Tandem Diabetes Care Q2 Earnings Call Highlights

Key Points

• Record second-quarter performance: Worldwide sales rose 6% year over year to $255 million, while pump shipments increased more than 10% to approximately 33,000. Gross margin reached 57%, and adjusted EBITDA margin was positive for the fourth consecutive quarter at 3%.
• Pharmacy-channel transition is progressing but weighs on near-term revenue: Pharmacy shipments represented about 10% of U.S. shipments during the first full quarter of the PAYG offering, with formulary coverage reaching approximately 45%. Tandem estimated the transition reduced second-quarter revenue by about $8 million, though higher recurring supply prices are expected to offset the impact over time.
• Outlook and product pipeline remain intact: Tandem reaffirmed its 2026 sales outlook of $1.065 billion to $1.085 billion and expects supply constraints to ease in the second half of the year. The company is pursuing FDA clearance for a tubeless Mobi option, plans to launch its seven-day SteadiSet infusion technology in 2027, and expects to begin a pivotal AIDANET study later this year.

Tandem Diabetes Care NASDAQ: TNDM reported second-quarter results that included record sales, pump shipments and gross margin for a second quarter, while management highlighted early progress in its transition to pharmacy-channel reimbursement and continued development of new insulin-delivery technologies.

Worldwide sales totaled $255 million, up 6% year over year, or 5% in constant currency. The company shipped approximately 33,000 insulin pumps globally, with shipments increasing more than 10% both year over year and sequentially, according to President and Chief Executive Officer John Sheridan.

“The second quarter marked an important step forward for Tandem,” Sheridan said, citing operational momentum, improved financial performance and broader access to the company’s technology.

U.S. sales and pharmacy-channel transition

U.S. sales rose 5% year over year to $179 million, while U.S. pump shipments increased 7% to a second-quarter record of roughly 22,000 pumps. New pump starts were nearly flat from a year earlier but rose more than 20% sequentially from the first quarter, Chief Financial Officer Leigh Vosseller said.

Customers transitioning from multiple daily injections, or MDI, represented about 70% of new pump starts and grew by a mid-single-digit percentage from the prior year. Tandem Mobi accounted for more than half of shipments to new customers, Vosseller said.

The company continued implementing its pay-as-you-go, or PAYG, reimbursement offering through the pharmacy channel, which launched in March. Tandem had approximately 45% formulary coverage at the end of the quarter, approaching the high end of its stated full-year coverage goals.

In the first full quarter of the PAYG offering, pharmacy pump shipments represented approximately 10% of total U.S. shipments, while pharmacy sales accounted for 10% of total U.S. sales. The transition changes how products are prescribed, supported and fulfilled, Sheridan said, but management described the initial rollout as proceeding as expected.

Vosseller said pharmacy pump sales create a near-term revenue headwind because they do not include upfront reimbursement as in a traditional durable medical equipment sale. The company estimated that initial pharmacy-pump dynamics reduced second-quarter revenue by about $8 million. Tandem expects this effect to be offset over time by higher prices for recurring supplies sold through pharmacy benefits.

About 6% of Tandem’s U.S. installed base of roughly 325,000 people purchased supplies through their pharmacy benefit during the quarter. The company said the average monthly pharmacy supply price was higher than the $350 per patient assumption previously used for modeling, though it did not change that assumption.

International growth and supply constraints

International sales increased 7% year over year, or 6% in constant currency, to $75 million. International pump shipments rose 19% to approximately 11,000 units. Direct-channel sales represented about 13% of international revenue, more than double the prior-year level.

Tandem has begun direct commercial efforts in the United Kingdom, Switzerland and Austria, with France expected to follow in the fourth quarter. Management said direct launches are intended to improve service to customers and providers while strengthening the company’s financial profile.

International results included about $3 million in headwinds related to distributor inventory buybacks and destocking in markets transitioning to direct operations. Sales were also affected by constraints involving a key third-party infusion-set supplier. Vosseller said the company received expected inventory during the quarter, but supplies arrived too late to fulfill certain distributor orders before quarter-end.

Management said the second quarter represented the period of greatest impact from the infusion-set shortage, with availability expected to improve through the second half of the year. Tandem introduced its AutoSoft+ infusion set in Canada in late July and plans to expand the product to additional markets, including the U.S., later this year.

Margins, cash and outlook

Gross margin reached 57%, improving five percentage points from a year earlier and two points sequentially. Tandem said the result was its second-highest quarterly gross margin, driven by pharmacy pricing benefits and product-cost improvements as Mobi volumes increased.

Operating expenses were flat year over year at $159 million. Adjusted EBITDA margin was 3% of sales, marking the company’s fourth consecutive quarter with a positive adjusted EBITDA margin. Stock-based compensation expense declined to $16 million, or 6% of sales, from 11% of sales in the prior-year period.

Tandem ended the quarter with $456 million in cash and investments, compared with $570 million at the end of the first quarter. The decline reflected investment in a new customer relationship management system, a payment under the Roche settlement agreement and an additional investment in CeQur, a private company that offers a wearable device for mealtime insulin delivery.

The company reaffirmed its 2026 outlook:

• Worldwide sales of $1.065 billion to $1.085 billion
• U.S. sales of $730 million to $745 million
• International sales of $335 million to $340 million
• Gross margin of 56% to 57%
• Adjusted EBITDA margin of 5% to 6%

For the third quarter, Tandem expects worldwide sales of approximately $265 million, including $180 million in U.S. sales and $85 million internationally. It expects gross margin of about 56% and adjusted EBITDA margin of about 2%, reflecting pharmacy pricing dynamics and planned commercial spending.

Pipeline developments

Tandem submitted a 510(k) application during the second quarter for a tubeless feature for the Tandem Mobi pump. Subject to FDA clearance, the feature would allow users to choose between tubed and tubeless wear using the same Mobi hardware by changing supplies. Sheridan said the company is preparing for a scaled launch in the second half of 2026 if clearance is received.

The company also said it plans to launch its SteadiSet proprietary infusion technology, which is FDA-cleared for wear up to seven days, in the first half of 2027. In automated insulin delivery, Tandem received FDA approval of an investigational device exemption in the second quarter for a pivotal study of the University of Virginia’s AIDANET algorithm. The company plans to begin that study later this year.

About Tandem Diabetes Care (NASDAQ:TNDM)

Tandem Diabetes Care, Inc NASDAQ: TNDM, headquartered in San Diego, California, is a medical device company focused on the design, development and commercialization of innovative insulin delivery systems for people with insulin-dependent diabetes. Founded in 2006, the company introduced its first product, the t:slim® Insulin Pump, in 2011 and has since built a portfolio of next-generation pumps featuring touchscreen interfaces, remote software updates and integrated continuous glucose monitoring (CGM) capabilities.

The company's flagship offering, the t:slim X2® Insulin Pump, is engineered to work with leading CGM sensors and features automated insulin delivery algorithms that adjust basal insulin rates based on real-time glucose trends.

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