Conference Transcript - TCMD 2026-06-02

Brandon Vasquez, Analyst — William Blair

Hello. Good morning, everybody. Thank you for joining us. My name is Brandon Vasquez. I am a research analyst here at William Blair covering tactile medical, covers medical devices and animal health. I'm required to inform you that a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com. And with that, I will, I'm excited to have the tactile medical here. We have the CEO, Sherry Dodd and Elaine Berkmeyer, CFO, who are going to run us through a presentation and then we'll We'll go to Burnham B. for a breakout after.

Sheri Louise Dodd, CEO

Thank you, Brandon. Looking forward to spending 30 minutes with you talking about tactile medical. Some of you may be familiar with our company. Those of you who aren't, I'm also going to make sure that I'm kind of covering the basics. It's an exciting time to be in med tech. I know it might not feel that way, but I think it's a very exciting time to be here, and I can talk about that specifically as I sit when I get an opportunity of talking about tactile medical. So as a starting place, the whole purpose of our company and what we're about is revealing and treating patients with underserved chronic conditions. And specifically, these are in the category of chronic swelling and lymphatic dysfunction, as well as chronic inflammatory lung disease. These are really large spaces, and we'll talk about that from a total TAM perspective. Leadership team is strong. I'm very proud to be part of what is a very experienced group of individuals that come not only from some large company experiences, but have chosen specifically and wanting to be a tactile medical to help with our overall kind of growth and profitability story, but also in a way of going after patients that are currently underserved. So very robust leadership team and a leadership team that is very invested and has participated in actually inking our current strategy. So let's talk about the total opportunity. We sit in a very large underpenetrated TAM. So 100 billion is part of that TAM. Of that, 2.5 million is a diagnosed population and 25 million is an undiagnosed population. These are patients that currently have the disease, not at risk of the disease, have the disease that are currently not yet diagnosed. So great opportunity if you're on our side obviously it's a great opportunity for patients to get to diagnosis and on to treatment. When you think about our ability to not only have a product portfolio but able to realize that in terms of a revenue standpoint, we are the largest company serving this population and have demonstrated scale as well as a market-leading position. Right now, we participate in number one market position on every category of business that we support, serving 95,000 patients last year and having $330 million in total revenue last year and growing. Profitability, a very attractive profile for us as we hear from all of you, but we also see it ourselves with 76% gross margin last year, $45 million adjusted EBITDA, and $43 million in operating cash flow. This operating cash flow of $43 million takes into account stock repurchase, and you can see on the cash balance in general that everything that we've been doing as far as using our cash has been both investing in the company as well as investing in products with our lymphotech acquisition, but also over the past couple years paying down debt, doing a stock buyback, and continuing to see cash grow. So a very attractive company portfolio and visual. We think about where we actually sit and what that opportunity is and why I'm excited about tactile and medtech in general is because we do sit and operate in a market where there is a large number of patients that are just not being served. And again, with 20 million on the lymphedema side, 4.4 million on the bronchiectasis side currently have the condition, not yet diagnosed. of those that have been diagnosed very small penetration into therapy isn't because the therapy doesn't exist has a lot to do with classic dynamics involved in market access where how are you making sure that there's clinician awareness patient awareness that the patient gets served as they're moving through their care journey all opportunities for us and assets that we have to help get those patients that are diagnosed into treatment when we break it down from the previous slide which showed a high overview this is breaking it down into the specific areas of our business and if you remember on the very beginning slide i talked about our bigger opportunity is in chronic swelling and lymphatic dysfunction that's a bigger category everything i'm going to show you now is kind of a sub within that lymphedema and i'll talk about that as a sub as bronchiectasis as a subcategory of chronic inflammatory lung disease this is important to share because our indications from our product actually have a much broader indication from population what is a limiting factor for us and why we discuss specifically say lymphedema and bronchiectasis is because that is where the payer coverage is so you have to follow where the money is and where the reimbursement is but our opportunity for continuing to develop evidence awareness and to get a payer for a broader indication or sorry a broader coverage given that we have the indication is an opportunity for for growth but right now lymphedema is sitting at the 5 billion bronchiectasis also at 5 billion in terms of what that addressable market is what gets us to that 10 billion big areas of opportunity and how you start to unlock this is in the patient education um and access being some of the bigger opportunities for how we unlock this um and the other good news for us bad news for patients is that this is a chronic progressive disease these are not patients that are going to be cured once you have the disease it is irreversible and the therapy options for patients are best suited for those