管理層發言
Welcome, ladies and gentlemen, to the second quarter 2026 Earnings Conference Call for Tactile Medical. This conference call is being recorded and will be available on the company's website for replay shortly. I would now like to turn the call over to Sam Bentzinger, Investor Relations at Gilmartin Group, for a few introductory comments. Please go ahead.
Good afternoon and thank you for joining today's call. With me from Tactile's management team are Sheri Dodd, Chief Executive Officer, and Elaine Birkemeyer, Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on the current expectations of management and are subject to inherent risks and uncertainties. These could cause actual results to differ materially from those indicated, including those identified in the risk factor section of our annual report on Form 10-K and our most recent Form 10-Q filed with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investors Relations portion of our website. With that, I'll now turn the call over to Sheri.
Thanks, Sam. Good afternoon, everyone, and welcome to our Second Quarter 2026 Earnings Call. Here with me is Elaine Birkemeyer, our Chief Financial Officer. We delivered another strong quarter of execution in Q2, highlighted by continued strength in our lymphedema business and meaningful profitability expansion. Total revenue was $85.7 million, up 9% year-over-year, with lymphedema contributing $73.6 million, up 12% year-over-year. AffloVest contributed $12.1 million, a 7% decline year-over-year due to temporary inventory management dynamics among several of our large DME partners associated with the launch of our next-generation AffloVest system during the quarter. Importantly, on a trailing 12-month basis, AffloVest revenue remains up 32% year-over-year, underscoring the durability of the underlying growth trend, even as we work through this near-term dynamic, which I will touch on shortly. Our strong revenue performance was complemented by another quarter of meaningful profitability expansion. Gross margin improved 180 basis points year-over-year and adjusted EBITDA increased 49% to $11.4 million, reflecting both operating leverage and disciplined execution across the business. We continue to be strategic and measured in our capital allocation, ending the second quarter with approximately $70 million in cash. Our balance sheet is strong, providing flexibility to invest in growth and return capital to shareholders over the short-, medium-, and long-term horizons. Based on our first-half performance, we are updating our full-year 2026 revenue guidance to a range of $360 million to $366 million. Within that outlook, we are projecting continued strength in revenue expectations for the lymphedema business while anticipating a more conservative view of the ordering patterns in our airway clearance business as some of our DME partners work through inventory as they convert to the next-generation AffloVest system. I will now review our second quarter performance by business line and provide updates on our ongoing strategic priorities. Elaine will then discuss our financial results in greater detail and provide additional perspectives on our outlook for the balance of 2026. Both the lymphedema market and our lymphedema business are healthy, and we are pleased to see the continued growth momentum, reflected in a 12% year-over-year revenue growth in Q2. As we have shared in the past, our sales organization calls on a variety of payor types, including vascular and oncology practices, lymphatic therapists, and the VA, each of which tends to serve different patient needs. As a result, our revenue mix across payor types — Medicare, commercial, and VA — naturally reflects these points and is further influenced by the unique coverage policy dynamics. Since aligning our documentation criteria with the now stable Medicare NCD policy, we continue to see increasing volume of Flexitouch orders, driven in part by our large number of Medicare patients accessing advanced pump therapy more directly than was allowed under the previous LCD policy. That growth was partially offset by the April 13th Medicare prior authorization requirement, which introduced additional administrative steps into the order process and contributed to some near-term moderation in Medicare order volumes during the quarter, even as Flexitouch adoption itself continues to grow. While the time from order completion to shipment is now slightly longer for these patients, prior authorization approval rates and adjudication timelines have tracked in line with our expectations. We moved quickly to prepare for these requirements ahead of the April 13th effective date and entered the quarter well-positioned to execute the new prior authorization process. With a full quarter of experience now behind us, we expect the initial impacts of the implementation to moderate and operational efficiency to continue improving as our teams and the MACs gain familiarity with the new requirements. Our commercial revenue mix continues to demonstrate durable growth, fueled by patient demand, product therapy options, and sales execution across the provider and clinician channels. While coverage policies are not uniform across commercial payors, we continue to see broad access to our therapies. Our efforts remain focused on reducing administrative burden and expanding patient access in areas where