Earnings

Tactile Medical's Tax Rate Fell Eight Points On Flat Tax Dollars, Flattering A Weaker Quarter

Nine-month net income rose to $13.2 million, but third-quarter operating income fell to $9.6 million and a $2.2 million earnout is due.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Tactile Medical's Tax Rate Fell Eight Points On Flat Tax Dollars, Flattering A Weaker Quarter

Tactile Medical's nine-month profit gain leans on a lower tax rate: the effective rate fell to 20.6% from 28.9% while the tax bill stayed at $3.4 million, the company said in its quarterly report Monday. Third-quarter operating income, meanwhile, slipped to $9.6 million from $11.0 million.

Flat tax dollars, lower rate

Tactile Systems Technology, which does business as Tactile Medical and makes at-home devices for chronic conditions such as lymphedema, booked $3.4 million of tax expense in both the first nine months of 2026 and the same period of 2025. Pre-tax income rose to $16.6 million from $11.9 million, so the same tax dollars translate into a much lower rate.

The company attributes the change to stock-based compensation discrete items, meaning one-off tax effects from stock pay. Nine-month net income rose to $13.2 million from $8.5 million.

The benefit did not carry into the third quarter. Tax was $3.0 million at a 29.3% rate, against 28.2% a year earlier. In the second quarter, the prior filing showed a $0.4 million tax benefit.

Cash tells a different story: cash paid for taxes in the nine months was $5.2 million, versus $0.9 million a year earlier.

A quarter of rising costs

Third-quarter revenue rose 7% to $91.9 million. Operating expenses rose 13% to $60.9 million, and net income fell to $7.2 million from $8.2 million.

Lymphedema products grew 13% to $81.8 million. Airway clearance sales fell 25% to $10.0 million, which the company attributed to a distributor inventory transition tied to the launch of its next-generation AffloVest.

For the full year, the company continues to expect revenue of $360 million to $366 million and now expects adjusted EBITDA of $50 million to $52 million, up from a prior $49 million to $51 million.

An earnout and a fee fight

Tactile bought LymphaTech, a 3D lymphedema measurement company, on February 17, and the contingent payout could reach $4.9 million. One milestone was met in October, so about $2.2 million is payable on or before November 12.

In a related matter, the court dismissed the False Claims Act cases on August 21, but relators in the Gorham case seek $0.6 million in fees. The company filed an opposition on September 11, and the matter is pending decision. It has accrued about $0.2 million for those fees.

The $2.2 million LymphaTech payment is due by November 12.

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