Tactile Systems Q3 2026 profit falls 13%; revenue rises
Lymphedema revenue partly offset lower airway-clearance sales, while third-quarter net income declined year over year.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Tactile Systems Technology (TCMD) reported third-quarter 2026 revenue of $91.858 million, up 7% year over year, while net income fell 13% to $7.160 million. Lymphedema revenue increased 13% to $81.838 million; airway-clearance revenue declined 25% to $10.020 million. The company attributed the airway decline primarily to a DME inventory transition tied to the AffloVest Gen 6 launch in the second quarter.
For the first nine months, revenue increased 12% to $252.823 million and net income rose 56% to $13.182 million. Net cash provided by operating activities was $14.893 million, compared with $25.515 million in 2025. Cash was $75.110 million and there were no outstanding borrowings under the revolving credit facility as of September 30, 2026.
Tactile acquired LymphaTech for total purchase consideration of $12.093 million: $7.230 million cash at closing and $4.863 million estimated contingent consideration. A milestone achieved in October means approximately $2.2 million will be payable on or before November 12, 2026. Under its three-year ElastiMed agreement, Tactile has exclusive MyoSleeve distribution rights through VA and DoD channels and limited non-exclusive U.S. commercial rights, subject to contractual conditions; it paid $3.0 million upfront, with availability expected in the fourth quarter of 2026.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointThird-quarter revenue increased 7% to $91.858 million.
- Moderate pointNine-month net income increased 56% to $13.182 million.
- Minor pointNine-month revenue increased 12% to $252.823 million.
Negative
- Moderate pointThird-quarter net income decreased 13% to $7.160 million.
- Moderate pointNet cash from operating activities was $14.893 million versus $25.515 million for nine months.
Filing Explained
At September 30, 2026, Tactile reported 22,495,939 shares outstanding and $38.7 million in purchase orders for goods expected within a year.
A Form 10-Q is an unaudited quarterly report with interim financial statements and updates to risks and liquidity. Here, Tactile reports completed share repurchases through
The program still allows further repurchases, but does not require a specific number; it expires on
Separately, period-end shares issued and outstanding were 22,495,939 at
The company also reports purchase orders totaling
Key Figures
Key Terms
sales-type leases financial
contingent consideration financial
Adjusted Term SOFR financial
Level 3 measurement financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
What were TCMD's third-quarter 2026 revenue and net income?
How did TCMD perform in the first nine months of 2026?
How many shares did TCMD repurchase in 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended:
or
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address and zip code of principal executive offices) | |
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| ( | |
| (Registrant’s telephone number, including area code) | |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☐ | | ☑ | | Non-accelerated filer | ◻ | |
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Smaller reporting company | | Emerging growth company | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Table of Contents
TABLE OF CONTENTS
| | |||
| PART I—FINANCIAL INFORMATION | | ||
| | | | |
Item 1. | | Financial Statements | | 4 |
Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 26 |
Item 3. | | Quantitative and Qualitative Disclosures About Market Risk | | 36 |
Item 4. | | Controls and Procedures | | 36 |
| | | | |
| PART II—OTHER INFORMATION | | | |
| | | | |
Item 1. | | Legal Proceedings | | 36 |
Item 1A. | | Risk Factors | | 37 |
Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds | | 37 |
Item 3. | | Defaults Upon Senior Securities | | 37 |
Item 4. | | Mine Safety Disclosures | | 38 |
Item 5. | | Other Information | | 38 |
Item 6. | | Exhibits | | 40 |
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Forward-Looking Information
All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition, are forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our results, levels of activity, performance or achievements to be materially different from the information expressed or implied by the forward-looking statements in this Quarterly Report on Form 10-Q. These risks, uncertainties and other factors include, but are not limited to:
| ● | our ability to obtain reimbursement from third-party payers for our products; |
| ● | adverse economic conditions, including inflation, rising interest rates or recession; |
| ● | the adequacy of our liquidity to pursue our business objectives; |
| ● | price increases for supplies and components; |
| ● | wage and component price inflation; |
| ● | loss of a key supplier or other supply chain disruptions; |
| ● | entry of new competitors and/or competitive products; |
| ● | compliance with and changes in federal, state and local government laws and regulations; |
| ● | technological obsolescence of, or quality issues with, our products; |
| ● | our ability to expand our business through strategic acquisitions; |
| ● | our ability to integrate acquisitions and related businesses; |
| ● | the effects of current and future U.S. and foreign trade policy and tariff actions; and |
| ● | the inability to carry out research, development and commercialization plans. |
You should read the matters described in “Risk Factors” and the other cautionary statements made in our Annual Report on Form 10-K for the year ended December 31, 2025, and in subsequent Quarterly Reports on Form 10-Q. We cannot assure you that the forward-looking statements in this report will prove to be accurate and therefore you are encouraged not to place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. You are urged to carefully review and consider the various disclosures made by us in this report and in other filings with the Securities and Exchange Commission (the “SEC”) that advise of the risks and factors that may affect our business. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
| | | | | | |
Tactile Systems Technology, Inc. | ||||||
Condensed Consolidated Balance Sheets | ||||||
(Unaudited) | ||||||
| | September 30, | | December 31, | ||
(In thousands, except share and per share data) | | 2026 | | 2025 | ||
Assets | | | | | | |
Current assets | | | | | | |
Cash | | $ | | | $ | |
Accounts receivable, net | |
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| |
Net investment in leases | |
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Inventories | |
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Income taxes receivable | |
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| — |
Prepaid expenses and other current assets | |
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Total current assets | |
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Non-current assets | | | | | | |
Property and equipment, net | |
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Right of use operating lease assets | |
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Intangible assets, net | |
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Goodwill | | | | | | |
Deferred income taxes | |
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Other non-current assets | |
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Total non-current assets | |
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Total assets | | $ | | | $ | |
Liabilities and Stockholders' Equity | | | | | | |
Current liabilities | | | | | | |
Accounts payable | | $ | | | $ | |
Accrued payroll and related taxes | |
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| |
Accrued expenses | |
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| |
Income taxes payable | |
| — | |
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Operating lease liabilities | |
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Other current liabilities | |
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Total current liabilities | |
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Non-current liabilities | | | | | | |
Accrued warranty reserve, non-current | |
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Income taxes payable, non-current | |
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Operating lease liabilities, non-current | | | | |
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Other non-current liabilities | | | | | | — |
Total non-current liabilities | |
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Total liabilities | |
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Commitments and Contingencies (see Note 9) | | | | | | |
Stockholders’ equity: | | | | | | |
Preferred stock, $ | |
| — | |
| — |
Common stock, $ | |
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Additional paid-in capital | |
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Retained earnings | |
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Total stockholders’ equity | |
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Total liabilities and stockholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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| | | | | | | | | | | | |
Tactile Systems Technology, Inc. | ||||||||||||
Condensed Consolidated Statements of Operations | ||||||||||||
(Unaudited) | ||||||||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands, except share and per share data) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Revenue | | | | | | | | | | | | |
Sales revenue | | $ | | | $ | | | $ | | | $ | |
Rental revenue | |
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| |
Total revenue | |
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| |
Cost of revenue | | | | | | | | | | | | |
Cost of sales revenue | |
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Cost of rental revenue | |
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| |
Total cost of revenue | |
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| |
Gross profit | | | | | | | | | | | | |
Gross profit - sales revenue | |
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| |
Gross profit - rental revenue | |
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| |
Gross profit | |
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| | |
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| |
Operating expenses | | | | | | | | | | | | |
Sales and marketing | |
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Research and development | |
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Reimbursement, general and administrative | |
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Intangible asset amortization and contingent consideration | | | | | | | | | | | | |
Total operating expenses | |
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Income from operations | |
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| | |
| | |
| |
Interest income | | | | | | | | | | | | |
Interest expense | | | ( | | | ( | | | ( | | | ( |
Other income | |
| — | |
| — | |
| — | |
| |
Income before income taxes | |
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Income tax expense | |
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Net income | | $ | | | $ | | | $ | | | $ | |
Net income per common share | | | | | | | | | | | | |
Basic | | $ | | $ | | $ | | $ | ||||
Diluted | | $ | | $ | | $ | | $ | ||||
Weighted-average common shares used to compute net income per common share | | | | | | | | | | | | |
Basic | | | | | | | | | | | | |
Diluted | | | | | | | | | | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents
| | | | | | | | | | | | | | |
Tactile Systems Technology, Inc. | ||||||||||||||
Condensed Consolidated Statements of Stockholders’ Equity | ||||||||||||||
(Unaudited) | ||||||||||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| | | | | | | | | | |||||
| | | | | | | Additional | | | | | | ||
| | Common Stock | | Paid-In | | Retained | | | | |||||
(In thousands, except share data) |
| Shares |
| Par Value |
| Capital |
| Earnings |
| Total | ||||
Balances, June 30, 2026 | | | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation | | — | | | — | | | | | | — | | | |
Exercise of common stock options and vesting of performance and restricted stock units | | | | | — | | | | | | — | | | |
Share repurchases | | ( | | | ( | | | ( | | | — | | | ( |
Net income for the period | | — | | | — | | | — | | | | | | |
Balances, September 30, 2026 | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | |
Balances, December 31, 2025 | | | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation | | — | | | — | | | | | | — | | | |
Exercise of common stock options and vesting of performance and restricted stock units | | | | | | | | | | | — | | | |
Share repurchases | | ( | | | ( | | | ( | | | — | | | ( |
Common shares issued for employee stock purchase plan | | | | | — | | | | | | — | | | |
Net income for the period | | — | | | — | | | — | | | | | | |
