Welcome, ladies and gentlemen, to the Third Quarter 2025 Earnings Conference Call for Tactile Medical. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. I would now like to turn the call over to Sam Bentzinger, Investor Relations at Gilmartin Group, for a few introductory comments. Please go ahead.

Good afternoon, and thank you for joining the call today. With me from Tactile's management team are: Sheri Dodd, Chief Executive Officer; and Elaine Birkemeyer, Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties. These could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our annual report on Form 10-K as well as our most recent 10-Q filing to be filed with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with Generally Accepted Accounting Principles or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website. With that, I'll now turn the call over to Sheri.

Thanks, Sam. Good afternoon, everyone, and welcome to our third quarter 2025 earnings call. Here with me is Elaine Birkemeyer, our Chief Financial Officer. We are looking forward to sharing our strong third quarter financial and business results with you today. As we'll discuss, these results reflect our progress in both strategy and operational execution, demonstrated by meaningful advances in business transformation, product innovation, and market leadership. In the third quarter, we delivered total revenue of $85.8 million, representing growth of 17% year-over-year. By business line, lymphedema revenue increased 11% year-over-year to $72.4 million, and airway clearance revenue increased 71% year-over-year to $13.4 million. We were also pleased to see sequential growth in both business lines with lymphedema revenue up 10% versus Q2 and airway clearance revenue, which is typically more seasonally depressed in Q3, up 3% versus Q2. Q3 gross margins increased 80 basis points year-over-year to 76%, while on the bottom line, adjusted EBITDA increased 34% year-over-year to $14.4 million. We also made progress with respect to our balance sheet in terms of strong cash generation. Based on our performance through the third quarter and sustaining momentum, we are raising our full year 2025 total revenue guidance to a range of $317 million to $321 million, representing growth of approximately 8% to 10% year-over-year. I will now focus on a deeper review of performance by individual business line and share progress updates on our key 2025 strategic priorities, which, as a reminder, center on: one, improved access to care, a core element of our growth strategy given our massively underpenetrated markets; two, expanding treatment options to optimize patient care and reinforce our market-leading position; and three, enhancing the lifetime patient value given the chronic nature of the disease states we support with both products and services. Elaine will follow with a review of our full third quarter results and additional details of our updated guidance. Our lymphedema business is continuing to demonstrate a steady recovery, and we expect this momentum to persist. In Q3, lymphedema revenue grew 11% year-over-year and 10% sequentially, driven by execution excellence of our go-to-market commercial strategy. With two full quarters behind us following the rebalance and optimization of our field sales organization, in addition to a new CRM launch, we have increasing conviction that our approach to field headcount, investments, and the hardwiring of Salesforce CRM into daily sales activities and productivity visibility is delivering as intended. We ended Q3 with 329 total reps, well ahead of our year-end goal of 300 reps and split roughly evenly between 167 account managers and 162 product specialists. This represents a 25% increase in total reps compared to the end of Q1. With these additions, we now have the largest field presence in Tactile's history, and we have them placed in the right roles in the right geographic location to meet and drive demand. My confidence in our field organization goes beyond the number of heads, depth and breadth of provider relationships, and sales leadership, although these are all very important. We have strong CRM technology adoption and have embedded market data algorithms and three tech enhancements since July, all of which support a data-driven and efficient approach to sales activities. The CRM is not a documentation tool, but rather a daily sales guide to opportunity identification, next best action, incomplete order details, and tracking productivity performance. We have recruited and onboarded high-caliber reps, engaging them immediately in new sales hire training and giving them early exposure and experiences in all sales channels. Our tenured account managers are now experiencing the multiplier impact of a robust CRM in-territory support resources and focused channel strategies. Our go-to-market philosophy and staffing model of roughly 1 account manager to product specialist in similarly sized territories supports our Q4 productivity expectations and positions us well for next year. Shifting to a review of our Q3 lymphedema payer mix and respective year-over-year comparisons. This quarter, sales in our Medicare channel increased 130% year-over-year, while our commercial and VA channels declined 9%. While these appear to be dramatic swings, there are a few dynamics to note. As you know, a change in documentation interpretation by Medicare administrators in Q2 of 2024 created a pervasive headwind that lasted throughout the year. During that period, we focused on understanding the MAC position and redirected efforts to call points with a higher concentration of VA and commercial patients, which were unaffected by these documentation challenges. As a result, non-Medicare business growth was unusually strong in Q3 last year. Since then, we have adapted to the new Medicare documentation requirements by launching e-prescribing, adding headcount to the back office, deploying our go-to-market headcount strategy and reimagining our order management