payor requirements or coverage limitations have not yet evolved to reflect the growing body of clinical evidence, society-based guidelines, and current standards of care. Regarding the VA, revenue performance here has less quarter-to-quarter variability due to the stable reimbursement environment and a more streamlined operating model. We continue to view the VA as a strategic long-term opportunity, given the breadth of providers and patient needs. To that end, we're really excited about our recently announced distribution agreement with ElastiMed to bring a novel compression therapy device specifically to veterans, active duty service members, and other beneficiaries served through the Department of Defense. We believe this opportunity will be an incremental growth contributor within the VA channel over time by expanding the range of treatment options available to patients and clinicians. I'll come back to this partnership in more detail shortly when we discuss our strategic initiatives. Turning now to airway clearance. As I mentioned, sales of AffloVest were down 7% year-over-year in the second quarter, reflecting temporary inventory management dynamics among several of our large DME partners associated with the launch of our next-generation AffloVest system during the quarter. As we work closely with the DMEs around the launch of our next-generation AffloVest system, we've learned of a few larger partners that had been carrying elevated AffloVest inventory levels. We expect this to moderate purchasing activity among these particular organizations as they work through existing inventory. As many of you know, this type of inventory management dynamic is common among DMEs. Based on our visibility today, we expect these inventory management dynamics to continue influencing ordering patterns throughout the third quarter, with purchasing activity beginning to normalize in the fourth quarter as their inventory levels rebalance. The underlying fundamentals of this business remain strong. Patient demand, the coverage environment, and AffloVest's competitive position are favorable. AffloVest is a differentiated product in a market leadership position supported by strong DME partnerships and a large addressable market. On a trailing 12-month basis, AffloVest revenue has grown at a compound annual rate of approximately 28% over the past two years and remains up 32% year-over-year in Q2 on a TTM basis. This underscores the durability of the underlying growth trend despite the near-term inventory management dynamics associated with the launch of our next-generation AffloVest system during the quarter. Importantly, airway clearance remains a profitable contributor to our business. We are confident that the recently launched next-generation AffloVest system will continue to solidify our category leadership position in high-frequency chest wall oscillation and remain the product of choice for DME partners, clinicians, and the patients they serve. Turning now to an update on LymphaTech. We believe this acquisition addresses two of the most important unmet needs in the lymphedema patient journey: earlier, more objective diagnosis and monitoring of disease progression, and the ability to personalize therapy to a patient's specific clinical needs over time. Starting with diagnosis, lymphedema is a chronic progressive disease that's largely diagnosed and monitored today through clinician evaluation, including girth measurement and patient-reported symptoms—inputs that are hard to standardize and unreliable for early detection. There are 20 million patients in the U.S. who have lymphedema but remain undiagnosed, and unlocking that population is a significant growth opportunity for us and, more importantly, for patient care. LymphaTech's FDA-cleared platform addresses the undiagnosed patient issue directly, providing objective, quantitative assessment of limb volume and circumference and generating a clinical-grade 3D model of the affected anatomy. This provides clinicians with a clear view of disease progression and gives patients a visual understanding of their own condition, which we believe strengthens engagement and supports more timely access to therapy. Today, LymphaTech is deployed as a Software-as-a-Service solution, primarily in oncology centers, where clinicians use it to establish patient baselines and monitor change over time. We see a larger opportunity ahead in expanding LymphaTech's role specifically as a diagnostic aid, helping close the gap for the millions of undiagnosed patients I just mentioned. As the market leader in this space, we would like to be the first to begin supporting these diagnostic needs of physicians and the complex patients they treat. To that end, we have submitted for an expanded indication as a diagnostic aid for lymphedema with an FDA approval expected in 2027. In parallel, we are advancing efforts to secure a Category III CPT code, which would establish a reimbursement pathway and support broader adoption over time. Looking ahead, LymphaTech also expands our R&D capabilities towards the second unmet need, integrating sensing and measurement directly into personalized therapy delivery, so treatment can be tailored to the patient's specific lymphatic care needs over time. We continue to advance integration activities with early clinician feedback reinforcing these key strategic opportunities we