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Date

Monday, November 3, 2025, at 5 p.m. ET

Call participants

  • Chief Executive Officer — Sheri Louise Dodd
  • Chief Financial Officer — Elaine M. Birkemeyer

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Takeaways

  • Total Revenue -- $85.8 million for fiscal Q3 2025 (period ended Sept. 30, 2025), reflecting 17% year-over-year growth, driven by both lymphedema and airway clearance business lines.
  • Lymphedema Revenue -- $72.4 million for fiscal Q3 2025, up 11% year over year and 10% sequentially, attributed to execution of a revised commercial strategy and field sales optimization.
  • Airway Clearance Revenue -- $13.4 million for fiscal Q3 2025, growing 71% year over year and 3% sequentially, reflecting accelerating demand and market share gains for AfloVest.
  • Gross Margin -- 76%, an increase of 80 basis points year over year, primarily from lower manufacturing and warranty costs along with improved revenue collections.
  • Adjusted EBITDA -- Adjusted EBITDA was $14.4 million for the quarter, representing 34% year-over-year growth.
  • Net Income -- $8.2 million ($0.36 per diluted share) for the quarter, up 59% from $5.2 million a year ago.
  • Field Sales Organization -- 329 sales representatives at quarter-end, a 25% increase since fiscal Q1 2025, with account managers and product specialists split nearly evenly.
  • Medicare Channel Growth -- Medicare sales in lymphedema up 130% year over year, reflecting recovery from the prior year’s policy headwinds.
  • Payer Mix Normalization -- Management indicated the quarter reflects a return to normalized payer mix, easing year-over-year volatility.
  • Nimble Adoption -- Management states Nimble unit growth “continues to outpace market growth,” positioning Tactile as a leader in the basic compression pump segment, less than nine months into a full product launch.
  • Clinical Evidence -- New six-month RCT data for Flexitouch Plus showed statistically significant improvements over usual care for head and neck lymphedema across two anatomical sites, with a peer-reviewed manuscript pending submission.
  • AI in Operations -- Pilot integration of AI technology into the order operations process has shown early success in improving speed and accuracy for medical record reviews.
  • FDA Submission -- The next-generation AfloVest featuring reduced weight, digital connectivity, and improved fit is under FDA review as of early fiscal Q4 2025.
  • Cash Position -- $66 million in cash and cash equivalents with no outstanding borrowings at quarter-end after retiring the $24 million term loan and expanding undrawn revolver capacity to $40 million.
  • Share Repurchase Program -- A new authorization for up to $25 million in common stock repurchases was announced, described by management as a “strategic action in near-term use of cash.”
  • 2025 Guidance Raised -- Full-year 2025 revenue guidance raised to $317 million-$321 million (8%-10% growth); adjusted EBITDA guidance increased to $38 million-$39.5 million for the full year.
  • Segment Outlook -- Management projects 2025 lymphedema revenue growth of 3%-4% and airway clearance revenue growth of 52%-55% for the full year.
  • NCD Policy Impact -- The transition from LCD to NCD has removed the basic pump trial requirement, allowing broader, direct access to advanced pump therapies like Flexitouch for Medicare patients.

Summary

Tactile Systems Technology (TCMD +40.65%) reported significant acceleration in both topline and bottom-line performance for the quarter, underpinned by robust airway clearance sales growth (71% year-over-year) and operational leverage from recent investments. Management highlighted a marked lift in Medicare-driven lymphedema revenue for the quarter. A normalization of payer mix set the stage for more stable future comparisons. Ongoing commercial and operational execution, combined with successful pilot initiatives in AI order review and omnichannel patient engagement, support the company’s improved outlook and strengthened balance sheet. Strategic capital deployment, including a new $25 million share repurchase program, was justified by continued free cash flow generation. The recent submission of the next-generation AfloVest to the FDA and superior clinical trial results for Flexitouch Plus add product innovation momentum, positioning TCMD for favorable reimbursement and further market penetration.