processes. While there will always be order management paperwork, we have effectively neutralized last year's coverage headwind and have several initiatives underway to support scale and operating leverage. Year-over-year, our Q3 2025 payer mix illustrates the impact of these dramatic policy shifts. We're recovering from a softer Medicare comparison, aided also by these newly implemented initiatives and our increased focus within vascular practices while simultaneously facing stronger prior year results in our commercial and VA channels. Importantly, our Q3 payer mix itself indicates a return to a more normalized mix environment, which we expect to sustain, supporting more balanced year-over-year comparisons moving forward. Our commercial go-to-market plan remains focused on deploying reps across each of our lymphedema call points, VA, Oncology, Vascular, and Lymphatic therapy practices. Further, the transition from the LCD to the NCD is an additional tailwind that should help drive continued improvement in Q4 and beyond. Elaine will speak to this in more detail shortly. Turning now to our Q3 airway clearance business line performance. What a fantastic quarter on top of a great year thus far. Sales of AffloVest increased 71% year-over-year and 3% sequentially. The key drivers of Q3's growth remain consistent with what we have shared previously. We have secured partnerships with the top 10 respiratory DMEs and prioritized placement agreements among a select handful of these DMEs, and we are executing well across these partnerships. We are seeing growing demand for AffloVest as broader awareness of bronchiectasis and its available treatment options continue to expand. And we have an excellent product with AffloVest and are continuing to take market share. While the claims data are lagging, we know we are very close to achieving a market-leading position as our commercial momentum accelerates. Looking ahead, we remain focused on strengthening relationships with each of our top DME partners and penetrating deeper within these accounts. With our highly focused and skilled airway clearance field team, we are deploying a proven strategy of a differentiated product, strong partnerships, and high-quality medical education and training for providers and DME staff. We are expecting this strategy to continue to drive AffloVest penetration to the 5 million diagnosed and undiagnosed bronchiectasis patients in the U.S. I would like to now share a few new progress updates on each of our three strategic priorities that are designed to unlock our TAM and enable scalable, profitable growth. Let me begin with an update on our foundational priority to improve access to care. As mentioned on previous calls, clinical evidence generation is a key element of improving access to care. And as the market leader, we are proud to be associated with robust evidence generation and peer-reviewed clinical evidence publications. Last week, we announced late-breaking 6-month data from our head and neck lymphedema RCT, which was presented at the American Congress of Rehabilitation Medicine 2025 Annual Fall Conference. This trial examined the effectiveness of Flexitouch Plus compared to usual care in treatment-naive head and neck cancer survivors with lymphedema, and this new long-term data follows an earlier presentation of 2-month data at the ASCO Annual Meeting in June. The study was designed to support treatment guidelines, patient care pathways, and reimbursement coverage for advanced pump therapy in this population. The results confirm what we had suspected, and we are very pleased to now have high-quality data demonstrating the sustained long-term effectiveness of Flexitouch Plus as an evidence-supported alternative to usual care at 6 months. Specific areas of Flexitouch Plus differentiation versus usual care demonstrated reduced internal swelling across the majority of anatomical sites with statistically significant improvement achieved in two sites in particular. Clinician-reported outcome measures of both internal and external soft tissue swelling also favored Flexitouch Plus over usual care. The 6-month manuscript is in the investigator review process right now and will be submitted in November. Additional manuscripts include a deeper analysis into usual care, defined in this study as therapist-guided lymphedema treatment and lifelong home-based self-care, which will be submitted in early 2026. In the meantime, we continue active discussions with commercial payers regarding their current experimental and investigational policy language for head and neck lymphedema, and we aim to influence those policies and reduce barriers for patients. A second update related to improving access to care is specific to a recently implemented pilot integrating AI-enabled technology into our order operations to improve speed, accuracy, and leverage throughout the order intake and medical record review processes for traditional non-eprescribed orders. The first phase of this pilot focused specifically on the medical record review process, which identifies if payer required medical necessity criteria is documented in the patient medical records. Early results from the pilot have been encouraging. Not only can the tool deliver efficiency in scanning the records themselves, but it is also able to quickly inform our sales team as to what's missing in the medical records. From there, our team can work more easily with our provider partners to obtain the necessary documentation. The next phase of the rollout will focus on the order intake process, and we look forward to sharing additional details on our next earnings call. Our second strategic priority is focused on expanding treatment options. In our lymphedema business line, sustained demand for Nimbl continues through the third quarter. Nimbl's full upper and lower extremity offerings launched just 9 months ago, and we remain pleased with the feedback we've received from both providers and patients. Nimbl's unit growth continues