see ahead. We'll provide additional updates as we make progress on commercialization, reimbursement, and product development initiatives. Our Q2 performance was anchored by continued execution of our three ongoing strategic priorities: improving access to care, expanding treatment options, and enhancing lifetime patient value. Beginning with improving access to care, our stated focus has been on internal and external initiatives aimed at breaking down the barriers and friction points along the patient care journey. From an external perspective, improving market access conditions is supported by clinical evidence generation, guideline dissemination, and engagement with government and commercial payors. With respect to clinical evidence generation, today I'm pleased to share that the six-month manuscript for our head and neck clinical evidence program has been published in the International Journal of Radiation Oncology, Biology, and Physics. This study, a 236-patient trial across 10 sites, represents the largest randomized controlled trial to date evaluating advanced pneumatic compression therapy for head and neck cancer-related lymphedema. The results showed that Flexitouch delivered patient-reported outcomes comparable to therapist-guided care in a treatment-naive population with a strong safety profile and durable benefit over the six-month study period. We believe these findings are clinically meaningful because many head and neck lymphedema patients face barriers to accessing lymphatic massage therapy, including travel burden, cost, and delays in care. An at-home advanced pneumatic compression option can help address that access gap and support more timely treatment for this underserved patient population. With this publication, we will continue to focus on translating the evidence into broader provider awareness and payor engagement. Notably, the NCD policy language already allows advanced pump coverage for patients with head and neck lymphedema. Our efforts post-publication will now be centered on working with commercial payors to remove restrictive experimental and investigational designations so coverage policies can reflect the growing body of clinical evidence. We view this as a deliberate, evidence-driven effort to expand awareness, improve access to care, and support broader adoption over time. Next, on expanding treatment options, we have an exciting update to highlight. In July, we announced an exclusive U.S. distribution agreement with ElastiMed to bring MyoSleeve to veterans, active duty service members, and other beneficiaries served through the Department of Defense. MyoSleeve is a discreet, wearable, non-pneumatic compression device for the lower leg, providing an additional treatment option for patients in the earlier stages of chronic swelling, where consistent therapy adherence is important for slowing disease progression. Compression therapy is not one-size-fits-all. Clinicians benefit from having a range of treatment options that can be matched to the patient's clinical needs, anatomy, lifestyle, and disease stage. The device is designed to integrate seamlessly into daily life. It can be worn beneath clothing, allowing patients to receive therapy while going about their normal activities, which provides a more discreet and flexible compression solution. Leveraging electroactive polymer technology, MyoSleeve delivers dynamic compression through flexible bands that contract in sequence, all within a fully battery-powered design that requires no tubing, cords, or external controller. Importantly, the device can function in both active and passive compression modes, providing flexibility to support patient preferences while helping promote long-term therapy adherence and engagement. MyoSleeve expands our market-leading portfolio of lymphatic care solutions and is specifically a natural fit within the VA channel, where we have historically not offered a basic compression product. It is designed specifically for lower-leg patients earlier in their care continuum who may not require foot or knee coverage or the advanced capabilities of a pneumatic compression device. As a result, we view MyoSleeve as complementary to, rather than a replacement for, our pneumatic compression therapies including Flexitouch. We plan to leverage our established VA relationships, reimbursement expertise, and patient support infrastructure to launch MyoSleeve. While adoption is expected to build over time, we believe the product increases our addressable patient population within the VA channel and further advances our strategy of delivering comprehensive solutions to patients across the lymphatic care continuum. We look forward to providing additional updates as we progress through commercialization. Finally, our third strategic priority of enhancing lifetime patient value. Consistent with previous updates, we are continuing our targeted care navigation work, designed to give patients clearer guidance earlier in the process and reduce administrative friction. We believe embedding this work in our referral-to-ship process will reduce patient leakage, enhance the patient experience, and over time reduce sales rep involvement in the order process, supporting both referral growth and operating leverage. With that, I'll now have Elaine review our Q2 financial results in more detail and provide an update on our outlook for 2026.
