Tandem Diabetes Care Q4 Earnings Call Highlights

Key Points

• Tandem reported a record 2025—surpassing $1 billion in annual sales with Q4 revenue of $290 million and record U.S. pump shipments—while profitability improved (FY gross margin 54%, Q4 58%), the company returned to a positive operating margin and generated free cash flow in H2.
• Management is accelerating U.S. pharmacy access and a PayGo reimbursement model that will cause near-term revenue recognition headwinds (Tandem cites $85–95M of 2026 headwinds, including $70–80M in the U.S.) but is expected to improve patient access, pricing and margins as pharmacy share rises from ~4% in 2025 toward a majority over 2–3 years.
• Key product catalysts include wider roll‑out of Control‑IQ+ (expanding the addressable market), recent integrations like FreeStyle Libre 3 Plus and Mobi Android control, and a planned 510(k) for Mobi Tubeless with potential H2 2026 launch, plus a pivotal trial for a fully closed‑loop system starting in 2026.

Tandem Diabetes Care NASDAQ: TNDM reported record fourth-quarter and full-year 2025 results while outlining a major shift in its U.S. reimbursement strategy that management said will reshape growth and profitability over time. Executives described 2025 as a “defining year,” highlighted by surpassing $1 billion in annual sales and building momentum that culminated in what the company called its strongest quarter in its history.

2025 results: record sales, shipments, and improved profitability

President and CEO John Sheridan said Tandem delivered its mission to nearly 500,000 customers worldwide and finished 2025 with “double-digit growth and improved profitability.” CFO Leigh Vosseller reported that worldwide sales grew 12% in 2025, driven by a 10% increase in U.S. sales to $707 million and 15% international growth to $308 million.

In the fourth quarter, Tandem posted record worldwide sales of $290 million, up 15% year over year. U.S. Q4 sales rose 14% to $210 million, supported by more than 27,000 pump shipments, the company’s highest quarterly total. Vosseller said renewals accounted for more than half of U.S. shipments, and multiple daily injection (MDI) conversions made up about two-thirds of customers new to Tandem, a trend he said was consistent throughout the year.

Internationally, Q4 sales grew 17% year over year to $80 million on 11,000 pump shipments, aided by growth in both pump and supply shipments. Vosseller noted favorable foreign exchange, offset by $4 million tied to the company’s transition to direct operations that primarily affected pump sales. For 2025, total distributor destocking and inventory buyback impact was about $7 million, below the company’s earlier estimate of $10 million due to a partial timing shift into the first quarter of 2026.

Profitability also improved. Vosseller said gross margin expanded by 3 percentage points to 54% for the full year, while Q4 gross margin reached a record 58%. He attributed the gains to product cost reductions, manufacturing efficiency, and pricing and channel initiatives. Fourth-quarter operating expenses were “essentially flat” year over year and sequentially, reflecting SG&A investments offset by planned efficiencies.

Adjusted EBITDA was 11% of sales in Q4, a 10-percentage-point improvement from the prior year. Tandem also reported its first positive operating margin since 2021, at 3% of sales in Q4, a 15-point improvement year over year. Vosseller cited lower non-cash stock-based compensation, which he said had declined to an approximate quarterly run rate of $20 million. The company ended 2025 with nearly $300 million in total cash and investments and generated free cash flow in both Q3 and Q4.

Commercial and international expansion efforts

Sheridan said Tandem’s 2025 priorities included modernizing commercial operations, delivering new technology, and reshaping the business model. In the U.S., he said the company expanded its sales team, updated sales processes, and began implementing new systems expected to improve efficiency in 2026. He also said Tandem started expanding dedicated commercial efforts for people living with type 2 diabetes.

Internationally, Tandem said it set record sales again in 2025 while preparing to move to direct commercial operations in the U.K., Switzerland, and Austria. Sheridan said the company is now live with direct operations in those markets and intends to use its experience as a “playbook” for further direct expansion in 2026 and 2027. Management said the direct model provides an opportunity to deepen relationships with the diabetes community while improving price and margins, though the transition requires operational buildout and is being staged to reduce risk.

Product pipeline: new launches, integrations, and tubeless option

On the technology front, Sheridan pointed to the launch of Control-IQ+, an automated insulin delivery algorithm indicated for people with type 1 diabetes down to age two and for adults with type 2 diabetes, which he said “doubles” Tandem’s addressable market. He also said the company generated clinical evidence supporting training that can simplify carbohydrate counting.

Late in 2025, Tandem launched FreeStyle Libre 3 Plus for t:slim in the U.S. and Android control for the Mobi system. Sheridan said early response was positive and contributed to fourth-quarter growth.