  • Management emphasized the direct effect of Medicare’s policy shift (NCD) on revenue accessibility, stating, “can now access advanced pumps like the Flexitouch directly without first undergoing a basic pump trial.”
  • Sheri Louise Dodd said AfloVest revenues now account for 16% of total revenue for the quarter, compared to 11% a year ago, and described current market positioning as “very close number one, if not already number one in taking over that miss as the market leader.”
  • Management indicated that while share gains and disease awareness contributed to airway clearance growth, “should not be expecting that we are going to see, you know, this type of growth next year.”
  • Elaine M. Birkemeyer noted, “Excluding the impact of the debt repayment, our ending cash balance for the quarter increased $9.2 million.”
  • Sheri Louise Dodd commented, “Our first pilot demonstrated proof of concept that patients appreciate more information about the order process and expectation setting.”
  • Commercial payer policy reviews for head and neck lymphedema coverage, prompted by new Flexitouch Plus RCT data, are not anticipated until 2026.

Industry glossary

  • LCD: Local Coverage Determination; a regional Medicare policy specifying coverage criteria for medical technologies.
  • NCD: National Coverage Determination; a nationwide Medicare policy expanding or defining coverage requirements for a specific therapy or device.
  • DME: Durable Medical Equipment; companies providing medical devices and equipment to patients, generally via reimbursement pathways.
  • RCT: Randomized Controlled Trial; a clinical study design regarded as the gold standard for evaluating treatment efficacy.
  • AfloVest: TCMD’s portable, high-frequency chest wall oscillation vest for airway clearance in pulmonary disorders.
  • Flexitouch Plus: TCMD’s advanced pneumatic compression system for treating lymphedema, including in complex anatomical areas.
  • Nimble: TCMD’s non-pneumatic and pneumatic compression pump system for lymphedema, targeting entry-level therapy needs.
  • Care Navigation: A suite of patient engagement services aimed at improving support and guidance through treatment and order processes.

Full Conference Call Transcript

Sheri Louise Dodd, Chief Executive Officer, and Elaine M. Birkemeyer, Chief Financial Officer. Before we begin, I would 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.

Sam Bentzinger: 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-Ks 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 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 will now turn the call over to Sheri Louise Dodd.

Sheri Louise Dodd: Thanks, Sam. Good afternoon, everyone, and welcome to our third quarter 2025 earnings call. Here with me is Elaine M. Birkemeyer, our Chief Financial Officer. We are looking forward to sharing our strong third quarter financial and business results with you today. As we will 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 Systems Technology, Inc., and we have been 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 a 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 one account manager to one product specialist in similar-sized territories supports our Q4 productivity expectations and positions us well for an end year. Shifting to a review of our 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 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 2024 created a pervasive headwind that lasted throughout the year. During that period, we focused on understanding the MAX position and redirected efforts to call points with 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 are 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 mixed 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 Aflovest increased 71% year over year and 3% sequentially. The key drivers of Q3's growth remain consistent with what we have shared.

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 AfloVest as broader awareness of bronchiectasis and its available treatment options continue to expand. And we have an excellent product with Aflovest 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 Aflodesk penetration to the five 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 six-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 two-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 six 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 six-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, defining the 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-e-prescribed 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 is 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 nimble continues through the third quarter. Nimble's full upper and lower extremity offerings launched just nine months ago, and we remain pleased with the feedback we have received from both providers and patients. Nimble'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 will have more details to share on our fourth-quarter call. I have exciting product innovation news to share in the airway clearance. In early Q4, we submitted a 510 to FDA for our next-generation AthloVest product. The product is currently under FDA review. And while we are not yet able to provide more details regarding expected clearance, I am pleased to share a brief preview of the product itself. The most notable enhancements with this new next-generation AfloVest include reduced weight, the addition of digital connectivity, and improved sizing adjustability to allow for a more customized patient fit.

The current AfloVest 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 AfloVest, 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 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 four 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 are 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 have 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 are 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 in 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 financial results in more detail and provide an update on our guidance for 2025.

Elaine M. Birkemeyer: Thanks, Sheri. Unless noted otherwise, all of our 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 Nimble systems, increased $7.1 million or 11% to $72.4 million, and sales of our airway clearance products, which includes our Alphabet system, 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 2024. The increase in gross margin was attributable primarily to lower manufacturing and warranty 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 $200,000 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 $300,000 or 31% to $700,000 due to a lower cash position following the repayment of our term loan. Interest expense decreased $300,000 or 63% to $200,000. Income tax expense increased $1.2 million, 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 12/31/2024. 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 52-55%. 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 restrictive 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, 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 therapies. 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. With that, I will turn the call back to Sheri for some closing remarks.

