Tandem Diabetes Care Q2 2026 Earnings Call Transcript

Tandem Diabetes Care (NASDAQ: TNDM ) released second-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary Tandem Diabetes Care reported a successful second quarter, with worldwide pump shipments increasing over 10% year-over-year, and significant margin improvement, marking the second-highest gross margin in the company's history. S. sales, and the modernization of the commercial organization with a new CRM system to improve sales efficiency. The company's focus on new technology involved the global launch of Control-IQ, CE Mark approval for broader indications, and the submission of Mobi Tubeless for FDA approval, aiming for a scaled launch by year-end.

S. sales up 5% and international sales up 7%. Gross margin improved to 57% while operating expenses remained flat. 085 billion for 2026 and a gross margin expectation of 56% to 57%, driven by increasing pharmacy adoption and international direct channel growth.

Full Transcript OPERATOR Thank you for standing by and welcome to the Tandem Diabetes Care second quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 11 on your telephone.

If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Susan Morrison, Chief Administration Officer and Investor Relations. Please go ahead.

Susan Morrison, Chief Administration Officer and Investor Relations Hello and welcome to Tandem's 2026 second quarter earnings call. Today's discussion will include forward-looking statements. These statements reflect management's expectations about future events, our product pipeline development timelines and financial performance and operating plans, and speak only as of today's date.

There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements, which are described in our press release issued earlier today and under the Risk Factors portion of our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Today's discussion will also include references to both GAAP and non-GAAP financial measures.

Please refer to our earnings release issued earlier today and available on the Investor Center portion of our website for a reconciliation of non-GAAP measures to their most directly comparable GAAP financial measure and other information regarding our use of non-GAAP financial measures. John Sheridan, Tandem's President and CEO, and Leigh Vosseller, Executive Vice President and Chief Financial Officer, will be providing prepared remarks on today's call, after which the operator will open up the call for questions. Thank you for limiting yourself to one question before rejoining the queue. I'll now turn the call over to John.

John Sheridan, President and Chief Executive Officer Thanks, Susan. We appreciate everyone joining the call today. The second quarter marked an important step forward for Tandem. We are executing against our strategic priorities while demonstrating operational momentum, improving our financial performance, and providing broader access to our technology.

S. A highlight of our performance was improvements in new pump start trends, led by a standout number of people transitioning from multiple daily injections. Internationally, we saw an acceleration of adoption in the countries where we launched direct efforts earlier this year. Additional Q2 highlights included significant margin improvement, including the second-highest gross margin of any quarter in our company's history.

We also advanced the global launch of new technologies while preparing to expand our portfolio with the FDA's submission for Tandem Mobi's tubeless feature. We'll discuss each of these accomplishments in greater detail on the call today. I'll begin my remarks with an update on the three strategic priorities we laid out at the beginning of the year, which included reshaping our business model, modernizing our commercial organization, and delivering new technology. In March, we launched pay-as-you-go reimbursement in the pharmacy channel.

This transition was designed to create clear benefits for customers, prescribers, and payers, with better economics to Tandem. During the second quarter, our focus was on early implementation. This included updating the end-to-end processes for how our technology is prescribed, how we support customers, and how our orders are processed. We are encouraged with the momentum behind this transition and beginning to see efficiencies that are positively contributing to our results.

We now have approximately 45% formulary coverage, which is already approaching the high end of our range for the goals this year. Access is a critical first step to driving PayGo adoption, and teams are now focused on driving plan utilization. S. sales through the pharmacy channel increased to 10%.

This early traction reinforces our confidence in the pharmacy strategy and the broad-reaching benefits it can deliver. The second key initiative I'll touch on is modernizing our commercial organization to improve productivity and support profitable growth. The work has been underway for the past year, and we are pleased with the progress. Key accomplishments include the deployment of a new CRM system to improve sales force efficiency and effectiveness, provide deeper insights into our customer base, and support our global channel strategy.

S. pharmacy transition and supporting direct commercial launches internationally. Our international direct launches began earlier this year in the UK, Switzerland, and Austria, with plans for France to follow in the fourth quarter. This strategy better positions Tandem to serve our customers and health care providers in these markets while strengthening our financial profile.