that are going to relieve their symptoms on a day-to-day basis which is then being in the home so let's talk about lymphedema big opportunity here with the five billion in the current addressable market before you can understand the the bigger opportunity here I think it's important to go back and even understanding what is it that we're talking about what is lymphedema Lymphedema is a disease that is usually a secondary diagnosis. So it's a secondary condition to something else that has happened for the patient. There's very few patients that are actually born with lymphedema, although there are some in primary. But it is a secondary condition. Secondary to what? Secondary to cancer. And so if you have surgical intervention or radiation, there's different probabilities based on what type of cancer you have, but that you will have lymphedema. For example, 90% of patients with head and neck cancer, so it's about 10% of total cancers, but 90%, 9 out of 10 of those patients are going to have lymphedema. So it's a known complication associated with the treatment of that disease. And the complications for head and neck cancer patients are significant. Lack of range of motion, inability to swallow, inability to speak. There is no cure for head and neck lymphedema. Once you have it, you have it. What you're trying to do is manage the symptoms, restoring that patient back to functionality. We're very proud of our footprint that we have in head and neck cancer, not only being the only manufacturer that has a garment that covers the head and neck, only manufacturer that has IP in the specific area of the body, and having evidence to support that this therapy is highly effective for patients with this condition. But head and neck cancer patients aren't the only patients that are going to require pump therapy, breast cancer patients, pelvic cancer patients, etc., all are going to see the benefits of our therapy. The lymphedema isn't only secondary to cancer, also very secondary to patients that have chronic venous insufficiency, so CVI. CVI usually is the primary and then secondary after you have chronic venous insufficiency is you've damaged your lymphatic system and again irreversible and now you've got your vein sorted out and now you need to address what is kind of chronic swelling these are the most prevalent type of areas where we see our product being used but obesity and trauma and surgery and infection are also other areas where pump therapy can be highly effective here's an example of where what some of the swelling actually looks like once you see lymphedema once you understand what it is, you start to see it. You'll see it in grocery stores, you'll see it in people at church, you'll see people at the airports, and while you may have thought before that that looks like someone who, especially in legs, that may be obese or maybe it's hereditary, it is quite likely that they have lymphedema associated with some other condition. So about 10% of all patients that are diagnosed are actually going to receive a solution that is appalling it's appalling that you have that many people that actually have a condition that is being impact on their quality of life that when there is a treatment that's available that they aren't getting it and what happens when they don't get it is they're going to end up typically with cellulitis wounds fibrosis dysphagia that's part of the head and neck in limited range of motion that could be both in breast cancer as well as in head and neck cancer. So the fact that patients are unaware of what they're experiencing and you have clinicians that also have lack of understanding of lymphedema is a big part of what we have to do as the market leader in unlocking what is access to care. So it's the education piece. It's having the right field force. It's having the data that supports the benefit as well as having the payer coverage policies that allows access for these patients. The other aspect, just to take us through the patient journey standpoint, you see a lot of red here, is that it is a really complex care journey. And I don't say this as a, you know, that it's, this is what makes it not attractive. This actually is what makes our opportunity very attractive. And understanding and thinking about us not only as a product company, but as a disease company, allows us and forces us to take a look at the full care continuum for these patients. So let's start on the side of the undiagnosed. Limited disease awareness. You see here, 60% of patients see at least three physicians before diagnosis. I'm often asked, where are these patients? They're in primary care. Depending on how they're coming through, if they don't have a cancer diagnosis, they're in primary care. They go from primary care to some sort of a rule out. They may go to heart failure or cardiology, and they're trying to rule out heart failure or a DVT. Then they end up in vascular often. often, or they end up in a wound clinic, and then they are backing into a diagnosis of lymphedema. By the time then you get to kind of diagnosis, this is a payer policy, not just our policy, but the patients have to have tried a four-week conservative therapy. Conservative therapy is elevation, it's exercise, and it's wearing garments, stockings, pantyhose, sleeves. Many of these patients find it very difficult to use these garments but from a payer perspective it has to be documented that they tried and failed what you can buy over-the-counter is not medical grade as well and it is just squeezing it's holding basically but it's not an active type of therapy many patients fail this conservative therapy but what happens is they don't go back to their physician for follow-up they just think that it doesn't work and they're just going to live with the condition. 