Sheri Louise Dodd: 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 terms. 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 will now open the call for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

And, again, that is 1 to ask a question.

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

Kyle Edward Winborne: Hi. This is Kyle Edward Winborne on for Adam. Congrats on a good quarter, and thanks for taking the questions. I guess, first, maybe I would like to double-click on the AstroVest performance. It was another really strong quarter. And I 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. Maybe just be curious, you know, how did these different accounts perform in the quarter? Are you seeing growth across most of the accounts? And I know there is also this effort to continue increasing awareness. So just any additional insights you could give would be helpful.

We try to just kind of understand the sustainability of the growth in this business here as we exit 2025 with another guidance raise?

Sheri Louise Dodd: Sure. Hi, Kyle. You know, we are, as I said, really pleased with just a fantastic quarter of AfloVest performance. And as you can see, revenue contribution now for Aflovest is about 16% versus prior year was 11%. I wish I could share something more colorful actually in terms of what is happening with that growth, but it is exactly what we have been saying all year. We really have three strategies that are working in our favor, and they are ones that we have been working on for a while, and they have really come to fruition this year. You know, the first is we do have those deep relationships with the top 10 DMEs.

And while we do not report out growth or call out any one of those, where we have those relationships again, and we do across all 10, you know, 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 is 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 products aligned with their financial team, there are no surprises as to what those ordering patterns look like.

Then we are able to continue our supply chain in a way that is super healthy and able to get and keep up with the demand. So from the DME partnership standpoint, that is all going very well. You are right that there is increased awareness of bronchiectasis, and we are both driving that with our medical education that we are providing not just to DMEs across their operations team and their reps, but also we are 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 are taking share. And we are achieving this market-leading position. As it relates to, you know, we are also comparing against what was a pretty low growth year from last year. So I do not think there is, you know, not projecting into 2026, but we should not be expecting that we are going to see, you know, this type of growth next year, but we are happy with where we are at. And, of course, the growth in Aflovest contributed to our overall guidance that we are taking up for the end of the year, and we will be able to share more on what we think our 2026 growth should be.

Kyle Edward Winborne: That is super helpful additional color there. Maybe just to follow-up on the best business, could you maybe give us any color, remind us where Afflovest sits in terms of market share? And maybe if you are not able to kind of share specifics there, 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 fits in the broader market.

Sheri Louise Dodd: Sure. So while I cannot, what I can share is the key players kind of in this space. Baxter has been number one for a really long time. I think they have been on the market for over thirty years. And as we have said, we feel like we are in a very close number one, if not already number one in taking over that miss as the market leader. In terms of overall growth of the market, very hard to share.

You know, it is growing clearly double digits, and that growth is really coming from I think you have got more therapies in this space, but I think more that is what is more relevant right now is the fact that there is just more awareness of the disease. There has been an introduction of a pharmaceutical product. That is helped bring overall awareness. They were very prolific within some of the most recent conferences. But the good news is that regardless of whether or not there is a drug in place, it is really complementary to the best therapies. So as awareness grows, so it grows.

The opportunity for us to penetrate the 5 million patients that are currently underserved. So we do not anticipate any change happening in this market. From a negative standpoint. Negative change.

Kyle Edward Winborne: That is all super helpful color. Thanks, Sheri.

Sheri Louise Dodd: Thank you. And moving on to Ryan Zimmerman with BTIG.

Ryan Benjamin Zimmerman: Hey, Sheri. Hey, Elaine. Congrats on a nice quarter here.

Sheri Louise Dodd: Thank you, Ryan.

Ryan Benjamin Zimmerman: 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, you know, certainly Aflovest 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 am clear about that. But then, you know, as I think about kind of historical performance, from 3Q to 4Q, particularly in lymphedema, it is typically stepped up more than kind of what you are assuming from March. At least for this year.

And so I just want to understand, you know, was there anything that was maybe pulled forward or one-time in nature in the quarter, particularly in the lymphedema business? And then I do have a follow-up.