The final key initiative I'll discuss is our delivery of new technology. , including pregnancy. Similarly, we strengthened our advantage internationally as we received CE Mark in Q2 for pregnancy as well as adults living with Type 2. Great excitement is also building internationally as we are in the early stages of introducing Tandem Mobi outside the United States.

We plan to bring our tiny pump with big outcomes to more than 10 countries by year end, including some of our largest markets. In addition, our team has been working to broaden CGM compatibility for Abbott's FreeStyle Libre 3; t:slim is now compatible in seven countries outside the United States, and we plan to expand to additional markets throughout the year. , and international markets are soon to follow. These launches are consistent with our efforts to ensure the broadest possible coverage across devices and markets.

Looking ahead, the team continues to drive long-term innovation across our pumps and infusion technology, software ecosystem, and AID algorithms. Starting with pumps, we reached an important R&D milestone in Q2 with a 510(k) submission for Mobi Tubeless. This new infusion site option is designed to transform the existing Mobi pump into a tubeless AID system, giving users the unique flexibility to choose between tubed and tubeless wear on a single hardware platform by simply changing the supplies they use.

Compatible with the existing Mobi pump, subject to FDA clearance, this will be Tandem's first tubeless pump offering and the world's first with extended-wear technology, an important differentiator that enhances our position in this dynamic market segment. Pre-commercial preparations are actively underway. Our goal remains to begin a scaled launch this year, after which time we'll begin training our field and HCP community on the novel tubeless Mobi feature. We will also begin updating our payer contracts and completing operational activities in support of the launch.

Infusion technology is another key area of focus as we work to expand tubed and tubeless options, improve comfort, extend wear time, and simplify the user experience. To support this, we are launching AutoSoft Plus, a new infusion set designed to enable quick set changes with reliable one-handed insertion. , later this year. This timing is important as we continue to manage shortages from our key infusion set supplier.

We believe Q2 was the period of greatest impact, and our supplier expects availability to improve through the second half of the year. The launch of AutoSoft Plus is expected to reduce the demand for the SKUs currently under allocation. Looking to the first half of 2027, we plan to provide further choice in infusion sets with the launch of SteadySet, our proprietary technology that is FDA cleared for wear up to seven days, which is now in manufacturing scale-up. The last technology advancement I'll discuss is automated insulin delivery.

Since Tandem was founded, we've maintained our vision of creating an AID system worthy of the term artificial pancreas. Today we are closer to this vision than ever and excited to begin sharing more details. Under our long-standing research collaboration with the University of Virginia, we are advancing their next-generation ADANET algorithm into a compelling, fully closed-loop experience for everyone. ADANET, which stands for Automated Insulin Delivery as an Adaptive Network, has been under active development and clinical testing for the past several years.

We are developing a system designed to help both Type 1 and Type 2 users meet the clinical time-in-range guidelines, whether they are new to pump therapy or longtime users. Our goal is to achieve this without meal announcements or other user inputs, but because diabetes can vary day to day, we are also designing the system to incorporate additional user context and respond in more personalized ways. This is an ambitious goal, but advancing closed-loop technology requires solving the most complex real-world use cases.

Over the past two years our development and user experience teams have been working toward that objective, culminating in FDA approval of an IDE in Q2 and positioning us to begin a pivotal study later this year. Overall, the second quarter progress reflects the strength of our execution across the priorities that we set for the year. We remain encouraged by momentum that we are building and remain focused on translating these initiatives into broader customer impact while improving our financial performance. With that, I'll turn the call over to Lee to provide more detail on financial results.

Leigh Vosseller, Executive Vice President and Chief Financial Officer Thanks, John. Our second quarter results reflect strong execution and accelerating progress across our strategic initiatives, which are beginning to deliver sustainable operational and financial benefits. It was a record second quarter performance worldwide for sales, pump shipments, and gross margin. Beginning with sales, we shipped approximately 33,000 pumps worldwide.