to outpace market growth. And in a short period of time, we have moved into a market leadership position in the basic pneumatic, non-pneumatic compression pump category. We look forward to serving more lymphedema patients with this therapy. On the advanced compression pump side, we are making good progress on our product innovation roadmap, and we'll have more details to share on our fourth quarter call. I have exciting product innovation news to share in the airway clearance business. In early Q4, we submitted a 510(k) to the FDA for our next-generation AffloVest product. The product is currently under FDA review. And while we are not yet able to provide more details regarding expected clearance, I'm pleased to share a brief preview on the product itself. The most notable enhancements with this new next-generation AffloVest include reduced weight, the addition of digital connectivity, and improved sizing adjustability to allow for a more customized patient fit. The current AffloVest is already proven to be patient-preferred versus other high-velocity chest wall oscillation products and is effective in managing the symptoms associated with bronchiectasis and other airway clearance conditions. We look forward to introducing this next-generation AffloVest, and I believe the enhanced features will support the patient experience while promoting adherence. Finally, our third strategic priority is aimed at enhancing the lifetime patient value. We are seeing increasing opportunities to enhance support for lymphedema patients across the full care continuum. This includes more efficient and personalized engagement before, during, and after the order and delivery process. One way we are approaching this is through expanded utilization and efficient operations of our patient services organization. This organization is composed of our Patient Education Consultants or PECs, who support the majority of patient product demos and training and our back-office patient support team who support patient advocacy, financial services, clinical and product support, and other patient-related services. These two teams interface directly and most frequently with our patients. Last quarter, we announced plans to launch a small care navigation pilot designed to proactively reach out to patients earlier and more consistently throughout the order process to better understand the moments that matter most for patients to receive more information and solidify their engagement in the process. This is important because often the order progression requires the patient to do something, such as follow up with their clinician post 4 weeks of conservative therapy or to be available for a product demo and initial treatment. We are taking a measured approach with care navigation pilots as we want to ensure efficient scalability, a positive patient experience, and improved yield impact. Our first pilot demonstrated proof of concept that patients appreciate more information about the order process and expectation setting. One outcome we identified is a clear need to meet patients where they are by modernizing our communication infrastructure. To do this effectively, we're investing in a comprehensive omnichannel platform that integrates text, email, chat, self-service, and phone support, ensuring seamless personalized engagement through the patient journey. Our future plans include technology infrastructure investment in this area. In the interim, we will continue to leverage current resources to pilot targeted care navigation initiatives at key engagement points in the order process. These pilots will help us define our future patient engagement strategies and optimize communication scripts to better support the patient experience. With continued expansion in scope, we expect care navigation to further reduce the need for sales rep involvement in the order process, help mitigate patient leakage, and enhance the overall patient support connectivity and experience. As you can see, we are executing well across a diverse set of strategic priorities, supported by key investments in our sales organization, order operations, clinical evidence generation, and new product development. As we've shared previously, these initiatives are designed to unlock our TAM and position the business for sustained profitable growth. We are already seeing the impact of these investments on our top line through our commercial go-to-market strategy, and now those benefits are beginning to flow through to the bottom line as well. In Q3, our profit margin was flat year-over-year despite these ongoing investments, and adjusted EBITDA grew 34%. As Elaine will discuss shortly, we are raising our full year adjusted EBITDA guidance to reflect the increasing operating leverage these investments are generating. We have made these investments with a clear goal of driving profitable growth, and we're pleased to see those returns materializing earlier than expected. Before turning the call over to Elaine, I want to share a brief update on our capital allocation strategy. As we have shared previously, we are increasingly benefiting from generating free cash flow, a trend we expect to continue. This provides us the luxury of continuing to evaluate various investment opportunities to drive growth and increase shareholder value while also initiating a second share repurchase program of up to $25 million of outstanding stock. We believe this strategic action and near-term use of cash aligns with our conviction in the trajectory of our business as well as our ability to execute our financial and operational initiatives. To be clear, our strong balance sheet affords us a multitude of options in terms of meaningful capital deployment, and we will continue to evaluate ways to leverage our market leadership and strong commercial and operational footprint to invest and drive incremental growth. With that, I will now have Elaine review our Q3 financial results in more detail and provide an update on our guidance for 2025.