Sheri Louise Dodd: Yeah. So I would say there is nothing that was pulled forward. I think from a comparison to last year, just to reset, I am remarking on this because it has been a year now, really, when I joined on kind of what was my first quarter. At that time, if you remember, there was the change in interpretation of the NCD LCD, sorry, we have talked about that a lot. But our entire lymphedema went into a major slowdown with that headwind. More documentation was required. We, if you think about the number of reps that we had, it was considerably less than we have today.

And so the business just incredibly slow last year, and it dragged on for the remaining of the year. We do not have anything happening this year. In fact, we have got the opposite where we have some tailwinds starting with the NCD. While we have not seen that completely materialize as much as it will happen in a little bit in Q4 as well as in next year. That is more of a tailwind where before it was very much of a headwind. So we did step up our overall guidance on lymphedema. We did have it out one to two percent, and we have raised that, three to four percent for the end of this year.

Elaine M. Birkemeyer: Yeah. So I think that is exactly on. Go ahead. Sorry. Why did year-over-year growth kind of look like it is slowing down for Q4? I think this is a little bit Sheri is talking about. Is that comparable to last year? Unfortunately, last quarter '3, which is really depressed with us. Kind of being at that bottom trough of the impact, we started to have that recovery in Q4 and then more so into 2026. So I think that is part of it. And then you mentioned, kind of sequential. So, yeah, sequential sequentials were a bit different this year, and I think we alluded to that.

We expect to see that based on the hiring that we are doing. So we hired close to 30, additional reps there in Q2. So we had just a much bigger workforce as we moved into Q3. So that sort of, created this kind of a naturally higher growth from Q2 to Q3 than we normally see, and that also moderating that Q3 to Q4 growth as well a bit there. So, so sequentials are a bit different, but I would say looking at half two altogether is still I would say, actually on the high end.

When you think about a, you know, a sequential year-over-year growth for us, I think the Q3, Q4 cadence is a little different this year just due to the sales rep hiring.

Ryan Benjamin Zimmerman: Oh, okay. Very helpful. That is color. And then, you know, as I think about '26 and I do not know you will comment on this, but what do you see as the market growth rate lymphedema?

Because, I mean, right now, I think the street is assuming that you guys can get back to that high single-digit kind of growth in lymphedema for next year, and, you know, I want to make sure that is not unreasonable in your mind or and I know, Sherry, I have asked you this, certainly when you joined, which is if you have any commentary on the long-term targets that were kind of set out before you joined and you know, what you whether you feel those are appropriate, I guess.

Sheri Louise Dodd: Sure. Thanks, Ryan. Well, I can, you know, market is growing at 10%. In the landscape of market. So there is nothing at this point that indicates to us that we should underperform the market. So I am not going to comment on next year, but, certainly, we believe that this is a market that is growing 10%, and with our products and our sales force and our productivity, and supporting our back office and the investments we have been making, we believe we should be able to be in this range as well. Our new guidance for the end of this year ticks us up between 8-10%.

And so that is a nice recovery than what we had at the beginning of this year. This recovery is fueled by, again, adding to our sales headcount, having our CRM, our channel strategies, as well as our back office support. All of these things were part of our strategy. They are all building. We are executing. We have got the momentum. So, again, not providing any guidance on 2026, I do not have any reason to believe that we should be underperforming the market.

Ryan Benjamin Zimmerman: Very helpful. Thank you.

Sheri Louise Dodd: Thanks, Ryan.

Operator: And our next question comes from Brandon Vazquez with William Blair.

Brandon Vazquez: Hey, thanks for taking the questions. Maybe first on a high level, you know, there have been a lot of tailwinds going on for you guys. It is really encouraging. Can you is there anything one or two top initiatives or reimbursement improvements that you would call out that is driving growth? It feels like this quarter was a bit of inflection, frankly, both sides of the business. So curious if there is anything you would call out, or is it just really broad-based across all the initiatives?

Sheri Louise Dodd: I would say what was and I already spoke to with the previous question from Kyle. I think that one just reflects again our strategy and action with our DME relationships as well as growth of the market with awareness of bronchiectasis as well as just great products. The lymphedema side, a few things that we are seeing, again, it is also very aligned to our strategy. So our go-to-market strategy our Q1, we did a rebalance. We did an optimization. We said we reevaluated the number of account managers we needed. The number of product specialists. We did that. We executed. You saw some of that lift happening in Q2.