Thanks, Sheri. Unless noted otherwise, all references to second quarter financial results are on a GAAP and year-over-year basis. Revenue and profitability exceeded our expectations during the quarter, driven by continued strength in our lymphedema business and disciplined execution across the organization. Total revenue in the second quarter increased by $6.8 million, or 9%, to $85.7 million, driven by continued strength in our lymphedema business. By product line, sales and rentals of lymphedema products, which includes our Flexitouch, Nimbl, and LymphaTech systems, increased $7.7 million, or 12%, to $73.6 million. Sales of our airway clearance products, which includes our AffloVest system, decreased $0.9 million, or 7%, to $12.1 million, reflecting temporary inventory management dynamics associated with the launch of our next-generation AffloVest system among a few DME partners during the quarter. Turning to profitability, gross margin was 76.3% of revenue compared to 74.5% in the second quarter of 2025. The increase in gross margin was attributable primarily to lower manufacturing costs, stronger collections reflected in revenue, and favorable mix benefits. Second quarter operating expenses increased $3.8 million, or 7%, to $58.5 million, reflecting continued strategic investments to support long-term growth, including investments in our commercial organization, technology initiatives, and operational capabilities. The change in GAAP operating expenses reflected a $2.0 million increase in sales and marketing expenses, a $0.5 million increase in research and development expenses, and a $1.3 million increase in reimbursement, general, and administrative expenses, primarily driven by strategic investments. Operating income increased $2.7 million, or 67%, to $6.8 million. Interest income decreased $0.3 million, or 34%, to $0.6 million due to our decreased cash position. Interest expense decreased $0.4 million, or 95%, to $19,000. Income tax benefit was $0.4 million compared to income tax expense of $1.3 million in the prior year period. Net income increased $4.6 million, or 142%, to $7.8 million, or $0.34 per diluted share, compared to $3.2 million, or $0.14 per diluted share. Adjusted EBITDA increased 49% to $11.4 million compared to $7.7 million in the prior year period, driven by revenue growth, gross margin expansion, and disciplined expense management. With respect to our balance sheet, we had $69.9 million in cash and cash equivalents and no outstanding borrowings at quarter end. This compares to $83.4 million in cash and no outstanding borrowings as of December 31, 2025. The decline in cash during the quarter primarily reflects the upfront payment made to allow ElastiMed to secure the exclusive distribution rights for MyoSleeve in the VA and Department of Defense. Share repurchases were completed during the quarter under our repurchase program. Excluding new strategic uses of cash, we generated positive operating cash flow during the quarter, and our balance sheet continues to provide meaningful flexibility to invest in growth and return capital to shareholders. Moving to review our 2026 outlook. For the full year 2026, we are updating our guidance and now expect total revenue in the range of $360 million to $366 million, representing growth of approximately 9% to 11% year-over-year. At the product line level, we continue to expect lymphedema revenue growth in the low double-digit range for the full year, while airway clearance revenue is now expected to be closer to flat year-over-year. This range reflects continued strength across our lymphedema business and a temporary impact of the inventory management dynamics within the airway clearance channel during the second and third quarters that Sheri discussed earlier. For modeling purposes for the full year 2026, we expect our GAAP gross margins to be 76% to 76.5%. Our GAAP operating expenses are expected to increase 10% to 12% year-over-year as the annualized sales organization investments and advanced tech-related investments continue throughout the year. We expect net interest income of approximately $2.4 million, a tax rate of 28%, and a fully diluted weighted average share count of approximately 23 million shares. We continue to expect to generate adjusted EBITDA of approximately $49 million to $51 million in 2026. While we are pleased with our strong first-half profitability, maintaining our outlook reflects a balanced view of temporary airway clearance inventory dynamics, the Medicare prior authorization transition, and continued investment in strategic growth initiatives. Our adjusted EBITDA expectation assumes certain non-cash items, including stock compensation expense of approximately $8.6 million, intangible amortization of approximately $4.2 million, depreciation expense of approximately $3.3 million, litigation-related costs of approximately $1 million, and one-time acquisition-related and integration costs of $1.3 million. With that, I'll turn the call back to Sheri for some closing remarks.