This was driven by the continued demand for Control-IQ, new product innovations, and improved channel access. Worldwide sales totaled 255 million, increasing 6% year over year, or 5% in constant currency. This was the tenth consecutive quarter we delivered record results for the respective sales quarter, which is a trend we plan to continue building on even during our business model transition. , we shipped a Q2 record of 22,000 pumps, growing 7% year over year.

We've seen improvement in the new start trajectory with Q2 new starts nearly flat to last year, but stepping up impressively by more than 20% from Q1. Notably, new customers coming from MDI grew mid single digits year over year and now represent approximately 70% of new pump starts. This improvement was driven in part by increasing enthusiasm for Tandem Mobi, which now represents more than half of our shipments to new customers, as well as the availability of a more affordable option through pharmacy renewals. More than half of our pump shipments continue to be a robust source of business at double-digit growth.

This retention is a direct reflection of the value we place on delivering high levels of customer service, driving strong customer satisfaction. S. sales totaled 179 million, increasing 5% year over year. This reflects measurable improvement in pharmacy adoption, partially offset by the expected impact of infusion set constraints from our key supplier.

As John discussed, we continued the implementation and rollout of our PayGo offering through the pharmacy channel that began in March. During the second quarter, our teams focused on educating patients and physicians about the offering, as well as optimizing the new processes and workflows for scale. In this first full quarter under the PayGo structure, pharmacy pump shipments were approximately 10% of total shipments. As a reminder, pump shipments through the pharmacy channel do not include upfront reimbursement, which creates a near-term headwind to revenue when compared to a traditional DME sale.

This initial pump headwind is more than offset over time by higher pricing for recurring supplies from both new PayGo customers and existing customers who transition from use of their DME benefits. In the second quarter, the initial headwind from pharmacy pumps was approximately 8 million, yet we still saw more than half of our sales growth driven by net favorable pricing. S. installed base of approximately 325,000 people who use their pharmacy benefit to purchase supplies.

S. sales in Q2 in our first full quarter of offering. PayGo pump adoption progressed slightly faster than supply conversions of existing customers and is expected to continue to do so in the third quarter directionally. We anticipate that each of these measures will continue to step up across the quarters as momentum builds, tracking in line to achieve the average annual modeling assumptions we illustrated at the beginning of the year.

I'll also note that we are seeing a higher average monthly ASP for pharmacy supplies compared to the $350 per month originally provided. For modeling purposes, we are not updating our baseline assumption at this time as we'd like to gain more experience, but needless to say, the early data is encouraging. Turning to our international performance, we shipped approximately 11,000 pumps in the second quarter, which is an increase of 19% year over year.

While shipment growth in the quarter was primarily driven by our distributor markets, we are beginning to see encouraging traction in our direct European markets from our direct sales and marketing efforts, which reinforces our expectations for sustainable top-line growth and margin expansion over time. International sales totaled 75 million, increasing 7% year over year, or 6% in constant currency. Direct channel sales represented approximately 13% of international revenue, more than double prior-year levels.

As we continue executing our transition strategy, sales reflect approximately 3 million of headwinds related to distributor inventory buybacks in markets where we have already transitioned to direct operations, as well as destocking ahead of future transitions. , were greater than anticipated this quarter. The impact was largely due to timing, as infusion sets were received late in the quarter, limiting distributor order fulfillment before quarter end. Turning to margins, gross margin was 57%, improving 5 percentage points year over year and 2 points sequentially.

It reflects continued execution against our key margin drivers, including price appreciation from our global channel strategies and product cost improvements as Mobi volumes continue to scale. Operating expenses were 159 million, remaining relatively flat year over year while we continue to invest in strategic growth initiatives in our global commercial infrastructure and product portfolio. Adjusted EBITDA margin increased to 3% of sales, demonstrating a positive result for the fourth quarter in a row. This continued improvement reflects the benefits of scale and sustained gross margin expansion while maintaining investment in future growth opportunities.

Stock-based compensation expense decreased meaningfully in the quarter to 16 million, or 6% of sales, down from 11% of sales in the prior year.