Balances, September 30, 2026 | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | |
Balances, June 30, 2025 | | | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation | | — | | | — | | | | | | — | | | |
Exercise of common stock options and vesting of performance and restricted stock units | | | | | — | | | — | | | — | | | — |
Net income for the period | | — | | | — | | | — | | | | | | |
Balances, September 30, 2025 | | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | |
Balances, December 31, 2024 | | | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation | | — | | | — | | | | | | — | | | |
Exercise of common stock options and vesting of performance and restricted stock units | | | | | — | | | | | | — | | | |
Share repurchases | | ( | | | ( | | | ( | | | — | | | ( |
Common shares issued for employee stock purchase plan | | | | | — | | | | | | — | | | |
Net income for the period | | — | | | — | | | — | | | | | | |
Balances, September 30, 2025 | | | | $ | | | $ | | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Table of Contents
| | | | | | |
Tactile Systems Technology, Inc. | ||||||
Condensed Consolidated Statements of Cash Flows | ||||||
(Unaudited) | ||||||
| | | ||||
| | Nine Months Ended September 30, | ||||
(In thousands) | | 2026 | | 2025 | ||
Cash flows from operating activities | | | | | | |
Net income | | $ | | | $ | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | | | | | |
Deferred income taxes | | | | | | |
Stock-based compensation expense | | | | | | |
Loss on disposal of property and equipment and intangibles | | | | | | |
Change in fair value of contingent consideration | | | | | | — |
Changes in assets and liabilities, net of acquisition: | | | | | | |
Accounts receivable, net | | | ( | | | |
Net investment in leases | | | | | | ( |
Inventories | | | ( | | | |
Income taxes payable | | | ( | | | |
Prepaid expenses and other assets | | | ( | | | ( |
Right of use operating lease assets | | | ( | | | ( |
Accounts payable | | | | | | |
Accrued payroll and related taxes | | | ( | | | ( |
Accrued expenses and other liabilities | | | ( | | | |
Net cash provided by operating activities | | | | | | |
Cash flows from investing activities | | | | | | |
Payments related to acquisition, net of cash acquired | | | ( | | | — |
Purchases of property and equipment | | | ( | | | ( |
Intangible assets expenditures | | | ( | | | ( |
Payment for exclusive distribution agreement | | | ( | | | — |
Net cash used in investing activities | | | ( | | | ( |
Cash flows from financing activities | | | | | | |
Payments on note payable | | | — | | | ( |
Proceeds from exercise of common stock options | | | | | | |
Proceeds from the issuance of common stock from the employee stock purchase plan | | | | | | |
Payments for repurchases of common stock | | | ( | | | ( |
Net cash used in financing activities | | | ( | | | ( |
Net decrease in cash | | | ( | | | ( |
Cash – beginning of period | | | | | | |
Cash – end of period | | $ | | | $ | |
| | | | | | |
Supplemental cash flow disclosure | | | | | | |
Cash paid for interest | | $ | | | $ | |
Cash paid for taxes | | $ | | | $ | |
Accrued excise tax on stock repurchases | | $ | — | | $ | |
Capital expenditures incurred but not yet paid | | $ | | | $ | |
Fair value of contingent consideration included in purchase consideration | | $ | | | $ | — |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Tactile Systems Technology, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Nature of Business and Operations
Tactile Systems Technology, Inc. (“we,” “us,” “our,” and the “Company”) manufactures and distributes medical devices for the treatment of patients with underserved chronic diseases in the home. Our lymphedema product portfolio includes the Flexitouch® Plus, Entre™ Plus, and Nimbl compression device systems, which help manage the symptoms of lymphedema, a chronic and progressive medical condition. We market these products through a direct sales force that engages healthcare providers involved in the diagnosis and treatment of lymphedema, including vascular specialists, vein and wound care clinicians, oncology providers, and certified lymphedema therapists throughout the United States. Our lymphedema products are prescribed for home use and are sold or rented to patients through commercial and government channels, including the Department of Veterans Affairs.
On September 8, 2021, we acquired the assets of the AffloVest airway clearance business (“AffloVest Acquisition”). AffloVest is a portable, wearable vest that treats patients with chronic respiratory conditions. We sell this device through home medical equipment and durable medical equipment (“DME”) providers throughout the United States.
On February 17, 2026, we acquired all outstanding equity interests of LymphaTech, Inc. (“LymphaTech”). LymphaTech is a medical technology company pioneering a digital, three-dimensional (“3D”) full body measurement and monitoring platform designed specifically for lymphedema.
On April 24, 2026, we entered into a
We were originally incorporated in Minnesota under the name Tactile Systems Technology, Inc. on January 30, 1995. During 2006, we established a merger corporation and subsequently, on July 21, 2006, merged with and into this merger corporation, resulting in our reincorporation as a Delaware corporation. The resulting corporation assumed the name Tactile Systems Technology, Inc. In September 2013, we began doing business as “Tactile Medical.”
On August 2, 2016, we closed the initial public offering of our common stock, which resulted in the sale of
On February 27, 2023, we closed on a public offering of
Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and because patients desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those
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Table of Contents
payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial reporting and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included.
The results for the nine months ended September 30, 2026, are not necessarily indicative of results to be expected for the year ending December 31, 2026, or for any other interim period or for any future year. The condensed consolidated interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of Tactile Systems Technology, Inc. and its wholly owned subsidiaries, Swelling Solutions, Inc. and LymphaTech, Inc. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Note 3. Summary of Significant Accounting Policies
Significant Accounting Policies
There were no material changes in our significant accounting policies during the nine months ended September 30, 2026. See Note 3 – “Summary of Significant Accounting Policies” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, for information regarding our significant accounting policies.
Business Segments
The Company operates as
Accounting Pronouncements Not Yet Adopted
In September 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” which modernizes the accounting for internal-use software costs to better align with the way that software is currently developed. The update
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removes all references to the project stages of software development and establishes two criteria that must be met to begin capitalizing software costs. This update is effective for interim and annual periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” which requires entities to disclose additional information about specific expense categories in the notes to financial statements on an annual and interim basis. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on its consolidated financial statements and related disclosures.
Note 4. Inventories
Inventories consisted of the following:
| | | | | | |
(In thousands) | | At September 30, 2026 | | At December 31, 2025 | ||
Finished goods | | $ | | | $ | |
Component parts and work-in-process | |
| | |
| |
Total inventories | | $ | | | $ | |
Note 5. Goodwill and Intangible Assets
Goodwill
In the third quarter of fiscal 2021, we completed the AffloVest Acquisition. The purchase price of the AffloVest product line exceeded the net acquisition-date estimated fair value amounts of the identifiable assets acquired and the liabilities assumed by $
The changes in the carrying amount of goodwill were as follows:
| | | |
(In thousands) | | | |
Goodwill at December 31, 2025 | | $ | |
Addition for acquisition | | | |
Goodwill at September 30, 2026 | | $ | |
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Intangible Assets
Our patents and other intangible assets are summarized as follows:
| | | | | | | | | | | |
| | Weighted- | | At September 30, 2026 | |||||||
| | Average | | Gross | | | | | |||
| | Amortization | | Carrying | | Accumulated | | Net | |||
(In thousands) | | Period | | Amount | | Amortization | | Amount | |||
Definite-lived intangible assets: | | | | | | | | | | | |
Patents | | | $ | | | $ | | | $ | | |
Tradenames | | | | | | | | | | | |
Customer relationships | | | | | | | | | | | |
Developed technology | | | | | | | | | | | |
Other | | | | | | | — | | | | |
Subtotal | | | | | | | | | | | |
Unamortized intangible assets: | | | | | | | | | | | |
Tradenames | | | | | | | | — | | | |
Patents pending | | | | | | | | — | | | |
Total intangible assets | | | | $ | | | $ | | | $ | |
| | | | | | | | | | | |
| | Weighted- | | At December 31, 2025 | |||||||
| | Average | | Gross | | | | | |||
| | Amortization | | Carrying | | Accumulated | | Net | |||
(In thousands) | | Period | | Amount | | Amortization | | Amount | |||
Definite-lived intangible assets: | | | | | | | | | | | |
Patents | | | $ | | | $ | | | $ | | |
Customer relationships | | | | | | | | | | | |
Developed technology | | | | | | | | | | | |
Subtotal | | | | | | | | | | | |
Unamortized intangible assets: | | | | | | | | | | | |
Tradenames | | | | | | | | — | | | |
Patents pending | | | | | | | | — | | | |
Total intangible assets | | | | $ | | | $ | | | $ | |
Amortization expense was $
| | | |
(In thousands) | | | |
2026 (October 1 - December 31) | | $ | |
2027 | | | |
2028 | |
| |
2029 | |
| |
2030 | |
| |
Thereafter | |
| |
Total | | $ | |
During the third quarter of 2026, the Company performed its annual goodwill impairment assessment using a qualitative evaluation of relevant events and circumstances. Based on this assessment, the Company concluded that it was not more likely than not that the fair value of its reporting unit was less than its carrying
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amount. Therefore, a quantitative goodwill impairment test was not performed and no impairment was recognized.
Note 6. Accrued Expenses
Accrued expenses consisted of the following:
| | | | | | |
(In thousands) | | At September 30, 2026 | | At December 31, 2025 | ||
Legal and consulting | | | | | | |
Sales and use tax | | $ | | | $ | |
Travel | | | | | | |
In-transit inventory | | | | | | |
Warranty | | | | | | |
Clinical studies | | | | | | |
Other | |
| | |
| |
Total | | $ | | | $ | |
Note 7. Warranty Reserves
The activity in the warranty reserve during and as of the end of the reporting periods presented was as follows:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Beginning balance | | $ | | | $ | | | $ | | | $ | |
Warranty provision | |
| | |
| | |
| | |
| |
Processed warranty claims | |
| ( | |
| ( | |
| ( | |
| ( |
Ending balance | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Accrued warranty reserve, current | | $ | | | $ | | | $ | | | $ | |
Accrued warranty reserve, non-current | | | | | | | | | | | | |
Total accrued warranty reserve | | $ | | | $ | | | $ | | | $ | |
Note 8. Credit Agreement
On July 31, 2025, we entered into an Amended and Restated Credit Agreement with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent (the “2025 Credit Agreement”), which amended and restated the credit agreement that we had in place prior to that time (the “Prior Credit Agreement”). The 2025 Credit Agreement provides for a $
In connection with the entry into the 2025 Credit Agreement, on July 31, 2025, we paid off the full amount outstanding under the term loan that was outstanding under the Prior Credit Agreement, which was $
Amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus
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margin or (b) Adjusted Term SOFR for an interest period of one, three or six months, at our option, plus the applicable margin. The applicable margin is
The 2025 Credit Agreement provides for a commitment fee at a rate per annum ranging from
The 2025 Credit Agreement includes financial covenants consisting of a maximum consolidated total leverage ratio covenant and a minimum fixed charge coverage ratio covenant. In addition, the 2025 Credit Agreement includes customary negative covenants, including a restricted payment covenant that permits the Company to repurchase shares of its common stock and make certain other payments, as long as the Company is not in default under the 2025 Credit Agreement, has a consolidated total leverage ratio of no greater than
Our obligations under the 2025 Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary.