Thank you, Elaine. We believe our second quarter top- and bottom-line results reinforce the strength and resilience of our business model. We are growing, our profitability profile continues to improve, and we have the financial flexibility to continue to invest in opportunities that can further strengthen our long-term growth profile while maintaining a disciplined approach to execution. Our focus remains clear: improving access to care, broadening treatment options, and creating lifetime value through an enhanced patient experience. At scale, these strategies will drive growth through market leadership, market development, and operational excellence. Notably, LymphaTech expands our platform across the lymphedema care continuum, including upstream diagnosis and monitoring. The next-generation AffloVest system reinforces our commitment to innovation and airway clearance. And our MyoSleeve distribution agreement broadens our portfolio with an additional treatment option for veterans and active duty service members and their beneficiaries through the Department of Defense. Our clinical evidence and payor strategies will support broader access to care for underserved patient populations, and our order operations transformation will continue to unlock leverage and referral expansion. Tactile is well-positioned to generate sustainable, profitable growth, and deliver meaningful long-term value for our shareholders. I want to thank the Tactile Medical employees for all they do for patients, our clinical customers, and for each other. With that, operator, we'll now open the call for questions.
分析師問答
And our first question will come from Adam Maeder with Piper Sandler.
This is Kyle Winborne on for Adam. I guess, maybe I'll start on lymphedema. The performance was good there in the quarter. And maybe on the prior authorization updates that you gave. Given the performance and the momentum, it seems like maybe some of the ability to navigate some of the turbulence there was offset by strength in the underlying business momentum. But I'm curious, because last quarter we had a lot of discussion about sales acceleration in Q1 and maybe some shift in revenue into Q3 from Q2 due to the prior authorization requirements. Could you quantify any shift in orders and revenue between the quarters so we can get a sense of where normal order patterns are? Because given the strong quarter, were those timing impacts less prevalent than feared, or did your team's experience with this process carry you through successfully?
So, a couple of things. Definitely, lymphedema was a primary driver of the upside, and we continue to see really strong execution across our commercial organization, which is reflected in healthy referral trends, improved territory productivity, and continued NCD-driven Flexitouch adoption. Remember that we started to align our policy with that NCD change in November of last year. We added additional reps, so we've got more referrals coming in, that productivity is happening, and all of these things contributed to the overall growth. For sure the Medicare prior authorization, as we reported in Q1, did have a timing impact on when we thought those orders would flow through given there was more upfront administrative work. But that is starting to normalize more and more now. We're starting to see exactly what we expected to see, where the MACs are converging a bit more in terms of their adjudication policies. We were really proud of how our team stood up our capabilities, and we're seeing the MACs also starting to resource what they need on their side. So it really was a product of healthy referral trends, territory productivity, NCD-driven Flexitouch adoption, and the expected timing impact from the Medicare prior authorization. We're really pleased with the results on lymphedema.
Okay, great. That's helpful. And then maybe just continuing in the lymphedema business with this new distribution agreement with ElastiMed. I wanted to get a better understanding of how this will fit into the business model and what we should expect for impact to our models. I understand it looks like there was commitments to minimum purchase agreements and marketing and sales promotion. Should we expect any added OpEx here from the agreement? Or given your already established infrastructure, should this be more plug-and-play? And what could we expect from a revenue impact perspective and timing when we might expect contribution?
So, I'll answer your last question first. We do see MyoSleeve as an incremental growth contributor within the VA channel over time, but our current guidance does not assume any material contribution from MyoSleeve. So that answers the revenue side of your question. As it relates to OpEx, what we really like about this agreement is we are leveraging our existing infrastructure. We already have the VA as a call point. We already have very talented reps who are used to selling within the VA and to multi-provider specialties. The MyoSleeve now offers them another opportunity to go in with a more expansive portfolio, using the same talent that we already have within our current sales force. So we're really excited to be leveraging the resources that we already have, which made the VA a great starting point for that product introduction.
