Tactile Systems (TCMD) Q2 Revenue Up 8% | The Motley Fool

Tactile Systems Technology (TCMD 2.49%), a medical technology company focused on chronic disease therapy devices, posted its financial results for the second quarter of fiscal 2025 on August 4, 2025. The standout result from the release was stronger-than-expected revenue, which exceeded analyst estimates for Q2 2025 (GAAP), led by impressive gains in the airway clearance business. GAAP revenue was $78.9 million in Q2 2025, ahead of the $73.9 million GAAP consensus estimate, and diluted earnings per share (GAAP) reached $0.14 in Q2 2025, beating the $0.1075 GAAP expectation. However, GAAP net income and Adjusted EBITDA both declined year over year, reflecting increased operating expenses tied to strategic investments in sales and technology. The quarter marked positive momentum, as total revenue increased 7.8% year-over-year to $78.9 million and product adoption but underscored continued challenges in profitability as the business invests for future growth.

Source: Analyst estimates provided by FactSet. Management expectations based on management’s guidance, as provided in Q1 2025 earnings report.

Business Overview and Recent Focus Areas

Tactile Systems Technology develops and sells medical devices for patients with lymphedema, a condition causing swelling due to lymphatic system issues, and for those needing help with airway clearance. Its main products include Flexitouch and Entre Plus pneumatic compression systems for lymphedema, and the wearable AffloVest for airway clearance. The company’s mission centers around providing devices that improve daily living and clinical outcomes for people with chronic conditions.

In the last year, Tactile Systems Technology focused on expanding its product lineup, investing in technology, and strengthening its sales force. These changes are aimed at supporting long-term growth and keeping the business competitive. Key success factors now include timely commercial launches, adoption of new products by healthcare providers, and securing reimbursement from payers. Maintaining a high standard of regulatory compliance also remains a central priority.

Quarterly Highlights and Performance Drivers

This quarter’s results showed momentum in revenue growth, supported by robust airway clearance performance. Sales of the AffloVest, a portable, wearable airway clearance therapy for respiratory conditions, jumped 52% in Q2 2025 compared to Q2 2024. Revenue from the lymphedema product family, which includes Flexitouch and the recently launched basic Nimbl compression pump, returned to growth in Q2 2025 after a slight decline in the previous period. Lymphedema products accounted for 84% of total revenue in Q2 2025, while airway clearance products contributed 16% of GAAP revenue.

The return to lymphedema growth reflects investments in optimizing the company’s sales organization. Leadership increased field sales headcount and implemented new productivity tools in Q1 2025, including a customer relationship management (CRM) system and expanded digital order processing via its Parachute e-prescribing platform. Management cited improved field productivity as a key factor in channel mix improvements for lymphedema sales. This is notable given the prior quarter’s disruption from sales reorganization and technology onboarding.

GAAP gross margin rose to 75% in Q2 2025, up from 74% in Q2 2024. This improvement was credited to lower manufacturing and warranty-related costs. However, operating expenses climbed 13% to $54.7 million, driven by planned strategic investments. These costs outweighed topline gains, leading to a drop in net income (GAAP) and Adjusted EBITDA compared with Q2 2024. Capital allocation also reflected management’s strategy, as the business completed a $30.0 million share repurchase program, and subsequently paid down its term loan and increased its revolving credit facility.

There were no material one-time events or significant product recalls affecting results this quarter. On the clinical front, newly published data highlighted the benefits of Flexitouch Plus, an advanced lymphedema pump, for patients with head and neck cancer. Nimbl continued to see fast adoption after its broader commercial launch, and Over 25% of orders now come through digital prescribing as of Q1 2025.

Looking Forward: Financial Outlook and Watch Items

Management modestly raised the lower bound of its full-year 2025 revenue guidance, now expecting $310–315 million for the year (up from $309–315 million previously). The updated FY2025 outlook assumes slower growth from lymphedema products (now 4–5%, down from 8–10%) but higher expectations for airway clearance, now projected to rise 20–23% year-over-year in 2025. The company also raised its Adjusted EBITDA (non-GAAP) outlook to $33–35 million for FY2025, even though that remains below the prior year’s result.

The company highlighted that the remainder of 2025 should see greater productivity as hiring and technology investments take effect. The assumption is that the expanded field force, which the company aims to grow to over 300 by year end, will play a bigger role in driving sales as it becomes more experienced and efficient. Nevertheless, management flagged that profitability will likely remain pressured in the near term because of continued investment in sales and operational improvements.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.