Tandem Diabetes Care (NasdaqGM:TNDM) Q4 2025 Earnings call February 19, 2026 04:30 PM ET Company ParticipantsJoanne Wuensch - Managing DirectorJohn Sheridan - President and CEOJon Block - Managing DirectorLeigh Vosseller - EVP and CFOMathew Blackman - Managing DirectorMatt Taylor - Managing DirectorMike Kratky - Senior Managing Director of Medical Devices and Technology Equity ResearchShaymus Contorno - Equity Research AssociateSusan Morrison - EVP and Chief Administrative OfficerTravis Steed - Managing Dir ...

Financial Data and Key Metrics Changes - In 2025, Tandem Diabetes Care achieved over $1 billion in worldwide sales, marking a 12% growth year-over-year, with U.S. sales increasing by 10% to $707 million and international sales growing by 15% to $308 million [13][16] - Q4 2025 saw record worldwide sales of $290 million, representing a 15% year-over-year growth, with U.S. sales increasing by 14% to $210 million [14][15] - Gross margin expanded by 3 percentage points to 54% for the full year, with the highest quarterly margin ever recorded at 58% in Q4 [16][17] - Adjusted EBITDA was 11% of sales in Q4, a 10 percentage point improvement over the prior year, and the company reported its first positive operating margin since 2021 at 3% of sales in Q4 [17] Business Line Data and Key Metrics Changes - The U.S. market saw more than 27,000 pump shipments in Q4, with renewals from loyal customers making up over half of the shipments [15] - Internationally, Q4 sales grew 17% year-over-year, delivering $80 million in sales and 11,000 pump shipments [16] - Sales through the pharmacy channel nearly doubled from Q3, growing to $16 million or 7% of total U.S. sales in Q4 [15] Market Data and Key Metrics Changes - The company began direct commercial operations in the UK, Switzerland, and Austria, with expectations for strong sales productivity in these markets [6][23] - Direct sales represented approximately 5% of total international sales in 2025, expected to increase to about 15% in 2026 [24] Company Strategy and Development Direction - The company is focused on three key initiatives: modernizing commercial operations, delivering new technology, and reshaping the business model [4][5] - The transition to a pay-as-you-go reimbursement model is expected to drive market growth and profitability, with plans to increase pharmacy coverage for both t:slim X2 and Mobi platforms [10][11] - The company aims to maintain leadership in automated insulin delivery (AID) systems and plans to begin a pivotal trial for a fully closed loop algorithm later this year [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving long-term objectives of accelerated sales growth, with a gross margin target of at least 65% and an operating margin of 25% [18] - The transition to the pay-as-you-go model is anticipated to moderate sales growth in 2026 but is expected to create a more predictable revenue stream over time [19][21] - Management highlighted the importance of pump shipments as a key indicator of progress in growing the market while expanding margins [19] Other Important Information - The company exited 2025 with nearly $300 million in total cash and investments, generating free cash flow in both Q3 and Q4 [17] - The anticipated revenue headwinds from the pay-as-you-go model are expected to be most pronounced in 2026, with a projected U.S. sales range of $730 million to $745 million [22] Q&A Session Summary Question: Can you provide context on the expected growth rates for U.S. and international shipments? - Management indicated that overall revenue growth for the year is expected to be in the line of 10-11%, with double-digit growth in shipments [32] Question: What is the current status of pharmacy coverage and contracting? - Management confirmed contracts with major PBMs covering about 80% of lives, with formulary access currently at roughly a third [40] Question: Why is now the right time for the pay-as-you-go model? - Management stated that the experience gained in Q4 and positive conversations with payers made this the right time for the transition [44] Question: How will the transition to direct sales impact revenue? - Management explained that while there are headwinds from the transition, the long-term benefits of direct sales and pricing premiums are expected to outweigh these challenges [77] Question: What are the expected impacts of the pharmacy shift on the P&L? - Management noted that the headwinds from the pay-as-you-go model will be more pronounced in 2026, but the transition is expected to lead to significant revenue growth in subsequent years [68]