are taking share.”
    • Lymphedema recovery and sequential momentum: +11% YoY and +10% QoQ on field force expansion (329 reps) and CRM adoption; Medicare channel sales +130% YoY as documentation headwinds neutralized.
    • Margin and outlook: Gross margin 76% (+80 bps YoY) on lower manufacturing/warranty costs; FY25 revenue raised to $317–$321M and adjusted EBITDA to $38–$39.5M.

  • What Went Wrong

    • OpEx up double digits: Q3 operating expenses +13% YoY to $54.0M given strategic investments (sales force, tech), partially muting operating leverage.
    • Lymphedema mix normalization: Commercial and VA channels declined 9% YoY as 2024 comp was unusually strong due to prior Medicare headwinds shifting mix; normalized mix implies tougher comps in commercial/VA near term.
    • Sequential cadence caution: Q3-to-Q4 lymphedema step-up expected to be more muted vs historical given Q2 hiring pull-forward benefits boosting Q3; guides lymphedema FY25 +3–4% (improved from +1–2% earlier but still modest).

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$73.09 $78.91 $85.76
Gross Margin (%)75% 75% 76%
Operating Income ($M)$6.78 $4.08 $11.00
Net Income ($M)$5.16 $3.22 $8.21
Diluted EPS ($)$0.21 $0.14 $0.36
Adjusted EBITDA ($M)$10.72 $7.68 $14.42

Segment revenue breakdown

Product Line ($USD Millions)Q3 2024Q2 2025Q3 2025
Lymphedema Products$65.28 $65.97 $72.38
Airway Clearance Products$7.81 $12.94 $13.37
Total$73.09 $78.91 $85.76

KPIs and balance sheet

KPIQ3 2024Q2 2025Q3 2025
Weighted Avg Diluted Shares (M)24.25 23.24 22.51
Cash & Equivalents ($M)—$81.53 (6/30/25) $65.97 (9/30/25)
Borrowings Outstanding—$24.80M term/revolver (6/30/25) $0; term loan repaid Jul 31, 2025
Cash from Operations YTD ($M)—$15.17 (H1’25) $25.52 (9M’25)

Estimate comparison (S&P Global consensus)

MetricConsensusActualSurprise
Revenue ($USD Millions)$79.31*$85.76 +$6.45*
Diluted EPS ($)$0.174*$0.36 +$0.186*
# of Estimates (Rev / EPS)5* / 5*——

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)FY 2025$310–$315 $317–$321 Raised
Adjusted EBITDA ($M)FY 2025$33–$35 $38–$39.5 Raised
GAAP Gross Margin (%)FY 2025—~75% New/maintained level
GAAP OpEx (YoY)FY 2025—~+11% New
Interest Income ($M)FY 2025—~$1.8 New
Tax Rate (%)FY 2025—~28% New
Diluted Shares (M)FY 2025—~23 New
Lymphedema Revenue GrowthFY 2025+1%–2% (implied prior) +3%–4% Raised
Airway Clearance Revenue GrowthFY 2025—+52%–55% New
Tariff Impact ($M)FY 2025—~$1 this year; ~half ongoing beyond 2025 New

Other corporate actions:

  • Share repurchase program: New authorization up to $25M through Nov 3, 2027, funded from cash/flows.

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Sales force & CRMQ1: Sales org optimization and CRM go‑live; temporary productivity impact. 329 reps (167 AM/162 PS), largest ever; CRM embedded with data/algorithms; productivity ramp noted. Improving
Medicare policy (LCD→NCD)Q2: Favorable near-term payer environment noted. Clearer NCD pathway for complex lymphedema to advanced pumps without basic trial; expected to help from Q4 onward. Improving
Airway clearance (AffloVest)Q2: Growth via top-10 DME placements; +52% YoY in Q2. +71% YoY in Q3; near market-leading position; 510(k) submitted for next-gen device. Strengthening
Lymphedema product mix (Nimbl/Flexitouch)Q1: Nimbl lower extremity launch completed. Nimbl outpacing market; Flexitouch supported by six-month head & neck data; expected NCD tailwind. Improving
AI/Tech initiatives—AI-enabled order ops pilot improving speed/accuracy; next phase order intake. New/Positive
Tariffs & supply—Tariff impact ~$1M in 2025; ~half ongoing beyond; strong DME inventory alignment. Managed headwind
Capital allocationQ1/Q2: $26.6M repurchased YTD; plan to retire term loan post-Q2. Term loan repaid; new $25M buyback authorized. Shareholder friendly

