Tactile Systems Technology, Inc.

Sherry, I've asked you this, you know, 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, whether you feel those are appropriate, I guess. Thank you.

Sure. Thanks, Ryan. Well, I can, you know, the market's growing at 10% in the length of the market. So there's nothing at this point that indicates to us that we should underperform the market. So I'm not going to comment on next year. But certainly, we believe that this is a market that's growing 10% and with our products and our sales force and our productivity and supporting our back office and the investments we've been making, we believe we should be able to be in this range as well. Our new guidance for the end of this year takes us up between 8 and 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're all building. We're executing. We've got the momentum. So again, not providing any guidance on 2026, but I don't have any reason to believe that we should be underperforming the market.

Very helpful. Thank you.

Thanks, Ryan. Our next question comes from Brandon Vasquez with William Blair.

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

I would say what we're – and Afloves, I already spoke to with the previous question from Kyle. I think that one just reflects, again, our strategy in action with our DME relationships, as well as growth of the market with awareness of bronchiectasis, as well as just great products. On the lymphedema side, a few things that we're seeing, again, it's 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 re-evaluated the number of account managers we needed versus the number of product specialists. We did that. We executed. You saw some of that lift happening in Q2. You're seeing it in Q3, and we're 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've got the right headcount in the right geography with the right scopes. And so we're going to continue to see that materialize and get optimized as a multiplier as we go into Q4 and as we go into 2026. So that's a big part of the lymphedema growth standpoint is on that productivity. We also are going to see, and we'll see it more in Q4, is really the impact of the NCD. The NCD was announced in November of last year. As a reminder, we didn't 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're set up well so that patients who meet the criteria for advanced pump therapy like PlexiTouch can get to that directly without having to go through the four-week basic pump trial. So that's also going in a favor. And then we're starting to see some of the impact of our initiative. So Salesforce certainly, again, not just 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're starting to see efficiencies in the back office. This is all also realized not just on the top line, but we're seeing some of that come through on the bottom line. So we feel really well positioned for continued financial performance on both the top and bottom line as we go into Q4 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 Salesforce 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. Thanks a lot for the questions.

Sure. So on the rep standpoint, I mean, we feel really well positioned on our headcount strategy and execution. We'll make new headcount additions with this balance of one-to-one. Again, one account manager to one product specialist. We'll staff based on how these territories grow. And so we feel in good shape. We're going to continue to round that out, and we'll get to the right head count based on that strategy that we set in Q1. As it relates to the NCD, so the NCD does allow 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 type of skin conditions. We understand and have better clarification from the MACs of what they're looking for from a documentation standpoint. The documentation requirements are still there. It's just that now there is a path for that patient to go directly to that therapy without having to go to a basic pump therapy. We aren't 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 that they need based on what their conditions are. And 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 working with their provider to determine what is the right therapy for them.

Hope that answers your question.

Our next question comes from Anderson Shock with B. Reilly Securities.

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 flexi-touch, and has that mix stabilized from the second quarter to the third quarter, or when do you expect to reach a target mix?

Hi, Anderson. So I'll start with the mix first. We don't 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 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'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 Nimble. 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, chest lymphedema, trunk lymphedema. These patients were definitely not served with a basic pump prior. And now I forgot what your second question was.

Yeah, I think you asked a question around just the driver's lymphedema. And so I think, you know, just again, to hit on what I think Sherry started talking about before was, you know, really expanded headcount. So if you look at We've added a significant number of reps You know, sixty six reps, you know, or twenty five percent more than the one there. So it's a big amount of growth in each quarter that goes by. They're getting more and more tenured. And so that leads into increased productivity. So we've got sales reps that are ramping as well. Now, the CRM tool that we've 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. I'm seeing a lot of these lymphedema patients there. And then again, lastly, that strong airway clearance performance that Sheri also talked about.

Okay, got it. Thank you. 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.

Okay, got it. Thank you for taking our questions. Sure.

And as a final reminder, if you would like to ask a question, please press star 1. We'll go next to Ben Heyer with Lake Street Capital Markets.

Good afternoon. Thanks for taking the questions, and congrats on both the quarter and the FlexiTouch study.

Thank you.

And regarding the study in the head and neck cancer, really lymphedema study, You mentioned that I think that you've 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? Do we need the manuscripts out? Do we need the scheduled review to come around? Or could some of these folks or some of these entities act a little bit faster?

Yeah, thanks, Ben. You know, 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 the 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 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 six-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 had 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. Thanks for the color there. And then lastly for me, you've done the strategic optimizations, the rebalances, the tech upgrades internally. How would you characterize what inning of the impact that we'll ultimately see from some of these maneuvers as they play on in terms of revenue growth and leverage on expenses?

Well, I'm pleased that we're already starting to see that come through, and I think that that's 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 productivity, but then we also added, you know, 50-plus sales heads between Q2 and Q3, so a 25% increase, actually. We've added since the beginning of the year in sales. 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'll continue to see the benefit of that, and we're not stopping our investment. We'll 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'll 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're making into next year. We've already spent dollars this year. It'll continue to evolve next year. So when you kind of talk about innings, not necessarily like the world series where, you know, wrap up in seven games and either your team won or didn't win, This is going to be an ongoing game. And our commitment has always been that we needed some of these dollars in 2025 to get us going. And then we committed to continuing to show a return on that investment. So I mentioned our care navigation. We're going to stand up more of that omni-channel platform from next year. That's going to have returns, but those returns will be in late 26 and into 27. Our investments in Salesforce, big stand up in investment dollars now. That's 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 that we'll have a return. So it'll be a multi-inning game, but we continue to commit to being able to show a return on that investment. And we'll be teeing a lot of that up when we talk about our 2026 plan when we're all back together at the beginning of next year.

Got it. Thanks for the commentary there, and congrats again.

Thank you. 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.