Tactile Systems Technology (NASDAQ:TCMD) reported double-digit revenue growth and improved profitability for the fourth quarter and full year 2025, driven by continued momentum in its lymphedema franchise and a sharp increase in airway clearance revenue. Management also outlined its 2026 outlook, which incorporates potential short-term disruption from a new Medicare prior authorization requirement for pneumatic compression devices, and discussed the company’s acquisition of LymphaTech.
Fourth quarter capped “pivotal” year with 21% revenue growth
Chief Executive Officer Sheri Dodd said 2025 was “a pivotal year” as the company invested in commercial and operational initiatives while delivering “strong, profitable revenue growth.” For the full year, total revenue was $329.5 million, up 12% year-over-year. Gross margin expanded 190 basis points to 75.9%, and adjusted EBITDA increased 21% to $44.8 million.
- Lymphedema revenue increased 16% to $89.5 million.
- Airway clearance revenue increased 66% to $14.1 million.
Dodd attributed lymphedema growth to execution of a go-to-market strategy combining additional sales capacity with technology-enabled workflow. She said the company met its year-end sales representative hiring goal and now operates with a one-to-one ratio of account managers to product specialists. Dodd also highlighted the impact of a CRM rollout launched in February 2025, noting that adoption and use of data improved throughout the year and supported “visibility, accountability, and sales effectiveness.”
Management also pointed to a favorable shift in the Medicare channel during the quarter. Dodd said the company began seeing patients who met “new NCD unique characteristics” criteria move directly to the Flexitouch Advanced pump after conservative therapy, without first undergoing a basic pump trial, which she described as “a big win for patients.”
Airway clearance growth aided by DME partnerships and rising disease awareness
In airway clearance, Dodd said sales of the AffloVest increased 66% year-over-year and described 2025 as “an incredible year” for the segment. She said demand has benefited from growing awareness of bronchiectasis and available treatment options, and she noted that the company believes it has achieved a market-leading position in the category, supported by “prioritized placement agreements” within the top 10 respiratory durable medical equipment (DME) providers.
On the call, management was asked about the impact of a recently launched bronchiectasis drug on the market. Dodd said pharmaceutical entrants have contributed to greater disease awareness and education in the pulmonology and respiratory community, which has supported demand. She also said there are no guidelines requiring a drug to be used ahead of airway clearance therapy, and described the two as complementary, with drugs reducing inflammation while therapy addresses mucus clearance.
Looking ahead, Dodd said airway clearance growth is expected to “normalize” in 2026 compared with the elevated level in 2025, while the company continues to focus on deeper penetration within key DME accounts, provider education, and an enhanced AffloVest product.
Margins improved as revenue grew; strong cash flow supported debt payoff and buybacks
Chief Financial Officer Elaine Birkemeyer said fourth quarter gross margin was 78.2%, up from 75.2% in the prior-year period, driven primarily by lower manufacturing costs and stronger collections. Operating expenses rose 20% to $62.2 million, reflecting increases in sales and marketing, R&D, and reimbursement, general and administrative expenses, which she said were “primarily driven by strategic investments.”
Operating income increased 50% to $18.8 million. Net income rose to $10.6 million, or $0.46 per diluted share, compared with $9.7 million, or $0.40 per diluted share, in the year-ago quarter. Adjusted EBITDA in the fourth quarter increased to $22.0 million from $16.2 million.
Dodd said the company generated close to $43 million in operating cash flow during 2025, repaid $26.3 million to retire its term loan, and repurchased $26.5 million of stock. The company ended 2025 with $83.4 million in cash and cash equivalents and no outstanding borrowings.
In response to a question on profitability, Birkemeyer said results exceeded expectations due to cost discipline and early benefits from investments, including AI tools. She added that 2026 guidance reflects the annualization of sales force investments and continued technology initiatives, with the company expecting “more modest” margin expansion near term and faster gross margin improvement longer term once investments are completed.
LymphaTech acquisition adds digital measurement and monitoring capabilities
Tactile announced the acquisition of LymphaTech, a privately held company focused on assessing and monitoring fluid in patients with chronic swelling. Dodd said the deal supports Tactile’s evolution from “a product-based company to a comprehensive integrated lymphedema solutions leader.” She said LymphaTech’s handheld technology uses proprietary algorithms and mobile scanning to generate clinical-grade 3D models and provide fluid volume and circumference measurements, which she said can reduce variability compared with manual measurements and streamline workflow.
Dodd also emphasized longitudinal monitoring capabilities and said the 3D output can improve patient engagement by helping patients visualize their condition. Management said it expects the technology to support earlier identification and therapy access, citing “20 million undiagnosed symptomatic patients in the United States.”
Asked about commercialization, Dodd said LymphaTech already has a commercial product used for measurement and surveillance, including with compression garment manufacturers for digitizing and ordering, and in certain clinical workflows. She said Tactile plans to evaluate how to integrate the technology into its commercial organization over time and noted that regulatory and reimbursement strategies are also under evaluation.
2026 guidance reflects market momentum and Medicare prior authorization risk
For 2026, management guided for total revenue of $357 million to $365 million, implying 8% to 11% year-over-year growth. Birkemeyer said the guidance assumes both business lines grow in a similar range, with airway clearance “modestly faster,” and that quarterly growth should be higher in the first quarter before moderating through the year.
The outlook includes an expected short-term impact from a new Medicare prior authorization requirement. Birkemeyer said CMS announced in January that suppliers will need prior authorization for basic and advanced pneumatic compression device codes billed under traditional Medicare fee-for-service starting April 13. She characterized the change as part of a broader CMS oversight process and not specific to Tactile or to pneumatic compression devices uniquely.
Birkemeyer said prior authorization will add administrative steps and could temporarily affect the broader lymphedema market as the industry adjusts, but she said the company does not expect it to change its ability to grow in line with the overall market during the transition. Dodd and Birkemeyer emphasized that the company already operates in prior authorization environments across Medicare Advantage and commercial plans and that 2025 investments in documentation workflows and payer engagement position it to navigate the change.
When asked what could drive results toward the low or high end of the revenue range, management pointed to uncertainty around Medicare’s review process and speed, noting that manual review and conservative implementation could weigh on growth, while underlying demand drivers remain intact.
For modeling, Birkemeyer guided to approximately 76% GAAP gross margin, GAAP operating expense growth of 8% to 10%, net interest income of about $3 million, a 28% tax rate, and a diluted share count of roughly 22 to 23 million. The company expects adjusted EBITDA of approximately $49 million to $51 million in 2026, and cited expected non-cash items including about $9 million of stock-based compensation, $3.6 million of intangible amortization, and $3.2 million of depreciation.
About Tactile Systems Technology (NASDAQ:TCMD)
Tactile Systems Technology, Inc, headquartered in Plymouth, Minnesota, is a medical device company specializing in the design, manufacture and marketing of home-use pneumatic compression therapy systems for the treatment of lymphedema and other chronic edema-related conditions. Using proprietary software and patented pump technologies, the company’s platforms are designed to improve patient outcomes through sequential pressure treatment that promotes fluid mobilization and enhanced lymphatic function.
At the core of Tactile Systems’ product portfolio is the Flexitouch® system, a programmable pneumatic pump and garment system approved for home use, and the Aria® device, which features an intuitive touchscreen interface and advanced garment design.