Thanks, Sheri. Unless noted otherwise, all references to third quarter financial results are on a GAAP and year-over-year basis. Total revenue in the third quarter increased by $12.7 million or 17% to $85.8 million. By product line, sales and rentals of lymphedema products, which includes our Flexitouch, Entre, and Nimbl systems, increased $7.1 million or 11% to $72.4 million and sales of our airway clearance products, which includes our AffloVest systems, increased $5.6 million or 71% to $13.4 million. Continuing down the P&L. Gross margin was 76% of revenue compared to 75% in the third quarter of 2024. The increase in gross margin was attributable primarily to lower manufacturing and warranty costs, reflecting enhancements in product design and stronger collections reflected in our revenue. Third quarter operating expenses increased $6 million or 13% to $54 million. The change in GAAP operating expenses reflected a $3 million increase in sales and marketing expenses, a $0.2 million increase in research and development expenses, and a $3.3 million increase in reimbursement, general and administrative expenses, including and primarily driven by strategic investments. Operating income increased $4.2 million or 62% to $11 million. Interest income declined by $0.3 million or 31% to $0.7 million due to a lower cash position following the repayment of our term loan. Interest expense decreased $0.3 million or 63% to $0.2 million. Income tax expense increased $1.2 million or 55% year-over-year to $3.2 million. Net income increased $3.1 million or 59% to $8.2 million or $0.36 per diluted share compared to $5.2 million or $0.21 per diluted share. Adjusted EBITDA increased to $14.4 million compared to $10.7 million. With respect to our balance sheet, we had $66 million in cash and cash equivalents and no outstanding borrowings at quarter end. This compares to $94.4 million in cash and $26.3 million of outstanding borrowings as of December 31, 2024. As mentioned during our last call, subsequent to the end of the second quarter, we retired our $24 million term loan and refinanced our revolving credit facility to increase capacity from $25 million to $40 million. Excluding the impact of the debt repayment, our third quarter ending cash balance increased $9.2 million. Turning to a review of our 2025 outlook. For the full year 2025, we are raising our guidance and now expect total revenue in the range of $317 million to $321 million, representing growth of approximately 8% to 10% year-over-year. By product line, our updated total revenue guidance range assumes that growth for our lymphedema products will be 3% to 4% and growth for our airway clearance products will be 52% to 55%. This updated guidance is driven by several key factors. In addition to the continued strength of our airway clearance business and the commercial momentum in lymphedema that Sheri highlighted earlier, we are also benefiting from a favorable Medicare policy environment, an important tailwind for our business. As Sheri mentioned, this stems from the retirement of the LCD and the transition to the less restricted NCD, which expands access to advanced pump therapy. Nearly a year into this transition, we now have a clearer understanding of the NCD. Patients with complex lymphedema affecting areas such as the head, neck, chest, or trunk can now access advanced pumps like the Flexitouch directly without first undergoing a basic pump trial. This change eliminates a significant administrative hurdle and accelerates access to the appropriate therapy. We are actively engaging with providers to educate them on the NCD and reinforce that with proper documentation, patients with unique clinical conditions now have a direct pathway to coverage for advanced therapy. We expect to begin seeing positive impacts in Q4 with more meaningful momentum building into next year. For modeling purposes for the full year 2025, we now expect our GAAP gross margin to be approximately 75%, our GAAP operating expenses to increase approximately 11% year-over-year as we invest in our sales organization and advance our tech-related investments, net interest income of approximately $1.8 million, a tax rate of 28%, and a fully diluted weighted average share count of approximately 23 million shares. As a result of our stronger-than-expected revenue, we now expect to generate adjusted EBITDA of approximately $38 million to $39.5 million in 2025. Our adjusted EBITDA expectation assumes certain noncash items, including stock compensation expense of approximately $7.8 million, intangible amortization of approximately $1.3 million, and depreciation expense of approximately $5.3 million. Finally, we continue to expect the full-year tariff impact on our business to be approximately $1 million after the successful implementation of a range of tariff mitigation strategies as announced last quarter. Looking ahead, if no further changes occur, we anticipate an ongoing annual impact beyond 2025 of roughly half that amount.