You are seeing it in Q3, and we are going to continue to see that in Q4. That essentially boils down to productivity. We measure productivity as the revenue per territory. So now we have got the right headcount in the right geography with the right scope. And so we are going to continue to see that materialize and get optimized as a multiplier as we go into latter, Q4 and as we go into 2026. So that is a big part of the lymphedema growth standpoint is on that productivity. We also are going to see, and we will see it more in Q4, is really the impact of the NCD. The NCD was announced in November.

As a reminder, we did not get trained until February. Between February and early summer, there were some changes in their interpretation. So the NCD itself in terms of what is the interpretation has only really been on stable ground now for about four months. We now are doing our appropriate shift and making sure that we are set up well so that patients who meet the criteria for advanced pump therapy like Flexitouch can get to that directly without having to go through the four-week basic pump trial. So that is all also going in a favor. And then we are starting to see some of the impact of our initiatives.

So Salesforce certainly again, not just a documentation tool, but really like a job aid. It is the go-to for all of our sales reps in terms of how to plan their work. And we are starting to see efficiencies in the back office. This is all also realized not just on the top line, but we are seeing some of that come through on the bottom line. So feel really well positioned for continued financial performance on both the top and bottom line as we go into Q4 and beyond.

Brandon Vazquez: Okay. That is great. And two quick follow-ups to that onto the points that you had made. First, on the sales rep side. Think you said 329 reps you are at now. You are 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 Salesforce count? And how does that trend into next year? And then the other follow-up is 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. Thanks a lot for the questions.

Sheri Louise Dodd: Sure. So on the rep standpoint, I mean, we feel really well positioned on our headcount strategy and execution. We will make new headcount additions with this balance of one to one. Again, one tier one account manager to one product specialist. We will staff based on how these territories grow. And so we feel in good shape. Going to continue to round that out, and we will get to the right headcount based on that strategy that we set in Q1. It relates to the NCD, so the NCD does allow a path for patients with unique characteristics to go directly to an advanced pump.

And those unique characteristics have to do with where the edema is located as well as different types of skin conditions. We understand and have better clarification from the max of what they are looking for from a documentation standpoint. The documentation requirements are still there. It is just that now there is a path for that patient to go directly to that therapy without having to go to basic pump therapy. We are not yet going to be reporting nor do we report specifically on the breakout of what will have changed.

But we are anticipating that the NCD is a tailwind, will allow more patients to go directly to the right pump they need based on what their conditions are. Again, this is just getting started, but until there is a policy change, we anticipate the NCD to be in place, and this is the policy that our Medicare patients can progress to as they are and working with their provider determine what is the right therapy for them.

Brandon Vazquez: Hope that answers your question.

Sheri Louise Dodd: Our next question comes from Anderson Schock with B. Riley Securities.

Anderson Schock: Hi. Thank you for taking the questions, and 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 nimble versus Flexitouch? And has that mix stabilized from the second quarter to third quarter? Or when do you expect to reach a target mix?

Sheri Louise Dodd: Hi, Anderson. So I will start with the mix first. We do not report out nimble versus Flexitouch. So what we have said in the past and will say is currently happening is that nimble is growing faster than the market. And so as a reminder, we are just what, less than nine months into a full product launch of Nimble, so it continues to have great adoption from providers. Great adoption from patients. It is doing incredibly well. It was a great addition. And with that introduction, we now have taken a market leadership position in the basic pump category. So we are feeling really good about where that is.

The NCD allows us a path to see even greater unit growth from Flexitouch. But, again, we will not be breaking that out, but we are really pleased with what the policy environment is as well as the success of nimble. Flexitouch is a great product. I mean, we are glad that patients can get direct access to it. That need it, especially those that have head and neck lymphedema, chest lymphedema, trunk lymphedema. These patients were definitely not served with the basic pump prior. And now I forgot what your second question was. I am confused. I think you asked the question around just the driver's lymphedema.

And so I think, yeah, just again, to hit on what I think Sherry started talking about before was, you know, really, expanded headcount. So if you look at you have, you know, we have added, you know, significant number of reps, you know, 66 reps, you know, or 25% more than the NAQ one there. So I said it is a big amount of growth. And each quarter that goes by, they are getting more and more tenured. And so that leads into increased productivity.