As of September 30, 2026, we had
Note 9. Commitments and Contingencies
Lease Obligations
We lease property and equipment under operating leases, typically with terms greater than
We classify our leases as buildings or computer and office equipment and do not separate lease and non-lease components of contracts for any of the aforementioned classifications. In accordance with applicable guidance, we do not record leases with terms that are less than one year on the Condensed Consolidated Balance Sheets.
None of our lease agreements contain material restrictive covenants or residual value guarantees.
Buildings
We lease certain office and warehouse space at various locations in the United States where we provide services. These leases are typically greater than one year with fixed, escalating rents over the noncancelable terms and, therefore, ROU operating lease assets and operating lease liabilities are recorded on the Condensed Consolidated Balance Sheets, with rent expense recognized on a straight-line basis over the term of the lease. The remaining lease terms vary from approximately one to
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We entered into a lease (“initial lease”) in October 2018, for approximately
Computer and Office Equipment
We also have operating lease agreements for certain computer and office equipment. The remaining lease terms as of September 30, 2026, ranged from less than
Lease Position, Undiscounted Cash Flow and Supplemental Information
The table below presents information related to our ROU operating lease assets and operating lease liabilities that we have recorded:
| | | | | | |
(In thousands) | | At September 30, 2026 | | At December 31, 2025 | ||
Right of use operating lease assets | | $ | | | $ | |
| | | | | | |
Operating lease liabilities: | | | | | | |
Current | | $ | | | $ | |
Non-current | |
| | |
| |
Total | | $ | | | $ | |
| | | | | | |
Operating leases: | | | | | | |
Weighted average remaining lease term | |
| | | ||
Weighted average discount rate | | | | | ||
| | | | | | |
| | Nine Months Ended September 30, | ||||
| | 2026 | | 2025 | ||
Supplemental cash flow information for our operating leases: | | | | | | |
Cash paid for operating lease liabilities | | $ | | | $ | |
Non-cash right of use assets obtained in exchange for new operating lease obligations | | $ | | | $ | — |
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The table below reconciles the undiscounted cash flows for the periods presented to the operating lease liabilities recorded on the Condensed Consolidated Balance Sheet for the periods presented:
| | | |
(In thousands) | | | |
2026 (October 1 - December 31) | | $ | |
2027 | | | |
2028 | |
| |
2029 | |
| |
2030 | |
| |
Thereafter | |
| |
Total minimum lease payments | | | |
Less: Amount of lease payments representing interest | | | ( |
Present value of future minimum lease payments | | | |
Less: Current obligations under operating lease liabilities | | | ( |
Non-current obligations under operating lease liabilities | | $ | |
Operating lease costs were $
Major Vendors
We had purchases from
Purchase Commitments
We issued purchase orders prior to September 30, 2026, totaling $
Retirement Plan
We maintain a 401(k) retirement plan for our employees in which eligible employees can contribute a percentage of their pre-tax compensation. We recorded an expense related to our discretionary contributions to the 401(k) plan of $
Legal Proceedings
From time to time, we are subject to various claims and legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
On October 25, 2024, the United States District Court, District of Massachusetts (Boston) unsealed two qui tam complaints against us, and we were served with these complaints on January 14, 2025, and January 21, 2025. The first complaint was captioned United States ex rel. Benjaman Scarborough vs. Tactile Systems Technology, Inc., Case No. 1:21-cv-10813-IT, and was filed under seal on May 17, 2021, on behalf of the United States by a former employee (the “Scarborough Action”). The complaint in the Scarborough Action alleged that we submitted false claims and made false statements in connection with the Medicare programs, in violation of the Federal False Claims Act. The second complaint was captioned United States ex rel. Jackie Gorham, an individual, and Dustin Gast, an individual, vs. Tactile Systems Technology, Inc. Case No. 1:21-cv-11809-IT, and was filed under seal on September 1, 2021, on behalf of the United States by two former employees (the “Gorham Action”). The complaint in the Gorham Action alleged that we submitted false claims
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and made false statements in connection with the Medicare, Medicare Advantage plans, Medicaid and other government payers, in violation of the Federal False Claims Act and submitted false claims resulting from kickbacks in violation of the Federal False Claims Act and the Federal Anti-Kickback Statute. Both complaints sought damages, statutory penalties, attorneys’ fees, and costs. On February 24, 2025, the parties (the relators under both complaints and the Company) filed a joint motion requesting that both matters (hereinafter the “Actions”) be stayed until November 25, 2025, to provide time for the government to review and assess sample claims for the purpose of assessing the allegations. On February 25, 2025, the court granted the motion and issued orders that stayed the Actions until November 25, 2025. By joint motions of the parties granted by the court, the stay was extended until March 25, 2026, and subsequently until June 23, 2026.
On April 14, 2026, the affected parties (government, relators, and the Company) reached an agreement in principle to settle the Actions for an aggregate payment by the Company of approximately $
On August 21, 2026, the court entered orders dismissing with prejudice all False Claims Act claims against the Company as to the United States and the relators, thereby concluding both Actions, except for reserving the right of the relators in the Gorham Action to pursue claims for reasonable expenses, attorneys’ fees and costs. A motion for fees in the amount of $
The Company paid the aggregate amount of approximately $
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Note 10. Stockholders' Equity
Share Repurchase Program
On October 16, 2025, our Board of Directors authorized a new program to repurchase up to $
We made repurchases under the applicable share repurchase program in the following periods, which include the market price of the shares, commissions and excise tax:
| | | | | | | | | | | | | |
| | | Three Months Ended | | | | Nine Months Ended | ||||||
| | | September 30, | | | | September 30, | ||||||
(In thousands, except share and per share data) | | | 2026 | | | 2025 | | | | 2026 | | | 2025 |
Number of shares repurchased | | | | | | — | | | | | | | |
Total shares repurchased cost | | $ | | | $ | — | | | $ | | | $ | |
Average total cost per repurchased share | | $ | | | $ | — | | | $ | | | $ | |
As of September 30, 2026, approximately $
Stock-Based Compensation
On May 7, 2025, our stockholders approved the Tactile Systems Technology, Inc. 2025 Equity Incentive Plan (the “2025 Plan”), which authorizes us to grant stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to employees, non-employee directors and certain consultants and advisors. The 2025 Plan provides for the issuance of up to
Following our stockholders’ approval of the 2025 Plan on May 7, 2025,
We recorded stock-based compensation expense of $
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Cost of revenue | | $ | | | $ | | | $ | | | $ | |
Sales and marketing expenses | | | | | | | | | | | | |
Research and development expenses | | | ( | | | | | | | | | |
Reimbursement, general and administrative expenses | | | | | | | | | | | | |
Total stock-based compensation expense | | $ | | | $ | | | $ | | | $ | |
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Stock Options
Stock options issued to participants other than non-employees typically vest over three or
Our stock option activity for the nine months ended September 30, 2026, was as follows:
| | | | | | | | | | |
| | | | Weighted- | | Weighted- | | | | |
| | | | Average | | Average | | Aggregate | ||
| | Options | | Exercise Price | | Remaining | | Intrinsic | ||
(In thousands except options and per share data) | | Outstanding | | Per Share (1) | | Contractual Life | | Value (2) | ||
Balance at December 31, 2025 | | | | $ | | | | $ | | |
Exercised | | ( | | | | | | | $ | |
Cancelled/Expired | | ( | | | | | | | | |
Balance at September 30, 2026 | | | | $ | | | | $ | — | |
| | | | | | | | | | |
Options exercisable at September 30, 2026 | | | | $ | | | | $ | — | |
| (1) | The exercise price of each option granted during the periods shown was equal to the market price of the underlying stock on the date of grant. |
| (2) | The aggregate intrinsic value of options exercised represents the difference between the exercise price of the option and the closing stock price of our common stock on the date of exercise. The aggregate intrinsic value of options outstanding represents the difference between the exercise price of the option and the closing stock price of our common stock on the last trading day of the period. |
Options exercisable of
Time-Based Restricted Stock Units
We have granted time-based restricted stock units to certain participants that are stock-settled with common shares. Time-based restricted stock units vest over one to
Our time-based restricted stock unit activity for the nine months ended September 30, 2026, was as follows:
| | | | | | | | |
| | | | Weighted- | | | | |
| | | | Average Grant | | Aggregate | ||
| | Units | | Date Fair Value | | Intrinsic | ||
(In thousands except unit and per unit data) | | Outstanding | | Per Unit | | Value (1) | ||
Balance at December 31, 2025 | | | | $ | | | $ | |
Granted | | | | | | | | |
Vested | | ( | | | | | | |
Cancelled | | ( | | | | | | |
Balance at September 30, 2026 | | | | $ | | | $ | |
| (1) | The aggregate intrinsic value of restricted stock units outstanding was based on our closing stock price on the last trading day of the period. |
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Performance-Based Restricted Stock Units
We have granted performance-based restricted stock units (“PSUs”) to certain participants. These PSUs have both performance-based and time-based vesting features. The PSUs granted in 2025 have
Stock-based compensation expense recognized for PSUs was $
Our PSU activity for the nine months ended September 30, 2026, was as follows:
| | | | | | | | |
| | | | Weighted- | | | | |
| | | | Average Grant | | Aggregate | ||
| | PSUs | | Date Fair Value | | Intrinsic | ||
(In thousands except unit and per unit data) | | Outstanding | | Per Unit | | Value (1) | ||
Balance at December 31, 2025 | | | | $ | | | $ | |
Granted | | | | | | | | |
Adjusted | | | | | | | | |
Vested | | ( | | | | | | |
Cancelled | | ( | | | | | | |
Balance at September 30, 2026 | | | | $ | | | $ | |
| (1) | The aggregate intrinsic value of PSUs outstanding was based on our closing stock price on the last trading day of the period. |
Employee Stock Purchase Plan
Our employee stock purchase plan (“ESPP”), which was approved by our Board of Directors on April 27, 2016, and by our stockholders on June 20, 2016, allows participating employees to purchase shares of our common stock at a discount through payroll deductions. The ESPP is available to all of our employees and employees of participating subsidiaries. Participating employees may purchase common stock, on a voluntary after-tax basis, at a price equal to
A total of
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with the ESPP of $
Note 11. Revenue
We derive our revenue from the sale and rental of our products to our customers in the United States. The following table presents our revenue, inclusive of sales and rental revenue, disaggregated by product line:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Revenue | | | | | | | | | | | | |
Lymphedema products | | $ | | | $ | | | $ | | | $ | |
Airway clearance products | | | | | | | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Percentage of total revenue | | | | | | | | | | | | |
Lymphedema products | |
| |
| |
| |
| ||||
Airway clearance products | | | | | | | | | ||||
Total | |
| |
| |
| |
| ||||
Our revenue by channel, inclusive of sales and rental revenue, for the three and nine months ended September 30, 2026 and 2025, is summarized in the following table:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Private insurers and other payers | | $ | | | $ | | | $ | | | $ | |
Veterans Administration | | | | | | | | | | | | |
Medicare | | | | | | | | | | | | |
Durable medical equipment distributors | | | | | | | | | | | | |
Total | | $ | | | $ | | | $ | | | $ | |
Our rental revenue is derived from rent-to-purchase arrangements that typically range from three to
The revenue and associated cost of revenue of sales-type leases are recognized on the lease commencement date and a net investment in leases is recorded on the Condensed Consolidated Balance Sheets. We bill the patients’ insurance payers monthly over the duration of the rental term. We record the net investment in leases and recognize revenue upon commencement of the lease in the amount of the expected consideration to be received through the monthly payments. Similar to our sales revenue, the transaction price is impacted by multiple factors, including the terms and conditions contracted by third-party payers. As the rental contract resides with the patients, we have elected the portfolio approach, at the payer level, to determine the expected consideration, which considers the impact of early terminations. While the contract is with the patient, in certain circumstances, the third-party payer elects an initial rental period with an option to extend. We assess the likelihood of extending the lease at the onset of the lease to determine if the option is reasonably certain to be exercised. As the lease is short-term in nature, we anticipate collection of substantially all of the net investment within the first year of the lease agreement. Completion of these payments represents the fair market value of the equipment, and as such, interest income is not applicable.