Thank you, Elaine. Our financial performance and operational execution in the third quarter leave us incrementally confident in our ability to achieve and exceed our full year 2025 expectations. Both of our business lines are performing well with healthy call points. We are generating meaningful clinical evidence to support improved access to care for currently underrepresented patient groups. Our investments in people and various workflow processes are materializing and paying off as expected. And our commercial organization is robust, well organized, and poised to take advantage of the tailwinds in front of us over the near, medium, and longer term. We are confident in the trajectory of our business as reflected in our guidance update and new stock repurchase program. And our healthy balance sheet affords us a multitude of additional options in terms of meaningful capital deployment to drive growth and increase shareholder value. We look forward to closing out 2025 from a position of strength and continuing to execute in 2026 and beyond. With that, operator, we'll now open the call for questions.

And our first question comes from Adam Maeder with Piper Sandler.

This is Kyle Winborne on for Adam. Congrats on a good quarter. I guess, first, maybe like to double-click on the AffloVest performance. It was another really strong quarter, and would just love to hear more about what continues to drive the good performance there. You gave helpful color on the progress with the different DMEs. So maybe just be curious how did these different accounts perform in the quarter? Are you seeing growth across most of the accounts? And I know there's also this effort to continue increasing awareness. So just any additional insights you could give would be helpful as we try to just kind of understand the sustainability of the growth in this business here as we exit 2025 with another guidance raise.

Sure. Kyle, we are, as I said, really pleased with just a fantastic quarter of AffloVest performance. And as you can see, the revenue contribution now for AffloVest is about 16% versus prior year was 11%. I wish I could share something more colorful actually in terms of what's happening with that growth, but it is exactly what we've been saying all year. We really have three strategies that are working in our favor, and they're ones that we've been working on for a while, and they've really come to fruition this year. The first is we do have those deep relationships with the top 10 DMEs. And while we don't report out growth or call out any one of those, where we have those relationships, again, and we do across all 10, certain things are working very well. One, we have preferred product position in several of those top 10 DMEs. That is compensating their reps for this product. And so it's in their bag of respiratory products and one that they continue to sell and see appropriate placement. The other thing is we have got really good alignment on inventory and the cadence of when they want the product aligned with their financial team. So there's no surprises as to what those ordering patterns look like. And then we're able to continue our supply chain in a way that's super healthy and able to keep up with the demand. So from the DME partnership standpoint, that's all going very well. You are right that there is increased awareness of bronchiectasis, and we're both driving that with our medical education that we're providing not just to DMEs across their operations team and their reps, but also we're providing that medical education to clinicians themselves. And so that is going very well and just general market awareness is coming up. And then really last but not least, we just have an excellent product. We have a differentiated product, and we're taking share and are achieving this market-leading position. As it relates to growth, we're also comparing against what was a pretty low growth year from last year. So I don't think there's - not projecting into 2026, but we shouldn't be expecting that we're going to see this type of growth next year, but we are happy with where we're at. And of course, the growth in AffloVest contributed to our overall guidance that we're taking up for the end of the year, and we'll be able to share more on what we think our 2026 growth should be.

