• Total Revenue: $293 million for the full year, 6.8% growth year over year; $85.6 million in Q4, 10.2% growth year over year.
• Lymphedema Product Sales: $77.1 million in Q4, 11% growth year over year.
• Airway Clearance Product Sales: $8.5 million in Q4, 3.8% growth year over year.
• Gross Margin: 75.2% in Q4, up from 72.1% in the previous year.
• Operating Expenses: $51.9 million in Q4, 17.3% increase year over year.
• Operating Income: $12.5 million in Q4, 6.1% increase year over year.
• Net Income: $9.7 million in Q4, 18.3% increase year over year; $0.40 per diluted share.
• Adjusted EBITDA: $16.2 million in Q4, 18.9% of sales.
• Cash and Cash Equivalents: $94.4 million at year-end, increased by $12.2 million sequentially.
• 2025 Revenue Guidance: $316 million to $322 million, 8% to 10% growth year over year.
• 2025 Gross Margin Guidance: Approximately 74%.
• 2025 Adjusted EBITDA Guidance: $35 million to $37 million.

• Warning! GuruFocus has detected 3 Warning Sign with TCMD.

Release Date: February 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tactile Systems Technology Inc (NASDAQ:TCMD) reported a strong Q4 performance with total revenue of $85.6 million, marking a 10.2% year-over-year growth.
• The lymphedema business line saw a significant sales increase of 11% year over year, with a sequential growth of 18.1%.
• Gross margins improved by 310 basis points year over year, reflecting better manufacturing and warranty cost management.
• The company successfully launched Nimbl, a next-generation lymphedema PCD offering, which has been well-received by clinicians and patients.
• Cash and cash equivalents increased by $12.2 million sequentially, enhancing the company's financial position with a year-end cash balance of $94.4 million.

Negative Points

• The company faced challenges with changes in the Medicare policy environment, which created headwinds throughout the year.
• Operating expenses increased by 17.3% to $51.9 million, driven by strategic technology investments and increased sales and marketing expenses.
• The increased documentation requirements by MACs under the LCD policy created administrative burdens and potential patient leakage.
• Despite the positive revenue growth, the adjusted EBITDA guidance for 2025 is flat to down $2 million, indicating increased investment costs.
• The company is still navigating the ongoing legal matter related to qui tam, with uncertainty about government intervention.

Q & A Highlights

Q: How did Tactile Systems Technology Inc come up with the 8% to 10% sales growth guidance for 2025, and what factors contribute to this confidence? A: Sheri Dodd, Chief Executive Officer, explained that the guidance considers continued modernization efforts, including the recent CRM launch and the full system launch of Nimbl. The company anticipates benefits from the e-prescribing tool and a more streamlined policy landscape following changes from LCD to NCD. Although there is no new product launch for AffloVest in 2025, having full-year contracts with top DMEs is expected to drive growth.

Q: Can you provide more details on the e-prescribing tool's adoption and its impact on 2025? A: Sheri Dodd noted that the e-prescribing tool was piloted throughout 2024 and launched nationally in October. While specific adoption targets were not shared, the tool is expected to reduce documentation friction. The company is also exploring other AI tools to enhance efficiency, ensuring options for physicians who may not adopt the e-prescribing tool.

Q: Why is the adjusted EBITDA guidance for 2025 flat to down, and what investments are being prioritized? A: Sheri Dodd and Elaine Birkemeyer, Chief Financial Officer, highlighted that the company is making strategic investments in people, technology, and sales organization to support long-term growth. These investments include expanding specialist headcount and advancing tech-related initiatives, which are expected to drive sustainable top-line and profit growth.

Q: How should we view the head and neck opportunity in 2025 guidance, and what is the expected quarterly cadence for the year? A: Sheri Dodd stated that the head and neck opportunity is conservatively included in the guidance, with potential upside in the second half of 2025. The quarterly cadence is expected to follow historical patterns, with slower growth in the first half due to patient deductibles and ramping up in the second half as productivity increases with new tools like the CRM.

Q: What is Tactile Systems Technology Inc's approach to inorganic growth, and are there any strategic opportunities being considered? A: Sheri Dodd emphasized that any inorganic growth opportunities would be strategic and aligned with the company's focus on increasing access to care and supporting patients throughout their care pathway. The company is not looking to become a holding company but rather to make investments that complement its existing strategies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.