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Rental revenue for each of the three and nine months ended September 30, 2026 and 2025, was primarily from private insurers and Medicare. Sales-type lease revenue and the associated cost of revenue for the three and nine months ended September 30, 2026 and 2025, were:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Sales-type lease revenue | | $ | | | $ | | | $ | | | $ | |
Cost of sales-type lease revenue | |
| | |
| | |
| | |
| |
Gross profit | | $ | | | $ | | | $ | | | $ | |
Note 12. Income Taxes
We record our interim provision for income taxes by applying our estimated annual effective tax rate to our year-to-date pre-tax income and adjusting for discrete tax items recorded in the period. Deferred income taxes result from temporary differences between the reporting of amounts for financial statement purposes and income tax purposes. These differences relate primarily to different methods used for income tax reporting purposes, including for depreciation and amortization, warranty and vacation accruals, and deductions related to allowances for doubtful accounts receivable and inventory reserves. Our provision for income taxes included current federal and state income tax expense, as well as deferred federal and state income tax expense.
The effective tax rate for the three months ended September 30, 2026 was an expense of
The effective tax rate for the nine months ended September 30, 2026 was an expense of
We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority is more-likely-than-not to sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority.
The Company is subject to income tax examinations by federal and state taxing authorities. The Company is currently under examination by one state taxing authority.
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Note 13. Net Income Per Share
The following table sets forth the computation of our basic and diluted net income per share:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | September 30, | ||||||||
(In thousands, except share and per share data) | | 2026 | | 2025 | | 2026 | | 2025 | ||||
Net income | | $ | | | $ | | | $ | | | $ | |
Weighted-average shares outstanding | | | | | | | | | | | | |
Weighted-average shares used to compute diluted net income per share | | | | | | | | | | | | |
Net income per share - Basic | | $ | | $ | | $ | | $ | ||||
Net income per share - Diluted | | $ | | $ | | $ | | $ | ||||
The following common stock equivalents were excluded from the computation of diluted net income per share for the periods presented because including them would have been anti-dilutive:
| | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||
| | September 30, | | September 30, | ||||
| | 2026 | | 2025 | | 2026 | | 2025 |
Restricted stock units | | — | | | | — | | |
Common stock options | | | | | | | | |
Performance stock units | | — | | | | — | | |
Total | | | | | | | | |
Note 14. Fair Value Measurements
We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3).
The carrying amounts of financial instruments such as accounts receivable, other current assets, accounts payable, accrued expenses and other current liabilities approximate their related fair values due to the short-term maturities of these items. Non-financial assets, such as equipment and leasehold improvements, and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired.
As of September 30, 2026, we had an obligation to pay up to $
| | | |
(In thousands) | | | |
Contingent consideration at December 31, 2025 | | $ | |
Addition for acquisition | | | |
Fair value adjustments | | | |
Contingent consideration at September 30, 2026 | | $ | |
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| | | | | | | | | | | | | | |
The following table provides information regarding the fair value measurement of our contingent consideration liability as of September 30, 2026, according to the three-level fair value hierarchy:
| | | | | | | | | | | | |
| | At September 30, 2026 | ||||||||||
| | Quoted Prices | | | | | | | | | | |
| | in Active | | Significant | | | | | | | ||
| | Markets for | | Other | | Significant | | | ||||
| | Identical | | Observable | | Unobservable | | | ||||
| | Assets | | Inputs | | Inputs | | | ||||
(In thousands) | | (Level 1) | | (Level 2) | | (Level 3) | | Total | ||||
Recurring Fair Value Measurements: | | | | | | | | | | | | |
Contingent Consideration | | $ | — | |
| — | | $ | | | $ | |
Total | | $ | — | | $ | — | | $ | | | $ | |
See Note 15 – “Business Combination” for additional information regarding this contingent consideration liability.
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Note 15. Business Combination
On February 17, 2026, we acquired all outstanding equity interests of LymphaTech pursuant to the Stock Purchase Agreement, dated as of February 17, 2026. LymphaTech is a medical technology company pioneering a digital, 3D full body measurement and monitoring platform designed specifically for lymphedema. We acquired LymphaTech to further expand our position as a leader in treating lymphedema by extending our solutions across the care continuum, including earlier identification, assessment, and long‑term monitoring.
The total purchase consideration for LymphaTech payable at closing, on a cash-free, debt-free basis, was approximately $
The acquisition date fair value of contingent consideration was measured using the income approach, specifically the probability weighted expected return method for the milestone payments. We remeasure the fair value of the contingent liability on a quarterly basis. Estimates and assumptions used in the valuation include the probability of achieving these non-financial milestones, the expected timing of achieving these milestones, and a discount rate. These unobservable inputs represent a Level 3 measurement because they are supported by little or no market activity and reflect our own assumptions in measuring fair value. Any changes in the fair value subsequent to the acquisition date are recognized in our consolidated statements of operations.
During the three months ended September 30, 2026, the estimated fair value of the contingent consideration liability was increased by $
The acquisition of LymphaTech was funded by cash on hand. We recognized transaction costs of $
The following table reflects the allocation of the purchase consideration between the amount paid at closing and the estimated fair value of the contingent consideration at closing:
| | | |
(In thousands) | | Purchase Consideration | |
Cash consideration payments to LymphaTech stockholders | | $ | |
Estimated fair value of contingent consideration | | | |
Total purchase consideration | | $ | |
Fair Value of Assets Acquired and Liabilities Assumed
The acquisition of LymphaTech has been accounted for using the acquisition method of accounting in accordance with ASC 805, Business Combinations, with the Company treated as the accounting acquirer, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair value on the acquisition date. Acquisition accounting is dependent upon certain valuations and other studies that have yet to commence or progress to a stage where there is sufficient information for a definitive measurement. The process for estimating the fair values of identifiable intangible assets and certain tangible assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates.
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The purchase price allocation for the LymphaTech acquisition is considered final as of September 30, 2026. The table below presents the estimated fair values of assets acquired and liabilities assumed on the acquisition date based on valuations and management estimates. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of operations.
| | | |
| | | |
(In thousands) | | Estimated Fair Value | |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | | $ | |
Accounts receivable, net | | | |
Total current assets | | | |
Non-current assets | | | |
Intangible assets | | | |
Goodwill(1) | | | |
Total non-current assets | | | |
Total assets acquired | | $ | |
Liabilities and stockholders' equity | | | |
Current liabilities | | | |
Accrued expenses and other current liabilities | | $ | |
Unearned revenue | | | |
Total current liabilities | | | |
Non-current liabilities | | | |
Deferred income taxes | | | |
Total long term liabilities | | | |
Total liabilities assumed | | $ | |
| | | |
Net assets acquired | | $ | |
| (1) | Of the $ |
Identifiable Intangible Assets
The identifiable intangible assets acquired consist of a developed technology asset, customer relationship assets and a tradename asset. The estimated fair value of the developed technology asset was prepared using the relief from royalty method which calculates the value of the developed technology based on royalties that would be paid if licensed by a third party. The estimated fair value of customer relationship assets was prepared using the multi-period excess earnings method which calculates the present value of the incremental after-tax cash flows attributable solely to each customer relationship. The estimated fair value of the tradename asset was prepared using the relief from royalty method which calculates the value of the tradename based on royalties that would be paid if licensed by a third party. The estimated useful lives are based on forecasted periods of benefit for each intangible asset. Estimated useful lives and estimated fair values are presented in the table below.
| | | | | |
(In thousands) | | Estimated Fair Value | | Estimated Useful Life | |
Developed technology | | $ | | | |
Customer relationships | | | | | |
Tradename | | | | | |
Estimated fair value of intangible assets acquired | | $ | | | |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the accompanying notes thereto included elsewhere in this report.
