Tactile Systems Technology’s Mixed Earnings Call Outlook

Tactile Systems Technology ((TCMD)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Tactile Systems Technology presented a mixed outlook for the company. While there were positive developments in the airway clearance segment and operational improvements, challenges persisted in the lymphedema segment with decreased revenue, higher costs, and lower productivity due to sales vacancies and CRM implementation. The company’s strategic investments are expected to drive future growth, but current financial metrics show pressure on profitability.

Airway Clearance Revenue Increase

The airway clearance segment experienced a significant revenue increase, rising 22% year-over-year to $10.7 million. This growth highlights the quality of the product and the company’s strategic execution in this area.

Gross Margins Improvement

Gross margins saw an improvement of 290 basis points year-over-year. This positive change is attributed to lower manufacturing and warranty costs, indicating better cost management and operational efficiency.

Strong Cash Position

Tactile Systems Technology ended the quarter with a robust cash position of $83.6 million, providing a solid financial foundation for future investments and strategic initiatives.

Salesforce CRM Implementation

The company successfully launched a Salesforce CRM module on time, aiming to enhance sales productivity and operational efficiency. This implementation is part of the company’s broader strategy to improve sales processes.

AffloVest Market Growth

AffloVest sales increased by 22% year-over-year, supported by strategic partnerships and market penetration. This growth reflects the product’s strong market position and the company’s effective sales strategies.

Lymphedema Revenue Decline

The lymphedema segment faced challenges with a 3% decrease in product sales to $50.6 million. This decline was due to sales headcount vacancies and lower sales productivity resulting from the CRM transition.

Adjusted EBITDA Decrease

Adjusted EBITDA decreased by 125% year-over-year, driven by planned technology investments and other strategic initiatives. This decline underscores the financial impact of the company’s current investment strategy.

Sales Headcount Challenges

The company faced challenges with a decline in sales headcount due to strategic optimization, leading to a higher than expected vacancy rate and impacting sales productivity.

Revised Revenue Guidance

Tactile Systems Technology revised its full-year revenue guidance down to a range of $309 million to $315 million, due to the impacts of sales headcount vacancies and CRM implementation. This adjustment reflects the company’s cautious outlook amid current challenges.

Net Loss Increase

The net loss increased by 35% to $3 million, reflecting increased operating expenses and strategic investments. This increase highlights the financial pressures the company is currently facing.

Forward-Looking Guidance

During the first quarter of 2025 earnings call, Tactile Medical provided updated guidance reflecting anticipated revenue growth and strategic investments. Total revenue for Q1 grew 0.3% year-over-year to $61.3 million, with lymphedema revenue decreasing by 3% to $50.6 million and airway clearance revenue increasing by 22% to $10.7 million. Gross margins improved by 290 basis points, while adjusted EBITDA decreased by 125% due to planned investments in technology, including the launch of a new Salesforce CRM module. The company ended the quarter with a robust cash position of $83.6 million. As a result of sales vacancies and CRM implementation impacts, Tactile adjusted its full-year revenue guidance to a range of $309 million to $315 million, representing a growth rate of approximately 5% to 8%. Lymphedema product line growth is expected to be 4% to 5%, while airway clearance is projected to grow 20% to 23%. The strategic investments aim to enhance sales productivity and efficiency, with over 300 reps expected by year-end 2025, the highest in the company’s history.

In summary, Tactile Systems Technology’s earnings call revealed a mixed sentiment with both positive developments and ongoing challenges. The company is making strategic investments to drive future growth, particularly in the airway clearance segment, while addressing issues in the lymphedema segment. Despite current financial pressures, the company remains optimistic about its long-term growth prospects.