What Tactile Systems Technology (TCMD) Said on Its Q3 Earnings Call

Key Points

• Third-quarter revenue rose 7.1% to $91.9 million, driven by 13% growth in lymphedema revenue to $81.8 million. Growth reflected higher Medicare and commercial sales, increased clinic visits and expanded clinician education efforts.
• Airway-clearance revenue fell 25.1% to $10 million as distributors worked through inventory ahead of the next-generation AffloVest launch. The company now expects full-year airway-clearance revenue to decline by the mid- to high-single digits.
• Tactile Medical maintained its 2026 revenue outlook of $360 million to $366 million but raised adjusted EBITDA guidance to $50 million-$52 million. Gross margin expanded to 76.7%, although higher operating expenses reduced net income and adjusted EBITDA margin.

Tactile Systems Technology NASDAQ: TCMD, which operates as Tactile Medical, reported third-quarter revenue of $91.9 million, up 7.1% from a year earlier, as continued double-digit growth in its lymphedema business offset an expected decline in airway-clearance sales tied to distributor inventory transitions.

Chief Executive Officer Sheri Dodd said lymphedema revenue increased 13% year over year to $81.8 million, marking the company’s fifth consecutive quarter of above-market double-digit growth. Medicare revenue rose approximately 11%, commercial revenue increased about 17%, and Veterans Affairs revenue was approximately flat.

“We delivered total revenue of $91.9 million in Q3, led by a 13% year-over-year growth in lymphedema,” Dodd said. She added that the company expects the prior-authorization-related timing disruption in Medicare ordering following April’s implementation of new requirements is now behind it.

Lymphedema Growth Supported by Commercial Investments

Dodd attributed lymphedema growth to sales-force investments, customer-relationship-management technology, clinician education and marketing programs. Clinic visits increased 19% year over year during the quarter, while the number of referring clinics grew more than 10% year to date, she said.

The company said its medical education team has educated more than 13,000 clinicians who treat lymphedema patients in 2026, already 25% more than it educated during all of 2025. Tactile Medical also formed a dedicated strategic accounts team during the quarter to deepen engagement with large health systems, integrated delivery networks, and high-volume regional and national accounts.

Dodd said the company is pursuing growth through three strategic priorities: expanding patient access to care, improving conversion of referrals into therapy shipments, and broadening its treatment options. She said the estimated number of people in the U.S. living with undiagnosed lymphedema is about 20 million.

Tactile Medical recently received FDA 510(k) clearance for an expanded indication for its LymphaTech 3D Scanner. The scanner is now cleared to provide circumference and volume measurements to aid in assessing lymphedema. The company said its application for a Category III CPT code is scheduled for final review at a February 2027 meeting.

The company also said a small number of commercial payers have removed restrictive experimental and investigational designations from their policies following publication of six-month results from a randomized controlled trial involving Flexitouch therapy for head and neck cancer-related lymphedema. Dodd said the policy changes were early progress and that broader coverage expansion would take time.

Airway-Clearance Sales Decline on Inventory Transition

Airway-clearance revenue from AffloVest fell 25.1% to $10 million in the third quarter. Management said the decline was expected and resulted from a one-time durable medical equipment, or DME, inventory transition associated with the launch of the next-generation AffloVest system.

Chief Financial Officer Elaine Birkemeyer said DME customers are taking longer than initially anticipated to work through existing inventory. Tactile Medical now expects full-year airway-clearance revenue to decline by the mid- to high-single digits, compared with its previous outlook for roughly flat revenue.

Management maintained that underlying patient demand, therapy effectiveness and competitive dynamics have not changed. Dodd said the company expects sequential improvement in airway-clearance revenue in the fourth quarter, though revenue is expected to remain below the prior-year period.

For customers without excess inventory, Dodd said Tactile Medical is receiving positive feedback from clinicians and patients on the new generation of AffloVest. However, sales through those customers are not expected to fully offset the impact from distributors still reducing inventory.

Margins Expand Despite Higher Operating Expenses

Third-quarter gross margin expanded 90 basis points to 76.7%, from 75.8% a year earlier, primarily reflecting lower manufacturing costs and favorable product mix. Dodd said this was the company’s 12th consecutive quarter of year-over-year gross-margin expansion.

Operating expenses increased 12.7% to $60.9 million, reflecting the annualization of prior sales-force hiring and continued investments in technology and other operating capabilities. Operating income declined to $9.6 million from $11 million in the prior-year quarter, while net income fell to $7.2 million, or $0.31 per diluted share, from $8.2 million, or $0.36 per diluted share.

Adjusted EBITDA was $14.3 million, compared with $14.4 million a year earlier. Adjusted EBITDA margin was 15.6%, down from 16.8%, as higher operating costs more than offset gross-margin improvement.

The company ended the quarter with $75.1 million in cash and no outstanding borrowings. Operating cash flow totaled $12 million during the quarter, more than funding approximately $6.2 million in share repurchases. About $12.5 million remained available under its $25 million repurchase authorization as of Sept. 30.

Guidance Maintained; EBITDA Outlook Raised

Tactile Medical maintained its full-year 2026 revenue outlook of $360 million to $366 million, representing growth of approximately 9% to 11%. The company continues to expect low-double-digit full-year lymphedema growth, with stronger lymphedema performance offsetting the reduced airway-clearance outlook.

The company raised its adjusted EBITDA guidance to $50 million to $52 million, representing expected growth of approximately 12% to 16% from $44.8 million in 2025.

Looking ahead, management said it filed a 510(k) application in October for Flexitouch Pro, an enhanced version of its advanced pneumatic compression system. Subject to regulatory completion, the company is targeting a commercial launch in the second half of 2027. Dodd said Flexitouch Pro is expected to be reimbursed under the existing E0652 code and to have gross margins in line with the current Flexitouch portfolio.

Tactile Medical also plans to begin a focused Veterans Affairs pilot for MyoSleeve, a product being introduced through its partnership with ElastiMed, in late 2026. Management said MyoSleeve is not included in 2026 guidance and expects its contribution to build gradually over time.

About Tactile Systems Technology (NASDAQ:TCMD)

Tactile Systems Technology, doing business as Tactile Medical, develops and provides medical devices and services for people with chronic swelling and related conditions. The company focuses primarily on lymphedema and chronic venous insufficiency, conditions that can cause persistent fluid buildup in the limbs and trunk.

Its principal products include advanced pneumatic compression devices, such as the Flexitouch Plus system for the treatment of lymphedema and the Entre Plus system for home treatment of lymphedema and chronic venous insufficiency.

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