Tactile Systems Technology (NASDAQ:TCMD), doing business as Tactile Medical, reported second-quarter revenue growth and higher profitability, led by its lymphedema business, while updating its full-year outlook to reflect temporary inventory effects in its airway-clearance segment.
Total revenue rose 9% year over year to $85.7 million in the second quarter. Lymphedema revenue increased 12% to $73.6 million, while airway-clearance revenue declined 7% to $12.1 million. CEO Sheri Dodd said the airway-clearance decline reflected inventory management by several large durable medical equipment, or DME, partners during the rollout of the company’s next-generation AffloVest system.
Lymphedema Growth and Medicare Authorization
The company attributed lymphedema growth to commercial execution, healthy referral trends, improved territory productivity and increased Flexitouch adoption following alignment with Medicare’s national coverage determination policy.
Medicare prior authorization requirements that took effect April 13 added administrative steps to the ordering process and contributed to near-term moderation in Medicare order volumes, management said. However, Dodd said authorization approval rates and adjudication timing have met the company’s expectations, while the operational effects of the change are beginning to normalize.
During the question-and-answer session, Chief Financial Officer Elaine Birkemeyer said Medicare revenue declined during the quarter, reflecting the transition. She said the company expects a comparatively larger sequential increase in third-quarter revenue, similar to the pattern seen in the prior year, as orders affected by timing move through the process.
Commercial revenue continued to show growth, according to management, while the Department of Veterans Affairs channel remained more stable due to its reimbursement environment and streamlined operating model.
AffloVest Inventory Expected to Normalize in Fourth Quarter
Dodd said a limited number of larger DME partners had elevated AffloVest inventories as the company introduced its next-generation system. Those partners are expected to reduce existing inventory through the third quarter before returning to more normal purchasing patterns in the fourth quarter.
The next-generation AffloVest is lighter than the prior version, offers size adjustability and connectivity, and remains untethered, according to Dodd. The company said the updated device does not carry incremental reimbursement but is intended to provide additional features for patients and DME partners.
Management said the inventory issue was not broad-based across its DME network and was concentrated among a few larger partners. The company said it has improved visibility into inventory held by those organizations and incorporated the expected effect into its outlook.
Profitability Improves as Company Invests in Growth Initiatives
Gross margin expanded to 76.3% from 74.5% a year earlier, primarily due to lower manufacturing costs, stronger collections reflected in revenue and favorable product mix. Operating income increased 67% to $6.9 million.
- Net income increased 142% to $7.8 million, or $0.34 per diluted share, from $3.2 million, or $0.14 per diluted share.
- Adjusted EBITDA rose 49% to $11.4 million from $7.7 million.
- Operating expenses increased 7% to $58.5 million, reflecting investments in the commercial organization, technology and operational capabilities.
- The company ended the quarter with $69.9 million in cash and cash equivalents and no outstanding borrowings.
Birkemeyer said the cash balance declined from $83.4 million at the end of 2025 primarily because of upfront payments to ElastiMed for exclusive MyoSleeve distribution rights in the VA and Department of Defense channels, as well as share repurchases. She said the company generated positive operating cash flow excluding new strategic uses of cash.
Updated 2026 Outlook and Portfolio Expansion
Tactile Medical updated its 2026 revenue guidance to $360 million to $366 million, representing projected growth of approximately 9% to 11%. The company continues to expect low-double-digit lymphedema revenue growth, while it now expects airway-clearance revenue to be closer to flat for the year.
The company maintained its adjusted EBITDA outlook of approximately $49 million to $51 million. It expects GAAP gross margin of 76% to 76.5%, operating-expense growth of 10% to 12%, net interest income of about $2.4 million and a 28% tax rate.
Management also discussed strategic initiatives involving LymphaTech and MyoSleeve. The company has submitted for an expanded FDA indication for LymphaTech as a diagnostic aid for lymphedema, with anticipated approval in 2027, and is pursuing a Category III CPT code to support a potential reimbursement pathway.
In July, Tactile Medical announced an exclusive U.S. distribution agreement with ElastiMed for MyoSleeve, a wearable non-pneumatic compression device for lower-leg patients. The agreement initially covers veterans, active-duty service members and other beneficiaries served through the Department of Defense. Dodd said MyoSleeve is expected to be an incremental VA-channel growth contributor over time, though the company’s current guidance does not assume a material contribution.
The company also said a six-month study involving 236 patients across 10 sites was published in the International Journal of Radiation Oncology • Biology • Physics. Management said the study found Flexitouch produced patient-reported outcomes comparable with therapist-guided care in treatment-naive patients with head and neck cancer-related lymphedema. The company plans to use the publication in discussions with commercial payers regarding coverage policies.
About Tactile Systems Technology (NASDAQ:TCMD)
Tactile Systems Technology, Inc, headquartered in Plymouth, Minnesota, is a medical device company specializing in the design, manufacture and marketing of home-use pneumatic compression therapy systems for the treatment of lymphedema and other chronic edema-related conditions. Using proprietary software and patented pump technologies, the company’s platforms are designed to improve patient outcomes through sequential pressure treatment that promotes fluid mobilization and enhanced lymphatic function.
At the core of Tactile Systems’ product portfolio is the Flexitouch® system, a programmable pneumatic pump and garment system approved for home use, and the Aria® device, which features an intuitive touchscreen interface and advanced garment design.