That's super helpful additional color there. Maybe just to follow up on the Vest business. Could you maybe give us any color, remind us where AffloVest sits in terms of market share? And maybe if you aren't able to kind of share specifics there, could you just give us an idea of how quickly this market is growing and maybe just kind of some of the broader market trends to understand how this - how it fits into - in the broader market?

Sure. I can share that Baxter has been the market leader for a long time, over 30 years. We believe we are very close to, if not already, surpassing them as the market leader. The overall market is growing at double digits, driven by an increase in therapies and greater awareness of the disease. The introduction of a pharmaceutical product has boosted awareness significantly, especially at recent conferences. Importantly, even without a drug, the Vest therapies remain complementary and as awareness increases, so does our opportunity to reach the 5 million underserved patients. We do not expect any negative changes in this market.

Sheri, Elaine, congrats on the nice quarter here. So I want to ask about guidance a little bit, and I appreciate you giving the color on the segments, Elaine. Just to be clear, it looks like certainly AffloVest is coming up for the fourth quarter. It looks as if lymphedema is coming down maybe into the low single digits. I want to first make sure I'm clear about that. But then as I think about kind of historical performance from 3Q to 4Q, particularly in lymphedema, it's typically stepped up more than kind of what you're assuming from 3Q to 4Q, at least for this year. And so I just want to understand, was there anything that was maybe pulled forward or onetime in nature in the third quarter, particularly in the lymphedema business? And then I do have a follow-up.

Yes. I would say nothing was pulled forward. To compare it to last year, when I joined, we faced a change in the interpretation of the LCD, which led to a significant slowdown in our lymphedema business due to increased documentation requirements. The number of sales representatives we had was much lower than we have today, and as a result, the business was incredibly slow throughout last year. This year is different; in fact, we are experiencing some positive trends starting with the NCD, although we haven't fully realized these benefits yet. We expect to see more of this in Q4 and into next year, which marks a shift from the previous headwinds we faced. Consequently, we have increased our guidance for lymphedema from 1% to 2% to 3% to 4% for the end of this year.

Yes. I think specifically regarding why year-over-year growth appears to be slowing in Q4, it's partly what Sheri mentioned about the comparison to last year. Last quarter, Q3, was particularly low for us as we were at the bottom of the impact. We began to see recovery in Q4 and expect more of it into 2026. That's part of the reason. You also mentioned sequential growth, which was somewhat different this year. We noted that we anticipated changes based on our hiring. We brought on nearly 30 additional reps in Q2, resulting in a significantly larger workforce entering Q3. This naturally led to higher growth from Q2 to Q3 than we typically experience, which also affected the growth from Q3 to Q4. While the sequentials differ, I would still say that looking at the second half of the year overall, our sequential year-over-year growth is on the high end. The cadence between Q3 and Q4 is somewhat different this year due to the hiring of sales reps.

Okay, that's very helpful. As I consider 2026, I'm curious about your views on the market growth rate for lymphedema. Currently, it seems like analysts expect you to return to high single-digit growth in lymphedema for the next year. I want to confirm whether you think this expectation is reasonable. Also, Sheri, I've previously asked you about the long-term targets established before you joined the company. Do you think those targets are still appropriate?

Sure. Thanks, Ryan. The market is growing at 10% in the lymphedema sector. At this time, there is nothing suggesting we should underperform the market. I won't comment on next year, but we certainly believe this is a 10% growth market. With our products, sales force, productivity, and the investments in our back office, we expect to be within this range as well. Our new guidance for the end of this year indicates growth between 8% and 10%, which is a nice recovery compared to the beginning of this year. This recovery is driven by increasing our sales team, implementing our CRM, refining our channel strategies, and enhancing back office support. All these elements were part of our strategy, and we are executing effectively. We have the momentum, so while I'm not providing guidance for 2026, I have no reason to believe we should underperform the market.

There are a lot of positive factors working in your favor, which is really encouraging. Can you share one or two key initiatives or reimbursement improvements that are driving growth? It seems like this quarter marked a significant change for both sides of the business. I'm curious if there’s anything specific you would highlight, or is the growth widespread across all initiatives?