And our next question will come from Ryan Zimmerman with BTIG.
Just on the airway clearance dynamics, I wonder if we could dig in a little farther there. Why do the ordering patterns normalize in Q4? What are you seeing right now in terms of inventory levels that need to burn through? And when do we see the impact of the new AffloVest product start to kick in?
From a dynamic standpoint, when launching our next-generation product, it often causes partners to review overall inventory. In planning for the launch, some partners identified elevated inventory levels, and in turn we identified that they had more inventory sitting at some of those partners. It was limited to a few partners where they need to burn down that inventory before they pick up their normal purchasing patterns. We're aware of what that inventory looks like, and that has been built into our back-half guidance. That's why we're saying we believe that Q3 they'll start to burn through that inventory, and then starting in Q4, they'll start to pick back up on their overall ordering pattern. We feel confident that we have good visibility now to current inventory levels and we know what normal buying patterns are. This business can be a little bit lumpy on factors we can't control, such as cold and flu seasonality or patient affordability dynamics, but right now everything is really stable with reimbursement. This is a temporary, one-time dynamic driven by the introduction of a new product. As it relates to Gen 6, or our next-generation product, our DMEs are really excited to bring this product to patients. There is no incremental reimbursement for this; it's a better product on top of what was already the best product on the market. It has size adjustability, it's even lighter than our current product, it remains the only untethered vest that's out there, and now it offers connectivity. Our DME partners are excited to bring this to patients; they just need to burn through some inventory at a few of their branches, and then we'll be back exactly where we want to be starting in Q4 with regular ordering patterns.
Okay. And just to dig in a little farther on the guidance: you noted low double-digit lymphedema growth and airway clearance closer to flat. Does the lymphedema guide include any contribution from LymphaTech? And how much are you taking the airway clearance guidance down? If the overall midpoint is down $1 million, is there any incremental contribution, say, from LymphaTech that is offsetting any airway clearance weakness?
Yes, LymphaTech is already built into the overall guide. That's reflected when we talk about the health of the lymphedema business. LymphaTech continues to be a small portion of the broader lymphedema business growth for us. That growth is primarily driven by referral trends, territory productivity, and NCD-driven Flexitouch adoption. All of that is in the strength of the lymphedema business, which is why we are confident we're going to be delivering in the low double-digit range. Regarding AffloVest, we updated the top end but held the bottom end of the overall guide because we believe ordering patterns will normalize in the back half of the year as inventory rebalances among a few partners.
I just have one tiny follow-up. You said there's a near-term moderation in the lymphedema business from Q2 due to the prior authorization requirement. Are you able to size that, Elaine, as to what you may or may not make up in Q3?
I think the best way to look at it is to review our filings: the Medicare business was down in the quarter, and that's reflective of the timing impact we're discussing. Over time, we think that will start to normalize. From a sequential perspective, Q3 sequential growth is going to be on the larger side compared to years past and more similar to last year, reflecting the timing push from Q2 to Q3 related to Medicare prior authorization. We're expecting that normalization to occur through the back half of the year.
We'll go next to Brandon Vazquez with William Blair.
I wanted to stick with AffloVest first. Is there any way you can talk a little bit about sell-through versus sell-in to the channel? I'm trying to get a better sense of end-market demand. Is it still growing in line with the market? And can you quantify it or at least discuss it a little more?
Sure. The good news about the AffloVest story is that this is a temporary dynamic driven by us introducing a new product. This is not uncommon in the DME channel. Whenever a next-gen product is incoming or a manufacturer upgrades a platform, partners typically review what they currently have to determine future buying patterns. This triggered some partners to reassess and clean up inventory ahead of the launch. It's unfortunate in the near term, but it's temporary and contained to a small number of our largest DMEs. Overall, the market is still growing; there is more awareness of the disease state, and we already have the market-leading product and are adding an even better product with connectivity, improved sizing adjustability, and a lighter design. We feel very confident in this business: the patients are there, clinicians are excited about the next-gen product, it is a profitable product for us, and it is a healthy part of our overall business. We will get past this one-time temporary dynamic triggered by the launch of a new product introduction.