44% of patients have to wait four months between getting that first treatment following diagnosis. So even after you get the diagnosis, having to kind of wait for then what is going to be your therapy option is a really long time, and patients have dropped out. It's a leakage problem where I got diagnosed, but now I have to wait for everything to come through. Either I have to fail the conservative therapy trial, I have to do these things, and patients leak. So great opportunity for, again, engaging the patients through the care continuum for us. We see that as an opportunity. There's an order type of process. So this is payer-driven, but they want a lot of documentation to show that the patient meets the criteria. These are not inexpensive technologies, and they fall in the category of a DME. And we know that DME is often under scrutiny for whether it is appropriate for patients to get the therapy. So a lot of documentation is required. And so when we kind of talk about how we're advancing and helping patients and physicians with this, we spend a lot of time in trying to minimize the repetitiveness of documentation, getting it right the first time, and trying to make that process super easy so that physician can diagnose the patient, the patient can go from referral to an order, from an order to a shipment, and to get on therapy as fast as possible. There is a learning curve for the patients in terms of understanding when they should use the therapy, how to incorporate it in their daily life. And so we have been putting a priority on how do we make our therapies more user-friendly. And so the introduction of Nimble was a great example of where we took away a lot of the hosing. We made it portable with a battery so that the patient could use it in different places in their home or travel with it. And so we continue to look at ways of how do we actually take and think about that patient experience with the therapy and continue to make that as seamless as possible. So let's talk about the products. So as a differentiation for who we are as a company, we are the only manufacturer in this area that has a full suite of products that supports the patients from head to toe. There is no other manufacturer that has this. And this comes in a couple of categories. First is we have both a basic pump as well as an advanced pump. So when you see on the legacy systems, our legacy basic pump was called Entree Plus. We introduced Nimble last year, actually in November of 2024, and then full launch in February of 2025. It's smaller, lighter, portable, really became a very nice solution for patients that required a basic pump and put us in market leadership in the category of basic pump. In the advanced pump, so advanced pump are going to be the pump that has more sequencing of the way that the compression is given so that you can program it around a wound, for example. If a patient has a wound, you do not want to be squeezing it. Typically, patients who are in a basic pump don't have access to an advanced pump, only have a choice of having it squeeze a wound, and they typically have to stop therapy. So getting the patient in an advanced pump that can be programmed around a wound is a great benefit for patients and for care delivery. Our current product is FlexiTouch Plus. We have already shared that we will be submitting in what will be an upgrade to that product that we'll be launching next year. And the focus on that will be new features and product enhancements that are designed to meet the patient's needs. You'll see a very kind of similar value proposition in terms of making it more accessible to patients, making it a better fit and easier to use. So that is coming in 2027. outside of just this as I mentioned the only company that has head to toe we are also the only company that has the head and neck garments I spoke about that so being able to have bilateral bilateral arm and leg on limb chest trunk and head and neck serves the entire patient plus having two different type of pumps to support their their compression needs. We also have very strong evidence. So the evidence here, you'll see where it's not only the value of limb volume reduction, but ability to perform activity days of living, satisfaction with the product, as well as reduction in total lymphedema-related costs. The evidence is there. And very proud to share that only pneumatic compression therapies are included in the very first U.S. guidelines that were just announced in February and were published this summer. So the evidence that supports pneumatic compression therapies is in guidelines. The majority of that evidence is driven directly from tactile medical. I talked a little bit before about head and neck. I'm a little excited about this one because we have made the investments in clinical evidence. That study wrapped up in 2024. We spent 2025 putting together the data as well as getting the publications out, and you'll continue to see more of these. But what's super interesting about these data is the study was designed to show flexi-touch as first line for treatment-naive patients. So typically that patient has to go through the conservative therapy. This study showed patient went directly to flexi-touch, skipping conservative therapy, and showed what those outcomes look like. And in all cases, it was as good as the arm that went to manual compression therapy. In some cases, better than, and speed to therapy was faster for flexi-touch. There's a limited number of lymphatic therapists that are out there. Access to this population is really difficult for patients to get to. So having a product that can be used in the home, getting directly to the patient, is going to be valuable, and speed to therapy is certainly very important. So very proud of these results and eager to see the six-month manuscript coming out here So talked about product differentiation, talked about this aspect of the service that we provide in supporting, understanding what the documentation is, having the payer coverage across both Medicare and commercial for the suite of our products, but another aspect is how do you keep