Overview
We are a medical technology company that develops and commercializes medical devices in the United States. Our mission is to help people suffering from chronic diseases live better and care for themselves at home. We focus our efforts on advancing the standard of care in treating underserved chronic diseases in the home to improve patient outcomes and quality of life and help control rising healthcare expenditures. Our areas of therapeutic focus are (1) vascular disease, with a goal of advancing the standard of care in treating lymphedema and chronic venous insufficiency, (2) oncology, where lymphedema is a common consequence among cancer survivors and (3) providing airway clearance therapy for those suffering from chronic respiratory conditions. We possess a unique, scalable platform to deliver at-home healthcare solutions throughout the United States. This evolving home care delivery model is recognized by policymakers and insurance payers as a key for controlling rising healthcare costs. Our solutions deliver cost-effective, clinically proven, long-term treatment for people with these chronic diseases. We generally employ a direct-to-patient and -provider model within our lymphedema portfolio, through which we obtain patient referrals from clinicians, manage insurance claims on behalf of our patients and their clinicians, deliver our solutions directly to patients and train them on the proper use of our solutions. This model allows us to engage directly with patients and clinicians, which are both critical audiences to which we can provide clinical evidence and education. For our respiratory therapy product, we have a durable medical equipment (“DME”) distribution model, through which we sell the AffloVest product to accredited DME providers, whose representatives gather and submit documentation for payer reimbursement, train patients on use of the device, and provide ongoing patient support.
Our current lymphedema products are the Flexitouch Plus, Entre Plus and Nimbl pneumatic compression pump systems and our airway clearance product is a High-Frequency Chest Wall Oscillation (“HFCWO”) device called AffloVest. The Flexitouch system product line is considered an advanced pneumatic compression device. The first generation Flexitouch system received 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in July 2002, introducing a medical device technology to address the many limitations of self-administered home-based manual lymphatic drainage therapy. A second generation Flexitouch system received 510(k) clearance from the FDA in October 2006. In September 2016, we received 510(k) clearance from the FDA for the Flexitouch system in treating lymphedema of the head and neck. A third generation, Flexitouch Plus, received 510(k) clearance from the FDA in June 2017. In December 2020, we received 510(k) clearance from the FDA for two new indications for our Flexitouch Plus system: phlebolymphedema and lipedema. The Entre system product line and Nimbl product line are considered basic, or simple, pneumatic compression devices. These systems are sold or rented to patients who need a simple pump or who do not yet qualify for insurance reimbursement for an advanced compression device e.g., a Flexitouch Plus system. We introduced the Entre system in the United States in February 2013, this device was manufactured by Thermotek, Inc. and received FDA clearance in 2010. In 2015, we received FDA clearance for our own first generation Entre system and the second generation, Entre Plus, was released in March 2023. Nimbl, our next-generation pneumatic compression platform, received 510(k) clearance in June 2024 and was commercially launched for upper extremity lymphedema in October 2024 and was commercially launched for lower extremity lymphedema in February 2025. Nimbl has replaced most orders for our Entre system and we expect it will continue to do so. Sales and rentals of our lymphedema products represented 86% and 84% of our revenue in the nine months ended September 30, 2026 and 2025, respectively.
On April 24, 2026, we entered into a 3-year exclusive distribution agreement with ElastiMed, Inc. to bring MyoSleeve, a discreet, wearable non-pneumatic compression device for the lower leg, to Department of Veterans Affairs (“VA”) and Department of Defense (“DoD”) patients across the United States. Under the agreement, we received exclusive rights to distribute MyoSleeve through the VA and DoD channels and limited non-exclusive distribution rights in the broader U.S. commercial market, subject to certain contractual conditions. In exchange for these rights, we made a $3.0 million upfront payment in the second quarter of 2026, which was recorded as an intangible asset and will be amortized on a straight-line basis beginning on the date the product is commercially available for sale, which is expected to be in the fourth quarter of 2026.
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On February 17, 2026, we acquired all outstanding equity interests of LymphaTech, Inc. (“LymphaTech”). LymphaTech is a medical technology company pioneering a digital, three-dimensional (“3D”) full body measurement and monitoring platform designed specifically for lymphedema.
On September 8, 2021, we acquired the assets of the AffloVest airway clearance product line. AffloVest is a portable, wearable vest that provides airway clearance to treat patients with chronic respiratory conditions such as bronchiectasis or conditions resulting from neuromuscular disorders. In April 2026, we received FDA 510(k) clearance for our AffloVest Gen 6 and it was commercially launched in June 2026. For the nine months ended September 30, 2026 and 2025, sales of AffloVest represented 14% and 16% of our revenue, respectively.
To support the growth of our business, we continue to invest in our commercial infrastructure, consisting of a lymphedema and respiratory sales force, marketing team including clinical education programs, patient education team, reimbursement capabilities and clinical expertise. We market our lymphedema products using a direct-to-patient and -clinician model. The AffloVest device is sold through respiratory durable medical equipment providers throughout the United States that service patients and bill third-party payers for the product. We employ a small group of respiratory specialists, who educate DME representatives, provide product demonstrations for targeted clinicians and support technical questions related to the AffloVest. As of September 30, 2026, we employed 170 account managers and 166 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products. This compares to 167 account managers and 162 specialists for our lymphedema products and a team of 19 specialists supporting our airway clearance products as of September 30, 2025.
We invest in our reimbursement function to improve operational efficiencies and enhance individual payer expertise, while continuing our strategic focus of payer development. Our payer relations function focuses on payer policy development, education, contract negotiations, and data analysis. Our reimbursement operations function is responsible for verifying patient insurance benefits, individual patient case development, prior authorization submissions, case follow-up, and appeals when necessary.
We also have a clinical team, consisting of a scientific advisory board, in-house therapists and nurses, and a Chief Medical Officer, that serves as a resource to clinicians and patients and guides the development of clinical evidence in support of our products. Most clinical studies require observation and interaction with clinicians and patients to monitor results and progress.
We rely on third-party contract manufacturers for the sourcing of parts, the assembly of our controllers and the manufacturing of the garments used with our systems. We conduct final assembly of the garments used with our products, perform quality assurance and ship our products from our facility in Minnesota. We also manufacture and ship the AffloVest device from our Minnesota-based facility.
In July 2022, we launched Kylee™, a free mobile app that makes it easier for patients to manage their conditions by tracking treatments and symptoms, as well as having direct access to educational resources. Flexitouch Plus and Nimbl devices include Bluetooth technology, which is viewable using Kylee.
For the three months ended September 30, 2026, we generated revenue of $91.9 million and had net income of $7.2 million, compared to revenue of $85.8 million and net income of $8.2 million for the three months ended September 30, 2025. For the nine months ended September 30, 2026, we generated revenue of $252.8 million and had net income of $13.2 million, compared to revenue of $225.9 million and net income of $8.5 million for the nine months ended September 30, 2025. Our primary sources of capital since our initial public offering in 2016 have been from operating income, bank financing and our public offering in February 2023.
We operate in one segment for financial reporting purposes.