I think our strategy is effectively reflected in our relationships in the durable medical equipment sector and the growing awareness of bronchiectasis, alongside the quality of our products. On the lymphedema front, we're seeing alignment with our strategy as well. In the first quarter, we restructured our approach by optimizing our number of account managers relative to product specialists, which we executed successfully. You witnessed some improvements in the second quarter, and that trend continues into the third quarter, with expectations for further progress in the fourth quarter. This all ties back to productivity, which we define as revenue generated per territory. We've established the appropriate staffing in the right locations and the correct focus areas, and we anticipate these positive developments to continue as we approach the latter part of the year and into 2026. A significant driver of growth in lymphedema will be this productivity. Additionally, we expect to see the effects of the National Coverage Determination (NCD) more prominently in the fourth quarter. Announced last November, we received training in February, and since then, there have been some adjustments in how it is interpreted. For the last four months, we've had a consistent understanding of the NCD, and we are positioning ourselves to ensure that eligible patients can access advanced pump therapy like Flexitouch directly, avoiding the preliminary four-week basic pump trial. We're also beginning to see the benefits of our initiatives. Our sales force is not only a documentation tool but also a practical aid for our sales representatives in planning their work. We are witnessing increased efficiencies in our back office operations as well, which is positively affecting our financial performance at both the top and bottom lines as we head into the fourth quarter and beyond.

Okay. That's great. And two quick follow-ups to that on two of the points that you had made. First, on the sales side or the sales rep side, I think you said 329 reps you're at now, you're above your goal that was for 300. So help us think about where do you go from here? Do you need more reps? Are you pretty good on sales force count? And how does that trend into next year? And then the other follow-up is just on the NCD side, if you could spend a minute talking about I think you mentioned that it was an easier pathway now for patients to get on Flexitouch. Is that a shortened cycle? Like any data that you can give us around what that pathway looks like now for those patients under the new NCD would be helpful.

We feel well positioned with our headcount strategy and execution. We plan to add new headcounts with a balance of one account manager for every product specialist, staffing according to the growth of our territories. We're on track with our strategy from Q1 and will adjust headcount as needed. Regarding the NCD, it provides a direct path for patients with specific characteristics to access advanced pump therapy, particularly related to the location of edema and various skin conditions. We have gained clearer guidelines from the MACs regarding documentation requirements, which are still necessary. However, this new path allows patients to bypass basic pump therapy. Although we will not be breaking out specific changes yet, we expect the NCD to be beneficial, enabling more patients to access the appropriate pump based on their conditions. This process is just beginning, and we anticipate the NCD will remain in place as Medicare patients work with their providers to identify the right therapy for them. I hope this addresses your question.

Congrats on a really strong quarter. So first, on the lymphedema revenue growth, could you just break down the main drivers here? And then what percentage of lymphedema revenue is now Nimbl versus Flexitouch? And has that mix stabilized from the second quarter to third quarter? Or when do you expect to reach a target mix?

Anderson, so I'll start with the mix first. We don't report out Nimbl versus Flexitouch. So what we have said in the past and will say is currently happening is that Nimbl is growing faster than the market. And so as a reminder, we are just less than nine months into a full product launch of Nimbl. So it continues to have great adoption from providers, great adoption from patients. It's doing incredibly well. It's a great addition. And with that introduction, we now have taken a market leadership position in the basic pump category. So we're feeling really good about where that is. The NCD allows us a path to see even greater unit growth from Flexitouch. But again, we won't be breaking that out, but we are really pleased with what the policy environment is as well as the success of Nimbl. And Flexitouch is a great product. I mean we're glad that patients can get direct access to it that need it, especially those that have head and neck lymphedema and chest lymphedema. These patients were definitely not served with a basic pump prior. And now I forgot what your second question was.

Yes, I believe your question was about the factors contributing to lymphedema. To address that, as Sheri mentioned earlier, we have significantly expanded our team, adding 66 representatives, which is a 25% increase since the end of Q1. This represents substantial growth, and as time progresses, these sales reps are gaining more experience, which enhances their productivity. Not only are they ramping up, but we now have a CRM tool that helps them manage their work more effectively and pinpoint where to focus their efforts, particularly with clinicians treating lymphedema patients. Additionally, we are seeing strong performance in airway clearance, which Sheri also highlighted.