that patient engaged, talked about that as part of our strategy. So very proud that we launched the Kylie app, which is a patient engagement application. This is not only for patients on our therapy, it could be for any patients with lymphedema that wants to start monitoring what their symptoms are, be able to take pictures, and be able to share that data directly with their physicians. We have Bluetooth-enabled technology that was one of the benefits of Nimble. So now every session that a patient is doing with their therapy can actually be tracked through Bluetooth connectivity in their app so they could actually see the adherence of the patient on that therapy. So great opportunity for education and information sharing directly with the patient that's on Kylie, as well as just the tracking of overall activity and some and in symptoms lymphotech acquisition happened in February and we're only getting started the full continuum of care for these patients when we talked about that Tam was that huge buckets of patients that are sitting undiagnosed so there's a lot of ways we could have thought about well how are we going to get the patients diagnosed training and education something that we always do with clinicians making the patient more aware that they have symptoms and where to go but the big missing piece is actually having a diagnostic. And diagnostics, as we know in other markets, unlock a tremendous amount of opportunity in the TAM. So lymphotech acquisition adds not only a current diagnostic, but capabilities that will allow us to move into personalized delivery of therapy over time on our roadmap. Let me break this down in a couple of ways. First of all, the technology is an FDA cleared digital platform. It basically is taking a picture of what's going on under the skin for fluid volume and circumference measurements that's really important because right now lymphedema is a clinical diagnosis so it's what you see and what the patient is reporting you can't see all the fluid that's happening underneath the skin which is why a lot of patients actually have more advanced disease by the time they're diagnosed because you can't see it so the ability to actually see underneath before you see external is very important and it delivers this clinical grade 3d body model which then allows for not only the physician to actually see where the fluid is building up but the patient gets to see it as well. So that identification of you have a disease and this is what's happening even though you can't see it this is what's happening underneath very powerful for patients in activating their own engagement for treatment. Anything we can do to help identify patients earlier is going to be good good for us and good for the market. We believe that it will accelerate therapy access certainly it isn't going to say patients going to have lymphedema but the fact that tactile is bringing this this is in our bag we expect a lot of attachment with our therapy to happen with this and I think it again proves that we're in it for the long haul for the patient we think about from a workflow standpoint even measuring patients baseline in oncology centers which is where lymphotech currently has some business has been reported on our on our financials software as a service model no reimbursement that but they pay for it because it's valuable for them as clinicians to actually get a baseline and to measure patients over time. So that is something that we have and as much as we enjoy that model today we know that finding financial incentive for physicians to actually use a diagnostic is an important area of unlocking and so we're currently working through the process of category CPT3 codes so that there would be payment on the other side. What I share all the time and my background has been with payer and with reimbursement is be careful what you think you want the payment for whatever the diagnostic is it will be what it will be if it's four dollars or four hundred dollars it is what that payments going to be on the initial time so I don't hang my hat on it's just going to be about the payment what's most important is the value proposition of a diagnostic in the clinic four hundred dollar major value proposition pretty low four bucks you better have a high value proposition and I'm just making numbers up for the purpose of this discussion. What I will say is that the value proposition of workflow, where do we use the technology in the flow of the patient? What is the goal of that practice? They want to see more patients more efficiently. They want to get baseline data. They want to use it as part of a treatment plan. They want to take the inefficiency out of measurements of every patient so they can redeploy those resources to someone else. That's a big part what we're validating and testing right now so we'll pursue the reimbursement but in parallel we're pursuing the value proposition to the individual clinic to make sure that it works in overall workflow also very exciting is more of a long-term vision for this so now you have the sensing technology and so being able to embed that and think about that how do you use that as part of your overall therapy delivery will bring us from what is a prescribed technology and two, a personalized technology for patients with chronic swelling and lymphatic dysfunction. So we're very excited about that and also very excited that Lymphotech came with federal grants with the acquisition. So the R&D is currently being paid for by the federal government. That helps us with our overall kind of R&D allocation and again is very in line with our strategy of moving to help support patients from a broader disease standpoint. The slide I showed you about this before showed a lot of red what all the friction points were and this is what we're doing to remove that friction so undiagnosed before lack of a diagnosis lack of awareness now we're bringing an acquisition that allows earlier