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 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 [17][19] - Q4 2025 saw record worldwide sales of $290 million, representing a 15% year-over-year growth, with U.S. Q4 sales increasing by 14% to $210 million [17][18] - Gross margin expanded by 3 percentage points to 54% for the full year, with the highest quarterly margin ever recorded at 58% [19][20] - 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 [20] Business Line Data and Key Metrics Changes - The U.S. saw more than 27,000 pump shipments in Q4, with renewals from loyal customers making up over half of the shipments [18] - Internationally, Q4 sales grew 17% year-over-year, delivering $80 million in sales and 11,000 pump shipments [19] Market Data and Key Metrics Changes - The company began direct commercial operations in the U.K., Switzerland, and Austria, with expectations for strong performance in these markets [9][27] - Direct sales represented approximately 5% of total international sales in 2025, expected to increase to about 15% in 2026 [28] Company Strategy and Development Direction - Tandem's strategy focuses on modernizing commercial operations, delivering new technology, and reshaping the business model to drive sustainable growth and profitability [8][13] - The company plans to accelerate pharmacy coverage for its products, transitioning to a pay-as-you-go reimbursement model to enhance customer access and reduce out-of-pocket costs [15][22] 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% [21] - The transition to a pay-as-you-go model is expected to moderate 2026 sales growth but is seen as a key driver for long-term value creation [23][30] Other Important Information - The company plans to launch multiple new products in 2026, including Mobi Tubeless, which is expected to redefine pump wearability [11][12] - The anticipated revenue for 2026 is projected to be in the range of $730 million to $745 million, incorporating pricing headwinds due to the new business model [26] 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 range of 10%-11%, with double-digit growth in shipments and a return to growth in new shipments [35] 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 one-third of lives covered [40] Question: Why is now the right time to implement the pay-as-you-go model? - Management noted that experience gained in Q4 and positive discussions with payers made this the right time for the transition [44] Question: How will the transition to direct sales impact revenue growth? - Management explained that while there are near-term headwinds, the transition is expected to create long-term benefits and improve market access [49] Question: What are the key levers for margin expansion moving forward? - Management highlighted pricing strategies and product cost reduction initiatives as significant levers for improving margins [56]

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]

Core Insights - Tandem Diabetes Care reported Q3 CY2025 results with revenue of $249.3 million, exceeding analyst expectations by 5.6% and showing a year-on-year growth of 2.6% [1][6] - The company's GAAP loss per share was $0.31, which was 3.6% better than the consensus estimate of $0.32 [1][6] Operational Performance - The third quarter was characterized by improved operational efficiency and commercial execution, leading to a positive market reaction [3] - Management attributed the performance to the modernization of U.S. commercial operations, increased pricing contributions, and early traction from new product offerings [3][5] - Changes in sales processes and organizational restructuring have resulted in better sales productivity and a strong customer mix adopting both t:slim and Mobi pump platforms [3] Future Outlook - The company plans to expand pharmacy access, launch new products, and enhance direct international operations [4] - New product introductions, such as Mobi Tubeless and integration with continuous glucose monitoring systems, are expected to drive customer growth [4] - The focus on a fully closed-loop pump system and a multichannel approach is anticipated to improve both top-line and margin performance as the company enters new international markets [4] Financial Metrics - Adjusted EBITDA was reported at $2.77 million, which was a 50% miss compared to analyst estimates of $5.55 million [6] - The operating margin improved to -9.2%, up from -10.7% in the same quarter last year [6] - Sales volumes fell by 4.8% year on year, compared to a decline of 24.7% in the same quarter last year [6] - The company's market capitalization stands at $900.7 million [6]