Got it. Okay. And then I'll ask two reimbursement or market access questions. First, regarding the new six-month head and neck data published — congrats — what are the next steps and timelines we should be looking for to improve market access on the private side? Second, you mentioned using AI internally to improve market access and operations. Can you talk about how those AI efforts are going and how the trends look into the rest of the year?
We're very excited to have the six-month head and neck publication in a well-regarded peer-reviewed journal, and we're eager to put that in the hands of payors and clinicians. The study showed Flexitouch versus usual care in treatment-naive patients, sustaining outcomes at two, four, and six months, which will be compelling for payors, clinicians, and patients. We had been engaging with payors to share the two-month data in advance of the six-month manuscript, and now that we have the six-month publication, we're back in front of payors asking for two things: immediate reconsideration of their current experimental and investigational policy designations, and if they don't agree to immediate reconsideration, at least to put it in their docket for future policy updates. We're having good discussions and feel that the weight of the evidence will be very helpful. The timing of payor policy change is not something we control; it takes time. Note that the Medicare NCD already allows head and neck patients to receive a product, so the work primarily involves commercial payors and Medicare Advantage plans updating their policies. From an operations and AI perspective, our tech transformation is progressing well. We are partnering with AI companies to streamline work and reduce friction in moving documentation from physicians into the order management process. Those efforts are going well, and we'll provide updates when there's material information to share. The goal is to make the process easier for providers and for us, and to get therapy to patients sooner.
And we'll go next to Ben Haynor with Lake Street Capital Markets.
Just one more on AffloVest. It sounds like it's a handful of distributors or DMEs impacted. Can you share how much of AffloVest sales are coming from the top DMEs versus the rest? Is the mix heavily concentrated where the top accounts represent most of the volume?
Sure. There are over 1,000 DMEs in the market, but our focus is on the top 10 DMEs by volume; these are respiratory-focused DMEs. We have 20 account managers concentrating on those top 10 DMEs. Different DMEs manage inventory differently; some are hyper-diligent and some reassess inventory when triggered by an event like a product change. This dynamic is limited to a very few partners, but they are larger partners because that's where our focus is. The good news is we now have more visibility into the inventory they're carrying in an indirect model, and they are as eager as we are to get inventory moving so they can bring the next-gen product to patients during the upcoming cold and flu season. We are working closely with those partners to burn down inventory in Q3 and normalize ordering patterns starting in Q4.
That makes sense. On LymphaTech, you have the FDA submission in and you're working on a Category III code. Once you have those in place, what's the plan to take it more broadly to the market?
We're working on fuller integration. The product today is sold as SaaS largely into oncology centers, but the broader opportunity includes the 20 million undiagnosed patients who are in oncology, vascular, the VA, and with therapists. Getting FDA clearance as a diagnostic aid is a critical first step to market an objective tool for clinicians to identify those patients. Securing a Category III CPT code will help establish a reimbursement pathway and support broader adoption over time. The clearance for the diagnostic indication is our first step, and we continue to evaluate the best approach for commercialization and integration across channels.
Lastly, on account managers and field sales force territories, it looks like there are a few fewer account managers this quarter versus last quarter. What are the plans into the end of the year and into 2027?
We're only down two account managers from what we reported in Q1, so I would call that effectively flat. Day-to-day there will be some flow, but we've seen a lot of stabilization in our one-to-one territory manager to product specialist model. We're committed to that approach and have seen the team mature, leveraging CRM tools and improving productivity. We'll hold at this ratio and continue to evaluate targeted additions where territory growth warrants it, but right now we're focused on optimizing the people and tools we have.
That concludes our question-and-answer session. Ladies and gentlemen, thank you for your participation. This also concludes today's teleconference. You may disconnect your lines and have a wonderful day.