Looking ahead, management outlined multiple 2026 milestones, including three launches planned for the second quarter:

• A scaled launch of Mobi internationally
• A launch of Mobi integration with FreeStyle Libre 3 Plus beginning in the U.S.
• Dexcom’s 15-day sensor integration on both pumps and platforms globally

Sheridan also said Tandem recently submitted a 510(k) to the FDA for a pregnancy indication for Control-IQ+ technology. The company plans to file a 510(k) submission in the second quarter for “Mobi Tubeless,” described as a novel infusion-site option that converts the existing Mobi pump into a tubeless patch device with interchangeability between tubed and tubeless wear. Sheridan said the company is preparing for a launch in the second half of 2026, pending FDA clearance, while emphasizing that Mobi Tubeless is expected to be the world’s first patch pump with extended wear technology.

Additional pipeline items cited included SteadiSet extended-wear infusion set technology, a next-generation Mobi incorporating further miniaturization from Tandem’s Sigi technology, software features such as dual glucose-ketone sensor integration, and efforts toward a fully closed-loop AID system. Sheridan said Tandem plans to begin a pivotal trial for a fully closed-loop algorithm later in 2026, supporting an FDA filing in 2027.

Pharmacy and PayGo: near-term sales headwind, long-term model shift

The most consequential strategic change discussed was Tandem’s move to accelerate pharmacy channel access in the U.S. and adopt a “pay-as-you-go” (PayGo) reimbursement structure. Sheridan and Vosseller said pharmacy access can reduce out-of-pocket costs and ease onboarding, streamline prescribing for healthcare providers, and improve visibility and outcomes for payers. They also said manufacturers typically receive greater economic reimbursement via the pharmacy channel.

Vosseller said the company’s first year of pharmacy experience supported these assumptions, and the company now plans to drive broader pharmacy utilization across its platforms in 2026. However, he emphasized the shift creates a near-term offset to sales because, under pharmacy, there is no upfront reimbursement for the pump and revenue is recognized over time through recurring supply purchases.

In Q4, U.S. pharmacy sales nearly doubled sequentially to $16 million, or 7% of U.S. sales. Still, Vosseller said only a few percent of the installed base ordered supplies through pharmacy in Q4, calling it a “meaningful opportunity” given more than 300,000 U.S. customers regularly ordering supplies.

Management said new PayGo contracts are expected to become effective late in the first quarter of 2026. For modeling purposes, Vosseller suggested a starting assumption of about $350 per month per customer, noting contract terms and access status can affect rebates and co-pay assistance. He also said the business would be structured “agnostic” to whether a customer is new or already has a pump, with consistent pricing across customers.

2026 outlook: shipments as the key metric, margins expected to expand

For 2026, Tandem guided worldwide sales to $1.065 billion to $1.085 billion, incorporating $85 million to $95 million of headwinds related to business model changes. First-quarter 2026 worldwide sales are expected to be $236 million to $240 million, including about $10 million of headwinds split between the U.S. and international changes.

In the U.S., the company expects pump shipments to rise 10% to 11% year over year and said pump shipments will be the “key indicator” of progress, given revenue is affected by PayGo-related pricing headwinds. U.S. sales are expected to be $730 million to $745 million, including $70 million to $80 million of pricing headwinds tied to adopting PayGo. Management said renewal pumps are expected to comprise more than half of total shipments, and the company expects a return to growth in new pump shipments led by MDI conversions. Tandem said it is not currently including contributions from Mobi Tubeless in guidance, citing uncertainty around clearance and launch timing.

On channel mix, Vosseller said roughly 80% of 2026 pump shipments are expected to remain in the DME channel while pharmacy access scales, but over two to three years the company expects the mix to flip, with the majority of shipments through pharmacy. He said pharmacy sales are expected to represent about 15% of total U.S. sales in 2026, up from 4% in 2025, with a long-term expectation of more than 70%.

International sales are expected to be $335 million to $340 million in 2026. The company expects at least a 30% ASP premium in markets where it goes direct, though Vosseller said the blended 2026 benefit will be less as direct operations scale during the year. Tandem anticipates about $15 million of headwinds from distributor destocking and inventory buybacks associated with the transition. Direct sales were about 5% of international sales in 2025 and are expected to reach roughly 15% for full-year 2026, according to management.

On profitability, Tandem expects gross margin of 56% to 57% for 2026, with management describing a ramp from nearly 54% in Q1 to about 60% in Q4. Adjusted EBITDA is expected to be 5% to 6% of sales for the year, with Q1 adjusted EBITDA expected to be negative 2% to negative 1% due to seasonality, returning to positive in Q2. Vosseller also said the company expects to be free cash flow neutral for 2026, after exiting 2025 free cash flow positive, and noted the typical first-quarter cash dip from annual incentive payments.

In the Q&A, executives reiterated that PayGo is intended to remove barriers common in DME, including administrative friction for physician offices and large upfront patient out-of-pocket costs at deductible resets. Management also said it expects retention to remain strong, arguing that customers often stay beyond warranty periods because of pump performance and satisfaction, even if the pharmacy model reduces the “lock-in” dynamics associated with DME warranties.

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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