diagnosis as well as being able to monitor and see that patient through their care continuum clinical practice guidelines recently released in february will be published this summer again specifically call out pneumatic compression therapies as being within U.S. clinical guidelines. These are the very first U.S. clinical guidelines in lymphedema. We're glad to be there and we know we contribute substantially to that evidence. When we think about the overall kind of policy environment, big shift going from what was a local coverage decision that was also concomitant with a national coverage decision. Now we have only one policy. It has added a lot of clarity to the pathway for patients so now there is a path for a patient who has a disease has lymphedema who requires an advanced pump to go directly to an advanced pump after completing conservative care before they were forced into a basic pump which may not have even covered the area of body that was swelling and before they could get to an advanced pump now there's a first pass in order to get there and we're supporting that with our own our own processes and then of course data that help supports the this population that is not only underserved but in many commercial plans head and neck garments are considered experimental experimental and investigational which is the reason we did the study and we will be overturning those policies and converting them to what should be a typical policy under the ncd when we think about the order process and our go to market we've made sizable investments into our field organization to make sure that they have the tools and the resources in order for them to do their jobs. We're using AI technology. We have the app, care navigation pilots, all those things that are helping to support the patient as they go out. So very strong market leadership and a sales force that helps with a vernicated integrated model. We have scalable RCM. We've been able to prove that. That's not something to take for granted. It takes a long time to get that set up in a way that's super efficient, can use technology and get paid at the end of the day, we do that in spades and are very proud of that product innovation and strong IP mode. So overall, number one in the lymphedema space, when you think about bronchiectasis, another very important area for us, also a $5 billion opportunity, bronchiectasis, chronic inflammatory lung disease, you get damage to the airways, patients unable to breathe you get a cough you get mucus you got to move the mucus if you don't you're going to end up with infection and pneumonia you see 42% of patients with COPD end up having conditions like bronchiectasis and definitely an underserved market often left untreated cough assist very kind of basic technology are in place and then current standard of care is using CPT as well as kind of manual positioning and having somebody actually hitting your back to help release the cough very archaic and here we have a technology that truly has revolutionized the care for patients airway vest clearance has and I'm very proud in fact we announced today that we launched yesterday our new next-gen aflo vest product we always were the lightest product that was in the market what we have now is not an even lighter version size adjustability so a patient we reduce SKUs for our DME providers as well as being connected and that was a piece that we were missing so very proud to have this and launching this immediately already have orders coming in from our DME and very excited to be serving patients in a very different way with the innovation that we've been doing in Aflo, as well as our strategy and working with DMEs, we also sit as number one market share in this category and expect this to continue to be an area of growth and differentiation for us from a VEST product than our competitors. Big milestones have happened for our business as a whole. And so we're often asked of, you know, when are you going to start to see progression when does this business recover and i would say that over the past two years we've been in a position of showing that very recovery we are sitting in an area where we're generating the evidence where we have been optimizing our order management where we have refocused our sales organization where we have brought new technologies to the field and where we sit right now with an acquisition of lymphotech and as we think about our next gen products not only aflo today as well as what we're expecting next year we're on a roll and we're on a roll that is not going to go backwards it's going to continue to go forward and we have the policy environment that's very favorable to us right now and we are prepared if that policy environment changes to adapt and adjust as we've demonstrated over time a CAGR of 16 percent I know some of you have been with us in the lower periods and some of you with us are kind of joining on a little bit more of this upswing what we've committed to is that the market is growing at about 10 percent we are largely a big part of that market so we can and should be driving at least 10 percent growth and be in a position to drive the growth of the market even faster we did some slight adjustment on our guidance which you can see here showing both a nice uptick in our revenue as well as in our overall EBITDA. Strategic priorities, I discuss them on every earnings call. They're very basic. We have to increase access to care, removing all the barriers that are in the way, whether it's education, diagnostics, as well as the reimbursement. We have to have treatment options to help support the patients in this area and this idea of serving patients over time. These are our core three strategies and ones that we're really proud of and we will continue to invest. in this area and will continue to drive the growth that we expect and our patients expect and our shareholders expect. So with that, thank you very much. We'll see you upstairs.