So we have got sales reps that are ramping as well as now the CRM tool that we have never had before that not only helps them organize their work, but really identify where they should be best spending their time and which clinicians that are seeing a lot of these ones that even patients there. And then again, lastly, that strong airway clearance, you know, performance that Sherry also talked about.

Anderson Schock: Okay. Got it. Thank you. That is 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?

Sheri Louise Dodd: Where are we seeing it? Did you say?

Anderson Schock: I guess just how are you seeing this impact the overall bronchiatic market as far as diagnosis and growth there?

Sheri Louise Dodd: Well, we certainly believe that it is 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 is a lift. We also believe that it is a market share gain. So I am not going to attribute it all to increased awareness. We know and we can see in our DMEs that, you know, we are seeing growth in those areas, and we believe that is coming directly from our from share growth as well.

Anderson Schock: Okay. Got it. Thank you for taking our questions.

Operator: Sure. And as a final reminder, if you would like to ask a question, please press 1. We will go next to Ben Hayer with Lake Street Capital Markets.

Ben Hayer: Good afternoon. Thanks for taking the questions, and congrats on both the quarter and the Flexitouch study.

Sheri Louise Dodd: Thank you.

Ben Hayer: And regarding the study in the head and neck cancer, really, lymphedema, you know, you mentioned that, I think that you had some payer you have had some payer discussions or you have some payer discussions coming up. What should we kind of expect in terms of how quickly some of these policies could get reviewed? Or do we need the manuscripts out? Do we need, you know, the scheduled review to come around, or could some of these folks or some of these entities act a little bit faster?

Sheri Louise Dodd: Yeah, thanks, Ben. You know, regarding coverage, we are engaging with commercial payers 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, have a dossier. We have 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 have shared previously. I wish it could go faster. They are on a schedule for policy review, and some of them will do off-cycle review. I am sure having the six-month data and especially this being such a landmark study that is showing the benefit of Flexitouch particularly in treatment-naive patients. These are patients that did not receive a basic pump nor had they ever received therapist-guided lymphatic therapy. That we will 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.

Ben Hayer: Makes sense. So thanks for the color there. And then lastly for me, just you know, you have done the strategic optimization. The rebalances, kind of some tech upgrades internally. You know, what how would you characterize kind of what inning of the impact that we will ultimately see from some of these maneuvers as they as they kind of play out in terms of, you know, revenue growth and leverage on expenses.

Sheri Louise Dodd: Sure. Well, I am pleased that we are already starting to see that come through, and I think that is even better than we had expected. But let me break these down kind of individually. When I think about the CRM tool itself, right? So that got put into place. We knew that would help with product, but then we also added. So 25% increase, actually. We have added since the beginning of the year in sales. You know, 50 plus sales heads between Q2 and Q3.

And these sales reps are starting to use the tool, the Salesforce tool, versus our more tenured reps had to actually make a conversion between their older, you know, handmade tools into the CRM. So we will continue to see the benefit of that, and we are not stopping our investment. We will continue to refine that tool, make it better for the reps, help them really understand what is the best opportunity, where do they need to go, and then we will be looking at incorporating more of our back office, our order process pieces into Salesforce as well.

So it becomes basically the tool on record, not just for the CRM activities that sales reps are doing, but for the order. This is a big part of the investment that we are making into next year. We have already spent dollars this year. It will continue to evolve next year. So when you kind of talk about innings, not necessarily like the World Series where, you know, a wrap-up in seven games in the other your team won or did not win.

This is going to be an ongoing game, and our commitment has always been that we needed some of these dollars $20.25 to get us going, and then we committed to continuing to show return on that investment. I mentioned our care navigation. We are going to stand up more of that omnichannel platform from the next year. That is going to have returns, but those returns will be in late twenty-six and into '20. Our investments in Salesforce, big stand-up in investment dollars now. Going to return in order operations efficiency, yield, leverage. All of those things will happen.

So we are transforming our business both in terms of what that go-to-market strategy looks like, but also that order process streamlining and making it easier. And we know will have a return. So it will be a multi-inning game, but we continue to commit to being able to show return on that investment. And we will be teeing a lot of that up when we talk about our 2026 plan when we are all back together at the beginning of next year.

Ben Hayer: Got it. Thanks for the commentary there. And congrats again.

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