Okay. Got it. That's helpful. And then what are you seeing in growth in bronchiectasis awareness and diagnosis in the third and fourth quarter following the approval of the first bronchiectasis drug in August?

Where are we seeing it? Did you say?

I guess, just how are you seeing this impact the overall bronchiectasis market as far as diagnoses and growth there?

Well, we certainly believe that it's creating an uplift. Market awareness, both for lymphedema and for bronchiectasis has been one of the bigger challenges when we think about addressing the total addressable market is simply that these patients are undiagnosed and untreated. So with the launch of a pharmaceutical product and those dollars going into awareness, we believe that, that's a lift. We also believe that it is a market share gain. So I'm not going to attribute it all to increased awareness. We know and we can see in our DMEs that we're seeing growth in those areas, and we believe that's coming directly from share growth as well.

Congratulations on both the quarter and the Flexitouch study. Regarding the study on head and neck cancer-related lymphedema, you mentioned that you have had some discussions with payers or have some upcoming discussions. What can we expect in terms of how quickly some of these policies might be reviewed? Do we need the manuscripts to be published or the scheduled review to take place first? Or could some of these entities potentially act more quickly?

Yes. Thanks, Ben. Regarding coverage, we're engaging with commercial payers and bringing awareness of their current policies for head and neck lymphedema because many of them have classified it as experimental and investigational. And we know that is a market access barrier for patients that could otherwise benefit from therapy. So these conversations have been ongoing. We have a dossier. We've been engaging with payers. And many of them have been open to understanding more what data is currently available as well as understanding and investigating more of their current policy. In general, been really receptive to our outreach, and we expect that they will be reevaluating their current coverage policies. That said, the timeline for policy changes are likely more in the 2026 time period. This is really consistent with what we have seen previously and what we've shared previously. I wish it could go faster. They're on a schedule for policy review, and some of them will do off-cycle review. I'm sure having the 6-month data and especially this being such a landmark study that's showing the benefit of Flexitouch, particularly in treatment-naive patients. These are patients that did not receive a basic pump nor have they ever received therapist-guided lymphatic therapy that we'll be able to have a really robust conversation. But I would anticipate that the bigger changes in policy are going to happen more in 2026 and unfortunately, probably throughout that year, not necessarily in the beginning.

Makes sense. Lastly, you've made strategic optimizations, rebalances, and some internal tech upgrades. How would you describe the stage of impact we can expect from these initiatives in terms of revenue growth and expense management?

I'm happy to see that we're already beginning to observe positive outcomes, which actually exceed our expectations. Let me explain this in more detail. Regarding the CRM tool, we anticipated it would boost productivity, and we've also increased our sales team by over 50 individuals between Q2 and Q3, representing a 25% rise since the start of the year. These newer sales representatives are utilizing the Salesforce tool, while our more experienced team members had to transition from their older, manual processes to the CRM. We expect to keep reaping the advantages of this change and will not cease investing in it. We plan to enhance the tool further, making it more beneficial for the reps by helping them identify the best opportunities and directions. Additionally, we aim to integrate more of our back office order processing into Salesforce, establishing it as the primary tool not only for CRM activities but also for order management. This is a significant part of our investment strategy for next year. We've already allocated funds this year, and the evolution will continue into the next year. When discussing progress, it's more like a continuous game rather than a short series where there's a clear winner or loser. We recognize that we need some of these investments to be effective by 2025, and we are committed to demonstrating a return on that investment. I've mentioned our care navigation initiative, which will see the launch of a more comprehensive omnichannel platform next year. The returns will likely materialize in late 2026 and into 2027. Our spending on Salesforce will significantly enhance operational efficiency, productivity, and leverage. We are transforming our business in terms of go-to-market strategies and streamlining the order process, which we know will yield positive returns. This will be a long-term effort, but we are dedicated to showing returns on our investments, especially as we prepare for discussions around our 2026 plan at the beginning of next year.

And ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.