Tactile Systems Technology, Inc.

Welcome, ladies and gentlemen, to the second quarter 2026 earnings conference call for Tactile Medical. At this time, all participants have been placed in a listen-only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. I would now like to turn the call over to Sam Bensinger, Investor Relations at Guild Martin Group, for a few introductory comments. Please go ahead.

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

Thanks, Sam. Good afternoon, everyone, and welcome to our second quarter 2026 earnings call. Here with me is Elaine Birkemeyer, our Chief Financial Officer. We delivered another strong quarter of execution in Q2, highlighted by continued strength in our lymphedema business and meaningful profitability expansion. Total revenue was $85.7 million, up 9% year over year. with lymphedema contributing $73.6 million, up 12% year-over-year. Afloves contributed $12.1 million, a 7% decline year-over-year due to temporary inventory management dynamics among several of our large DME partners associated with the launch of our next generation Afloves system during the quarter. Importantly, on a trailing 12-month basis, AfloVest revenue remains up 32% year-over-year, underscoring the durability of the underlining growth trend, even as we work through this near-term dynamic, which I will touch on shortly. Our strong revenue performance was complemented by another quarter of meaningful profitability expansion. Growth margin improved 180 basis points year-over-year and adjusted 49% to $11.4 million, reflecting both operating leverage and disciplined execution across the business. We continue to be strategic and measured in our capital allocation, ending the second quarter with approximately $70 million in cash. Our cash balance sheet is strong, providing flexibility to invest in growth and return capital to shareholders over the short, medium, and long-term horizons. Based on our first half performance, we are updating our full year 2026 revenue guidance to a range of $360 to $366 million. Within that outlook, we are projecting continued strength in revenue expectations for the lymphedema business while anticipating a more conservative view of the ordering patterns in our airway clearance business as some of our DME partners work through inventory as they convert to the next generation AfloVest system.