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Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2026 and 2025
The following table presents our results of operations for the periods indicated:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | | ||||||||||
| | September 30, | | Change | ||||||||||||||
(In thousands) | | 2026 | | 2025 | | $ | | % | ||||||||||
Condensed Consolidated Statement | | | | | % of | | | | | % of | | | | | | | ||
of Operations Data: | | | | | revenue | | | | | revenue | | | | | | | ||
Revenue | | | | | | | | | | | | | | | | | | |
Sales revenue | | $ | 82,329 | | 90 | % | | $ | 76,890 | | 90 | % | | $ | 5,439 | | 7 | % |
Rental revenue | | | 9,529 | | 10 | % | | | 8,865 | | 10 | % | | | 664 | | 7 | % |
Total revenue | | | 91,858 | | 100 | % | | | 85,755 | | 100 | % | | | 6,103 | | 7 | % |
Cost of revenue | | | | | | | | | | | | | | | | | | |
Cost of sales revenue | | | 18,400 | | 20 | % | | | 17,896 | | 21 | % | | | 504 | | 3 | % |
Cost of rental revenue | | | 2,969 | | 3 | % | | | 2,858 | | 3 | % | | | 111 | | 4 | % |
Total cost of revenue | | | 21,369 | | 23 | % | | | 20,754 | | 24 | % | | | 615 | | 3 | % |
Gross profit | | | | | | | | | | | | | | | | | | |
Gross profit - sales revenue | | | 63,929 | | 70 | % | | | 58,994 | | 69 | % | | | 4,935 | | 8 | % |
Gross profit - rental revenue | | | 6,560 | | 7 | % | | | 6,007 | | 7 | % | | | 553 | | 9 | % |
Gross profit | | | 70,489 | | 77 | % | | | 65,001 | | 76 | % | | | 5,488 | | 8 | % |
Operating expenses | | | | | | | | | | | | | | | | | | |
Sales and marketing | | | 33,042 | | 36 | % | | | 29,809 | | 35 | % | | | 3,233 | | 11 | % |
Research and development | | | 2,506 | | 3 | % | | | 2,191 | | 3 | % | | | 315 | | 14 | % |
Reimbursement, general and administrative | | | 24,657 | | 27 | % | | | 21,442 | | 25 | % | | | 3,215 | | 15 | % |
Intangible asset amortization and contingent consideration | | | 693 | | 1 | % | | | 596 | | 1 | % | | | 97 | | 16 | % |
Total operating expenses | | | 60,898 | | 67 | % | | | 54,038 | | 64 | % | | | 6,860 | | 13 | % |
Income from operations | | | 9,591 | | 10 | % | | | 10,963 | | 12 | % | | | (1,372) | | (13) | % |
Interest income | | | 560 | | 1 | % | | | 667 | | 1 | % | | | (107) | | (16) | % |
Interest expense | | | (20) | | — | % | | | (193) | | — | % | | | 173 | | (90) | % |
Income before income taxes | | | 10,131 | | 11 | % | | | 11,437 | | 13 | % | | | (1,306) | | (11) | % |
Income tax expense | | | 2,971 | | 3 | % | | | 3,228 | | 4 | % | | | (257) | | (8) | % |
Net income | | $ | 7,160 | | 8 | % | | $ | 8,209 | | 9 | % | | $ | (1,049) | | (13) | % |
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| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | | | | | | ||||||||||
| | September 30, | | Change | ||||||||||||||
(In thousands) | | 2026 | | 2025 | | $ | | % | ||||||||||
Condensed Consolidated Statement | | | | | % of | | | | | % of | | | | | | | ||
of Operations Data: | | | | | revenue | | | | | revenue | | | | | | | ||
Revenue | | | | | | | | | | | | | | | | | | |
Sales revenue | | $ | 225,784 | | 89 | % | | $ | 199,890 | | 88 | % | | $ | 25,894 | | 13 | % |
Rental revenue | | | 27,039 | | 11 | % | | | 26,038 | | 12 | % | | | 1,001 | | 4 | % |
Total revenue | | | 252,823 | | 100 | % | | | 225,928 | | 100 | % | | | 26,895 | | 12 | % |
Cost of revenue | | | | | | | | | | | | | | | | | | |
Cost of sales revenue | | | 51,287 | | 20 | % | | | 49,270 | | 22 | % | | | 2,017 | | 4 | % |
Cost of rental revenue | | | 8,084 | | 3 | % | | | 7,518 | | 3 | % | | | 566 | | 8 | % |
Total cost of revenue | | | 59,371 | | 23 | % | | | 56,788 | | 25 | % | | | 2,583 | | 5 | % |
Gross profit | | | | | | | | | | | | | | | | | | |
Gross profit - sales revenue | | | 174,497 | | 69 | % | | | 150,620 | | 66 | % | | | 23,877 | | 16 | % |
Gross profit - rental revenue | | | 18,955 | | 8 | % | | | 18,520 | | 9 | % | | | 435 | | 2 | % |
Gross profit | | | 193,452 | | 77 | % | | | 169,140 | | 75 | % | | | 24,312 | | 14 | % |
Operating expenses | | | | | | | | | | | | | | | | | | |
Sales and marketing | | | 97,786 | | 39 | % | | | 87,364 | | 39 | % | | | 10,422 | | 12 | % |
Research and development | | | 7,783 | | 3 | % | | | 5,950 | | 3 | % | | | 1,833 | | 31 | % |
Reimbursement, general and administrative | | | 71,061 | | 28 | % | | | 63,474 | | 28 | % | | | 7,587 | | 12 | % |
Intangible asset amortization and contingent consideration | | | 1,939 | | 1 | % | | | 1,848 | | 1 | % | | | 91 | | 5 | % |
Total operating expenses | | | 178,569 | | 71 | % | | | 158,636 | | 71 | % | | | 19,933 | | 13 | % |
Income from operations | | | 14,883 | | 6 | % | | | 10,504 | | 4 | % | | | 4,379 | | 42 | % |
Interest income | | | 1,787 | | — | % | | | 2,412 | | 1 | % | | | (625) | | (26) | % |
Interest expense | | | (67) | | — | % | | | (1,027) | | — | % | | | 960 | | (93) | % |
Other income | | | — | | — | % | | | 1 | | — | % | | | (1) | | (100) | % |
Income before income taxes | | | 16,603 | | 6 | % | | | 11,890 | | 5 | % | | | 4,713 | | 40 | % |
Income tax expense | | | 3,421 | | 1 | % | | | 3,438 | | 1 | % | | | (17) | | (0) | % |
Net income | | $ | 13,182 | | 5 | % | | $ | 8,452 | | 4 | % | | $ | 4,730 | | 56 | % |
| | | | | | | | | | | | | | | | | | | |
Revenue
Revenue increased $6.1 million, or 7%, to $91.9 million in the three months ended September 30, 2026, compared to $85.8 million in the three months ended September 30, 2025. The increase in total revenue was attributable to an increase of $9.5 million, or 13%, in sales and rentals of the lymphedema product line in the three months ended September 30, 2026, compared to the three months ended September 30, 2025. The increase was partially offset by a decrease of $3.4 million, or 25%, in sales of the airway clearance product line in the three months ended September 30, 2026, compared to the three months ended September 30, 2025.
Revenue increased $26.9 million, or 12%, to $252.8 million in the nine months ended September 30, 2026, compared to $225.9 million in the nine months ended September 30, 2025. The increase in total revenue was attributable to an increase of $28.8 million, or 15%, in sales and rentals of the lymphedema product line in the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The increase was partially offset by a decrease of $1.9 million, or 5%, in sales of the airway clearance product line in the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025.
The increase in the lymphedema product line revenue in the three and nine months ended September 30, 2026, was driven by accelerating commercial momentum from our strong partnerships, execution of our go-to-market commercial strategy and disciplined focus on sales force productivity. The decrease in the airway clearance product line revenue in the three and nine months ended September 30, 2026 was primarily driven by the DME inventory transition associated with the launch of our next-generation AffloVest system in the second quarter of 2026.
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The following tables summarize our revenue by product line for the three and nine months ended September 30, 2026 and 2025, both in dollars and percentage of total revenue:
| | | | | | | | | | | |
| | Three Months Ended | | | | | | ||||
| | September 30, | | Change | |||||||
(In thousands) | | 2026 | | 2025 | | $ | | % | |||
Revenue | | | | | | | | | | | |
Lymphedema products | | $ | 81,838 | | $ | 72,381 | | $ | 9,457 | | 13% |
Airway clearance products | | | 10,020 | | | 13,374 | | | (3,354) | | (25)% |
Total | | $ | 91,858 | | $ | 85,755 | | $ | 6,103 | | 7% |
| | | | | | | | | | | |
Percentage of total revenue | | | | | | | | | | | |
Lymphedema products | |
| 89% | |
| 84% | |
| | | |
Airway clearance products | | | 11% | | | 16% | | | | | |
Total | |
| 100% | |
| 100% | |
| | | |
| | | | | | | | | | | |
| | Nine Months Ended | | | | | | ||||
| | September 30, | | Change | |||||||
(In thousands) | | 2026 | | 2025 | | $ | | % | |||
Revenue | | | | | | | | | | | |
Lymphedema products | | $ | 217,689 | | $ | 188,905 | | $ | 28,784 | | 15% |
Airway clearance products | | | 35,134 | | | 37,023 | | | (1,889) | | (5)% |
Total | | $ | 252,823 | | $ | 225,928 | | $ | 26,895 | | 12% |
| | | | | | | | | | | |
Percentage of total revenues | | | | | | | | | | | |
Lymphedema products | |
| 86% | |
| 84% | |
| | | |
Airway clearance products | | | 14% | | | 16% | | | | | |
Total | |
| 100% | |
| 100% | |
| | | |
Our business is affected by seasonality. In the first quarter of each year, when most patients have started a new insurance year and have not yet met their annual out-of-pocket payment obligations, we experience substantially reduced demand for our products. We typically experience higher revenue in the third and fourth quarters of the year when patients have met their annual insurance deductibles, thereby reducing their out-of-pocket costs for our products, and have an increasing desire to exhaust their flexible spending accounts at year end. This seasonality applies only to purchases and rentals of our products by patients covered by commercial insurance and is not relevant to Medicare, Medicaid or the Veterans Administration, as those payers either do not have plans that have declining deductibles over the course of the plan year and/or do not have plans that include patient deductibles for purchases or rentals of our products.
Cost of Revenue and Gross Margin
Cost of revenue increased $0.6 million, or 3%, to $21.4 million in the three months ended September 30, 2026, compared to $20.8 million in the three months ended September 30, 2025. Cost of revenue increased $2.6 million, or 5%, to $59.4 million in the nine months ended September 30, 2026, compared to $56.8 million in the nine months ended September 30, 2025. The increase in cost of revenue in both periods was primarily attributable to the increase in revenue.
Gross margin was 77% and 76% in the three months ended September 30, 2026 and 2025, respectively, and 77% and 75% in the nine months ended September 30, 2026 and 2025, respectively.
Sales and Marketing Expenses
Sales and marketing expenses increased $3.2 million, or 11%, to $33.0 million in the three months ended September 30, 2026, compared to $29.8 million in the three months ended September 30, 2025. The increase was primarily attributable to a $2.9 million increase in personnel-related compensation expenses
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(including travel and entertainment expenses) and a $0.6 million increase in expenses for meetings and seminars.
Sales and marketing expenses increased $10.4 million, or 12%, to $97.8 million in the nine months ended September 30, 2026, compared to $87.4 million in the nine months ended September 30, 2025. The increase was primarily attributable to a $9.7 million increase in personnel-related compensation expenses (including travel and entertainment expenses) and a $0.5 million increase in expenses related to meetings and seminars.
Research and Development Expenses
Research and development (“R&D”) expenses increased $0.3 million, or 14%, to $2.5 million in the three months ended September 30, 2026, compared to $2.2 million in the three months ended September 30, 2025. The increase was primarily attributable to a $0.2 million increase in IT-related expenses.
R&D expenses increased $1.8 million, or 31%, to $7.8 million in the nine months ended September 30, 2026, compared to $6.0 million in the nine months ended September 30, 2025. The increase was primarily attributable to a $0.8 million increase in personnel-related compensation expenses and a $0.7 million increase in IT-related expenses.
IT-related expenses reflected in both R&D expenses and Reimbursement, general and administrative expenses in both periods primarily related to the ongoing implementation of new technology across the entire order process, replacing legacy systems, which we expect to continue through the remainder of 2026.