Management Commentary

  • “We delivered total revenue of $85.8 million, representing growth of 17% year-over-year…gross margins increased 80 basis points…adjusted EBITDA increased 34% year-over-year to $14.4 million.”
  • “We ended Q3 with 329 total reps…largest field presence in Tactile’s history…CRM technology adoption…supports a data‑driven and efficient approach to sales activities.”
  • “Sales of AffloVest increased 71% year over year…we know we are very close to achieving a market‑leading position as our commercial momentum accelerates.”
  • “Six‑month data…demonstrating the sustained long‑term effectiveness of Flexitouch Plus…will be submitted in November.”
  • “We submitted a 510(k) to FDA for our next‑generation AffloVest…reduced weight, digital connectivity, improved sizing adjustability.”
  • “We are raising our full year 2025 total revenue guidance to $317–$321 million…adjusted EBITDA of approximately $38–$39.5 million.”

Q&A Highlights

  • AffloVest sustainability and share: Growth driven by preferred placement at top DMEs, tight inventory cadence, medical education, and product differentiation; management sees “very close” or possibly #1 market position vs. Baxter.
  • Lymphedema cadence: No pull‑forwards; Q3 benefited from rep hiring ramp, so Q3→Q4 sequential may be more muted; lymphedema FY25 growth raised to +3–4%.
  • Market growth outlook: Lymphedema market growing ~10%; management expects to be in range given products, sales force, and investments (no 2026 guide yet).
  • NCD coverage pathway: Complex lymphedema patients can go directly to advanced pumps with proper documentation; impact expected to build into 2026 as policies and provider education take hold.
  • Head & neck coverage timeline: Payer policy changes likely during 2026, even with compelling six‑month data; ongoing payer engagement.

Estimates Context

  • Q3 2025 results beat Street: Revenue $85.76M vs $79.31M consensus (+$6.45M); EPS $0.36 vs $0.174 consensus (+$0.186). Five estimates on both metrics.* *
  • Implications: Above‑trend AffloVest growth and faster lymphedema recovery should drive upward revisions to FY25/26 revenue and EBITDA, especially with raised FY25 guide and NCD tailwinds.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat and raise quarter: Broad-based execution drove a material top- and bottom-line beat and a higher FY25 outlook; setup positive for estimate revisions. *
  • Airway clearance remains a key growth engine with share gains; next‑gen product under FDA review adds 2026 product cycle optionality.
  • Lymphedema recovery is taking hold with a larger, more productive field and CRM; NCD pathway likely adds incremental lift into 2026 as provider workflows adapt.
  • Margin trajectory constructive: 80 bps YoY gross margin expansion amid investment; OpEx growth (~+11% YoY) should translate to increasing operating leverage into 2026.
  • Strong balance sheet/capital returns: Term loan retired; new $25M buyback authorization provides downside support and capital deployment flexibility.
  • Watch near-term cadence: Q3 benefited from hiring ramp; Q4 lymphedema step-up likely less than historical—focus on full H2 trajectory and FY26 drivers (NCD, next-gen AffloVest, AI ops).
  • Key catalysts: FDA clearance for next‑gen AffloVest, payer policy updates for head & neck lymphedema, continued DME penetration, and sustained gross margin gains.

Notes and sources:

  • Q3 2025 8‑K and Exhibit 99.1 (press release) for financials, guidance, and segment data:
  • Q3 2025 earnings call transcript for narrative, sequential, policy and operational updates:
  • Prior quarters’ earnings for trend analysis: Q2 2025 8‑K/press release ; Q1 2025 8‑K/press release
  • Consensus estimates from S&P Global (no document citations available). Values retrieved from S&P Global.*