Tactile Systems Technology (TCMD) 4 Nov 24 2024 Q3 Earnings call transcript

Tactile Medical, a leading medical device company specializing in lymphedema and airway clearance solutions, held its third quarter 2024 earnings call, revealing significant strides in operational and financial growth. The call, led by CEO Sheri Dodd and CFO Elaine Birkemeyer, showcased a company in a robust position, navigating challenges while maintaining a strong outlook for the future.

Financial Performance and Market Dynamics

Tactile Medical reported a 5% year-over-year increase in total revenue, reaching $73.1 million, with revenue from lymphedema and airway clearance products experiencing notable growth. The company's gross margin expanded by 410 basis points, underscoring the impact of strategic product improvements and operational efficiencies. Adjusted EBITDA grew by 39.3%, marking the 10th consecutive quarter of year-over-year improvement. These figures demonstrate Tactile Medical's commitment to operational excellence and financial health.

Lymphedema Business Performance and Policy Updates

The lymphedema business, Tactile Medical's core focus, showed a 4.4% year-over-year increase, with the airway clearance business experiencing a 10.3% year-over-year growth. Despite challenges with increased documentation requirements for Medicare patients, the company remains optimistic about its market fundamentals and patient demand. A significant development for the lymphedema business is the recent policy change from the Centers for Medicare & Medicaid Services (CMS), which will retire the Local Coverage Determination (LCD) for pneumatic compression devices (PCDs) and instead use the National Coverage Determination (NCD) as the sole coverage policy. This change is expected to streamline the process and improve access to life-changing treatment options for lymphedema patients.

Airway Clearance Business and Strategic Initiatives

In the airway clearance business, Tactile Medical's AffloVest sales showed year-over-year growth, despite uneven buying patterns from DME customers. The company continues to focus on educating and training DME sales partners and providers in bronchiectasis and the role of AffloVest in patient care. The launch of Nimbl, the next-generation lymphedema platform, and the publication of positive clinical trial results for veterans using Flexitouch have added to Tactile Medical's product portfolio and market differentiation.

Capital Allocation Strategy and Future Outlook

Tactile Medical's capital allocation strategy includes ongoing investment in technology, workflow improvements, and the launch of innovative therapies. The company has also initiated a share repurchase program of up to $30 million of outstanding stock. These strategic moves reflect Tactile Medical's confidence in its business trajectory and commitment to enhancing shareholder value.

Challenges and Future Outlook

Despite the strong financial performance, Tactile Medical faced challenges in Q3, including increased documentation requirements for Medicare patients and uneven DME buying patterns. However, the company remains confident in its ability to mitigate these challenges through operational improvements, technology advancements, and strategic initiatives. Tactile Medical's focus on patient-centric innovation and clinical evidence generation positions the company well for continued growth and profitability.

In conclusion, Tactile Medical's third quarter 2024 earnings call revealed a company in a strong financial position, navigating challenges while maintaining a positive outlook for the future. The company's strategic initiatives, operational improvements, and capital allocation strategy position Tactile Medical for continued growth and success in the medical device industry.