Reimbursement, General and Administrative Expenses
Reimbursement, general and administrative expenses increased $3.2 million, or 15%, to $24.7 million in the three months ended September 30, 2026, compared to $21.4 million in the three months ended September 30, 2025. This increase was primarily attributable to a $2.0 million increase in personnel-related compensation expenses, a $0.4 million increase in IT-related expenses, a $0.4 million increase in occupancy costs and a $0.2 million increase in acquisition and integration costs related to the LymphaTech acquisition.
Reimbursement, general and administrative expenses increased $7.6 million, or 12%, to $71.1 million in the nine months ended September 30, 2026, compared to $63.5 million in the nine months ended September 30, 2025. This increase was primarily attributable to a $5.3 million increase in personnel-related compensation expenses, a $1.1 million increase in IT-related expenses and a $1.1 million increase in acquisition and integration costs related to the LymphaTech acquisition.
Intangible Asset Amortization and Contingent Consideration
Intangible asset amortization and contingent consideration was $0.7 million and $0.6 million for the three months ended September 30, 2026 and 2025, respectively.
Intangible asset amortization and contingent consideration was $1.9 million and $1.8 million for the nine months ended September 30, 2026 and 2025, respectively.
Interest Income and Interest Expense
Interest income decreased $0.1 million, or 16%, to $0.6 million in the three months ended September 30, 2026, compared to $0.7 million in the three months ended September 30, 2025, primarily due to a lower cash balance in an Institutional Insured Liquid Deposit demand account due to funds being utilized for the LymphaTech acquisition. Interest expense decreased $0.2 million, or 90%, to $20,000 in the three months ended September 30, 2026, compared to $0.2 million in the three months ended September 30, 2025, primarily due to the repayment of debt.
Interest income decreased $0.6 million, or 26%, to $1.8 million in the nine months ended September 30, 2026, compared to $2.4 million in the nine months ended September 30, 2025, primarily due to a lower
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cash balance in an Institutional Insured Liquid Deposit demand account due to funds being utilized for the LymphaTech acquisition. Interest expense decreased $1.0 million, or 93%, to $67,000 in the nine months ended September 30, 2026, compared to $1.0 million in the nine months ended September 30, 2025, primarily due to the repayment of debt.
Income Taxes
We recorded an income tax expense of $3.0 million and $3.2 million for the three months ended September 30, 2026 and 2025, respectively. The effective tax rate was 29.3% and 28.2% for the three months ended September 30, 2026 and 2025, respectively. The primary driver of the change in our effective tax rate was attributable to the Company recording stock-based compensation discrete items when compared to the prior year period.
We recorded an income tax expense of $3.4 million for each of the nine months ended September 30, 2026 and 2025. The effective tax rate was 20.6% and 28.9% for the nine months ended September 30, 2026 and 2025, respectively. The primary driver of the change in our effective tax rate was attributable to the Company recording stock-based compensation discrete items when compared to the prior year period.
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Liquidity and Capital Resources
Cash Flows
On September 30, 2026, we had cash of $75.1 million and net accounts receivable of $48.3 million. This compares to cash of $66.0 million and net accounts receivable of $37.3 million at September 30, 2025.
The following table summarizes our cash flows for the periods indicated:
| | | | | | |
| | Nine Months Ended | ||||
| | September 30, | ||||
(In thousands) | | 2026 | | 2025 | ||
Net cash provided by (used in): | | | | | | |
Operating activities |
| $ | 14,893 | | $ | 25,515 |
Investing activities | | | (11,981) | | | (1,958) |
Financing activities | | | (11,248) | | | (51,959) |
Net decrease in cash |
| $ | (8,336) | | $ | (28,402) |
Operating Activities
Net cash provided by operating activities during the nine months ended September 30, 2026 was $14.9 million, resulting from net income of $13.2 million and non-cash net income adjustments of $11.8 million, partially offset by a net decrease in operating assets and liabilities of $10.1 million. The positive non-cash net income adjustments consisted primarily of $6.4 million of stock-based compensation expense, $5.2 million of depreciation and amortization, a change in fair value of contingent consideration of $0.1 million and a loss on disposal of property and equipment and intangibles of $0.1 million. Cash used relating to the change in operating assets and liabilities primarily consisted of an increase in prepaid expenses and other assets of $6.5 million, an increase in net accounts receivable of $4.4 million, a decrease in accrued payroll and related taxes of $1.9 million, a decrease in income taxes payable of $1.9 million, an increase in inventories of $1.6 million, a $1.1 million decrease in accrued expenses and other liabilities and an increase in right of use operating lease assets of $0.4 million, partially offset by a $6.8 million increase in accounts payable and a decrease of $0.8 million in net investment in leases.
Net cash provided by operating activities during the nine months ended September 30, 2025 was $25.5 million, resulting from non-cash net income adjustments of $12.5 million, net income of $8.5 million, and a net increase in operating assets and liabilities of $4.6 million. Cash provided relating to the change in operating assets and liabilities primarily consisted of a decrease in net accounts receivable of $7.7 million, a $1.0 million increase in accrued expenses and other liabilities, a decrease in inventories of $2.6 million and a $2.1 million increase in accounts payable, partially offset by a decrease in accrued payroll and related taxes of $3.2 million, an increase in prepaid expenses and other assets of $6.0 million, an increase in income taxes payable of $1.0 million, an increase in net investment in leases of $0.3 million and an increase in right of use operating lease assets of $0.3 million. The positive non-cash net income adjustments consisted primarily of $5.8 million of stock-based compensation expense, $5.0 million of depreciation and amortization, $1.6 million of deferred income taxes, and $0.1 million of loss on disposals.
Investing Activities
Net cash used in investing activities during the nine months ended September 30, 2026, was $12.0 million, primarily consisting of $6.2 million of net payments related to the acquisition of LymphaTech, a $3.0 million payment for the exclusive distribution agreement for MyoSleeve, $2.7 million of purchases of property and equipment and $0.1 million of patent costs.
Net cash used in investing activities during the nine months ended September 30, 2025, was $2.0 million, consisting of purchases of property and equipment and patent costs.
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Financing Activities
Net cash used in financing activities during the nine months ended September 30, 2026, was $11.2 million, primarily consisting of payments of $12.5 million for the repurchase of our common stock, partially offset by $1.0 million in proceeds from the issuance of common stock under the ESPP and $0.2 million in proceeds from the exercise of common stock options.
Net cash used in financing activities during the nine months ended September 30, 2025, was $52.0 million, primarily consisting of payments of $26.6 million for the repurchase of our common stock and a payment of $26.3 million made on our term loan, partially offset by $0.8 million in proceeds from the issuance of common stock under the ESPP.
Credit Agreement
On July 31, 2025, we entered into an Amended and Restated Credit Agreement with the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent (the “2025 Credit Agreement”), which amended and restated the credit agreement that we had in place prior to that time (the “Prior Credit Agreement”). The 2025 Credit Agreement provides for a $40.0 million revolving credit facility with a scheduled maturity date of July 31, 2028.
In connection with the entry into the 2025 Credit Agreement, on July 31, 2025, we paid off the full amount outstanding under the term loan that was outstanding under the Prior Credit Agreement, which was $24.4 million (inclusive of principal and interest), using cash on hand. The term loan had been reflected on our condensed consolidated financial statements as a note payable. The 2025 Credit Agreement removed the provisions from the Prior Credit Agreement related to a committed term loan, such that the only term loan related provisions in the 2025 Credit Agreement relate to our ability to request uncommitted incremental term loan facilities and/or an increase in the amount of the revolving loans available under the 2025 Credit Agreement in an amount not to exceed $25.0 million in the aggregate, subject to the satisfaction of certain conditions.
Amounts drawn under the revolving credit facility bear interest, at our option, at a rate equal to (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) Adjusted Term SOFR (defined as term Secured Overnight Financing Rate) for a one-month tenor plus 1% (the “Base Rate”) plus an applicable margin or (b) Adjusted Term SOFR for an interest period of one, three or six months, at our option, plus the applicable margin. The applicable margin is 0.75% to 1.75% on loans bearing interest at the Base Rate and 1.75% to 2.75% on loans bearing interest at Adjusted Term SOFR, in each case depending on our consolidated total leverage ratio.
The 2025 Credit Agreement provides for a commitment fee at a rate per annum ranging from 0.125% to 0.250% for the unused portion of the revolving credit facility, depending on our consolidated total leverage ratio.
The 2025 Credit Agreement includes financial covenants consisting of a maximum consolidated total leverage ratio covenant and a minimum fixed charge coverage ratio covenant. In addition, the 2025 Credit Agreement includes customary negative covenants, including a restricted payment covenant that permits the Company to repurchase shares of its common stock and make certain other payments, as long as the Company is not in default under the 2025 Credit Agreement, has a consolidated total leverage ratio of no greater than 1.75 to 1.00, and has liquidity of not less than $30.0 million, in each case both before and after giving effect to such stock repurchases or the making of such payments. As of September 30, 2026, we were in compliance with all covenants under the 2025 Credit Agreement.
Our obligations under the 2025 Credit Agreement are secured by a security interest in substantially all of our and our subsidiary’s assets and are also guaranteed by our subsidiary.
As of September 30, 2026, we had no outstanding borrowings under the 2025 Credit Agreement.
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Share Repurchase Program
On October 16, 2025, our Board of Directors authorized a new program to repurchase up to $25.0 million of our common stock. Under the program, purchases may be made from time to time in the open market, in privately negotiated purchases, or both. The timing and number of shares to be purchased will be based on the price of the Company's common stock, general business and market conditions and other investment considerations and factors. This share repurchase program expires on November 3, 2027. The program does not obligate the Company to repurchase any specific number of shares and may be suspended or discontinued at any time without prior notice.
During the nine months ended September 30, 2026, we repurchased 502,762 shares for approximately $12.5 million. We used cash on hand to fund these repurchases.
Future Cash Requirements
For a discussion of our material estimated future cash requirements under our contractual obligations and commercial commitments, in total and disaggregated into current and long-term, see “Future Cash Requirements” included in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes since December 31, 2025.
Adequacy of Resources
Our future cash requirements may vary significantly from those now planned and will depend on many factors, including:
| ● | the impacts of inflation, rising interest rates or a recession on our business; |
| ● | sales and marketing resources needed to further penetrate our market; |
| ● | expansion of our operations; |
| ● | IT investments to scale our business; |
| ● | response of competitors to our solutions and applications; |
| ● | costs associated with clinical research activities; |
| ● | labor shortages and wage inflation; |
| ● | component price inflation; |
| ● | costs to develop and implement new products and revisions to existing products; and |
| ● | use of capital for acquisitions or licenses, if any. |
Historically, we have experienced increases in our expenditures consistent with the growth in our revenue, operations and personnel, and we anticipate that our expenditures will continue to increase as we expand our business.
We believe our cash and cash flows from operations will be sufficient to meet our working capital, capital expenditure, debt repayment and related interest, and other cash requirements for at least the next twelve months.
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Recent Accounting Pronouncements
Refer to Note 3 – “Summary of Significant Accounting Policies” of the condensed consolidated financial statements contained in this report for a description of recently issued accounting pronouncements that are applicable to our business.
Critical Accounting Estimates
Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. For additional information, please see the discussion of our most critical accounting estimates under “Critical Accounting Estimates” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion on our market risks, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” included in our Annual Report on Form 10-K for the year ended December 31, 2025. There have been no material changes since December 31, 2025.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2026, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended September 30, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Information pertaining to certain legal proceedings in which we are involved can be found in Note 9 – “Commitments and Contingencies” to our condensed consolidated financial statements included in Part I, Item 1 of this report and is incorporated herein by reference.
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Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or future results. There have been no material changes in our risk factors from those disclosed in that report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Issuer Purchases of Equity Securities
| | | | | | | | | | | | |
| | | | | | | | | Total Number | | Approximate | |
| | | | | | | | | of Shares | | Dollar Value of | |
| | | | | | | | | Purchased as | | Shares that | |
| | | | | | | | | Part of Publicly | | May Yet Be | |
| | Total Number | | Average | | Announced | | Purchased | ||||
| | of Shares | | Price Paid | | Plans or | | Under the Plans or | ||||
(In thousands, except share and per share data) | | Purchased | | Per Share(1) | | Programs | | Programs(2) | ||||
July 1, 2026 - July 31, 2026 | | 42,146 | | | $ | 28.45 | | | 42,146 | | $ | 17,452 |
August 1, 2026 - August 31, 2026 | | 95,966 | | | | 24.73 | | | 95,966 | | | 15,079 |
September 1, 2026 - September 30, 2026 | | 115,500 | | | | 22.50 | | | 115,500 | | | 12,480 |
Total | | 253,612 | | | | | | | 253,612 | | | |
(1) Amount includes commissions paid.
(2) On November 3, 2025, we announced that our Board of Directors authorized a program to repurchase shares of our common stock in an aggregate amount not to exceed $25.0 million. The share repurchase program became effective on November 3, 2025 and expires on November 3, 2027.
Item 3. Defaults Upon Senior Securities.
Not applicable.
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Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Trading Arrangements
On
Executive Officer Transitions
Because we are filing this Quarterly Report on Form 10-Q within four business days after the triggering event, we are making the following disclosure under this Item 5 instead of filing a Current Report on Form 8-K under Item 5.02, Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Chief Operating Officer
On November 2, 2026, the Company announced that its Board of Directors has appointed Stephen A. Kiewiet to the office of Chief Operating Officer of the Company, effective November 2, 2026.
Prior to joining the Company, Mr. Kiewiet, age 58, served in various executive roles at CCS Medical, a chronic care management organization, including Chief Growth Officer from September 2025 to August 2026, Chief Commercial Officer from January 2024 to September 2025, and Chief Operating Officer from June 2021 to January 2024. Prior to that, Mr. Kiewiet served in various senior commercial and operational leadership roles at Intalere, BJC Healthcare, and Cardinal Health. Mr. Kiewiet has over 30 years of experience building operational discipline, accountability, and mission-focused leadership.
There are no arrangements or understandings between Mr. Kiewiet and any other persons pursuant to which he was appointed Chief Operating Officer. There are no family relationships between Mr. Kiewiet and any of the Company’s directors or executive officers, and Mr. Kiewiet does not have any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Mr. Kiewiet accepted a written offer letter establishing his compensation as the Company’s Chief Operating Officer. Pursuant to the offer letter, Mr. Kiewiet’s initial compensation will consist of the following:
| ● | An initial annualized base salary of $385,000 per year. |
| ● | Equity awards under the Company’s 2025 Equity Incentive Plan, to be granted on the second trading day following the public release of the Company’s financial results for the third quarter of 2026, as follows: |
| o | restricted stock units with a value of $175,000 that will vest in thirds over the first three anniversaries of the date of grant; and |
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| o | performance stock units with a value of $175,000 that will be earned and vested over three years consistent with performance share units granted to the Company’s other executive officers in 2026. |
| ● | Eligibility to participate in the Company’s Management Incentive Plan for 2027, in a target amount equal to 45% of his base salary. |
| ● | Participation in all employee benefit plans and programs to the extent that he meets the eligibility requirements for each individual plan or program. |
| ● | Participation in the Company’s Executive Employee Severance Plan (the “Executive Severance Plan”) following the execution of a standard Confidentiality, Assignment of Intellectual Property and Restrictive Covenants Agreement (the “Restrictive Covenants Agreement”). |
The foregoing summary of the offer letter does not purport to be complete and is qualified in its entirety by reference to the full text of the offer letter, a copy of which is filed as Exhibit 10.1 to this report and is incorporated herein by reference. A summary of the Executive Severance Plan is included in our Proxy Statement for our 2026 Annual Meeting of Stockholders, which was filed with the Securities and Exchange Commission on March 25, 2026. The Executive Severance Plan was filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q filed November 4, 2024 and is incorporated herein by reference as Exhibit 10.2. A summary of the Restrictive Covenants Agreement is included in our Proxy Statement for our 2026 Annual Meeting of Stockholders, which was filed with the Securities and Exchange Commission on March 25, 2026. The form of Restrictive Covenants Agreement was filed as Exhibit 10.3 to our Quarterly Report on Form 10-Q filed November 5, 2018 and is incorporated herein by reference as Exhibit 10.3.
Departure of Executive Officer
On October 27, 2026, in connection with the Company’s internal reorganization of various roles and responsibilities, the Company notified Kristie Burns, the Company’s Senior Vice President, Business Development, that her position would be eliminated, effective November 2, 2026, at which time she would no longer be an executive officer of the Company. Ms. Burns will remain with the Company as an employee until December 31, 2026, to assist with transition matters.
Ms. Burns’ separation from the Company will qualify as a termination without cause under the Executive Severance Plan, and therefore she will be entitled to the benefits under the Executive Severance Plan, including an amount equal to her annualized base salary, payable over 12 months, and the portion of the premium costs that would have been paid for continued group health insurance for 12 months. In addition, Ms. Burns will be entitled to have certain portions of her outstanding equity awards vest, as described in the Company’s proxy statement filed with the Securities and Exchange Commission on March 25, 2026. Ms. Burns' receipt of the severance benefits described above is subject to her timely execution, and non-rescission, of a release of claims, as required under the Executive Severance Plan.
The Compensation and Organization Committee (“Committee”) of the Board of Directors of the Company considered the fact that Ms. Burns would not be entitled to a bonus payment under the terms of the 2026 award program under the Company’s Management Incentive Plan (“2026 MIP”) due to her employment terminating prior to the payment date in early 2027, however, she will have been employed by, and provided valuable services and support to, the Company throughout the full year 2026. In light of these considerations, the Committee approved a waiver of the condition under the 2026 MIP that requires employment on the payment date, such that Ms. Burns will be eligible to receive a bonus payment under the 2026 MIP of the amount earned based on the Company’s actual 2026 financial performance, as long as she remains an employee of the Company through December 31, 2026, as planned.
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Item 6. Exhibits.
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index below.
EXHIBIT INDEX
| | | | | | | | | | |
| | | | Incorporated by Reference | | | ||||
Exhibit | | | | | | | | Exhibit | | Filed |
Number | | Description of Exhibit | | Form | | Date of Filing | | Number | | Herewith |
| | | | | | | | | | |
3.1 | | Amended and Restated Certificate of Incorporation, conformed version reflecting all amendments through May 6, 2026 | | 8-K | | 05/07/2026 | | 3.2 | | |
| | | | | | | | | | |
3.2 | | Amended and Restated By-laws, effective December 19, 2022 | | 10-K | | 02/21/2023 | | 3.2 | | |
| | | | | | | | | | |
10.1 | | Offer Letter between Steve Kiewiet and Tactile Systems Technology, Inc., dated October 16, 2026 | | | | | | | | X |
| | | | | | | | | | |
10.2 | | Tactile Systems Technology, Inc. Executive Employee Severance Plan, Amended and Restated as of October 15, 2024 | | 10-Q | | 11/04/2024 | | 10.1 | | |
| | | | | | | | | | |
10.3 | | Form of Confidentiality, Assignment of Intellectual Property and Restrictive Covenants Agreement | | 10-Q | | 11/05/2018 | | 10.3 | | |
| | | | | | | | | | |
31.1 | | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as amended | | | | | | | | X |
| | | | | | | | | | |
31.2 | | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) / 15d-14(a) of the Securities Exchange Act of 1934, as amended | | | | | | | | X |
| | | | | | | | | | |
32.1 | | Certification of Principal Executive Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | X |
| | | | | | | | | | |
32.2 | | Certification of Principal Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | | | | | | | X |
| | | | | | | | | | |
101.1 | | Inline XBRL for the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026: (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity, (iv) Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements; and for the information set forth in Part II, Item 5. | | | | | | | | X |
| | | | | | | | | | |
104.1 | | Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.1) | | | | | | | | X |
| | | | | | | | | | |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | ||
| Tactile Systems Technology, Inc. | ||
| | | |
Date: November 2, 2026 | | By: | /s/ Elaine M. Birkemeyer |
| Elaine M. Birkemeyer | ||
| Chief Financial Officer | ||
| (Principal financial and accounting officer) | ||
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