Hello, and welcome to Tandem's fourth quarter and year-end 2025 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.

Today's discussion will also include references to both GAAP and non-GAAP financial measures. Please refer to our earnings release, issued today and available on the Investor Center portion of our website, for a reconciliation of these 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, will be leading today's call, and he'll be joined by Leigh Vosseller, Executive Vice President and Chief Financial Officer. Following their prepared remarks, the operator will open the call up for questions.

Thanks in advance for limiting yourself to one question before getting back into the queue. I'll now turn the call over to John.

Thanks, Susan, and welcome, everyone. 2025 was a defining year for Tandem, where we surpassed the milestone of $1 billion in sales, while delivering on our mission to provide new innovations, improved outcomes, and a revolutionary experience to nearly half a million customers worldwide.

Momentum built across the year and culminated in Q4 results, where we set multiple records, while delivering double-digit growth and improved profitability. Seeing the dedicated efforts and strategic focus of our entire team makes me both proud of what we've accomplished and excited for what lies ahead.

In addition to our financial performance, I'm equally proud of our execution against the three key initiatives we prioritized at the beginning of the year, which were modernizing our commercial operations, delivering new technology, and shaping our business model. Together, these changes are transformational for our company, and set a strong foundation for Tandem to drive sustainable growth and profitability in 2026 and beyond.

In my prepared remarks today, I'll be speaking to each of these key initiatives, starting with the modernization of our commercial organization, which positions us for strengthened execution worldwide. In the United States, we expanded our sales team and updated our sales processes.

We also began implementing new systems during 2025 that will provide significant efficiencies and benefits to our sales team in 2026. In addition, we began expanding our dedicated commercial efforts for people living with type 2 diabetes.

Turning to our international business, we delivered a strong performance in 2025, setting record sales once again. This accomplishment is even more impressive, as we did so while preparing for direct commercial operations in the UK, Switzerland, and Austria.

The transition activities went exceptionally well, as our team hired talent in these countries, while smoothly coordinating the distributor separations and implementing the necessary back-end infrastructure. As a result, I am proud to share that we are now live and beginning to serve customers through our direct operations in Europe.

Our learnings from going direct in these countries will serve as a playbook to further expand our direct operations internationally in '26 and '27, which provides us the opportunity to deepen relationships with the diabetes community, while improving both price and margins. Complimenting our commercial efforts was the second key initiative for 2025, delivering new technology across our portfolio.

Early in the year, we launched Control-IQ+, our next-generation automated insulin delivery algorithm that is indicated for people living with type 1 diabetes down to age 2, and for adults with type 2 diabetes, which doubles our addressable market. It's designed for easy onboarding and use.

We also generated clinical evidence that allows us to use training to simplify the carb counting experience. We ended 2025 launching two highly sought-after pump features in the US, which was the launch of FreeStyle Libre 3 Plus for t:slim and Android control for Mobi.

Early response to both of these offerings has been positive and contributed to our growth in the fourth quarter. We plan to build on this momentum in 2026 and have multiple new products either eminently launching, awaiting regulatory clearance, or reaching key milestones in the development path.

We'll have three new product launches in the second quarter, which include a scaled launch of Mobi internationally, a launch of Mobi integration with the FreeStyle Libre 3 Plus beginning in the US, and Dexcom's 15-day sensor integration on both pumps and platforms globally. We also recently submitted a 510(k) with the FDA for a pregnancy indication for Control-IQ+ technology.

Tandem is a company founded on innovation, and in 2026, we plan to uphold the ongoing commitment to redefining pump wearability with the launch of Mobi Tubeless. This will be Tandem's first patch pump offering, and the world's first patch pump with extended wear technology.

As a reminder, Mobi Tubeless is our novel infusion site option for the existing Mobi pump that transforms it into a tubeless patch device, allowing for interchangeability between tubed and tubeless wear on one platform. We plan to file our 510(k) submission in the second quarter, and are preparing for its launch in the second half of the year.

In addition, our pipeline also includes SteadiSet, our extended wear infusion set technology, our next-generation Mobi featuring further miniaturization from our Sigi technology, software features such as dual glucose ketone sensor integration, and our pursuit of offering the world's most robust fully closed loop AID system. Tandem's leadership in AID has been evident since the first launch Control-IQ in 2020.

We are committed to maintaining this position, and plan to begin a pivotal trial for the fully closed loop algorithm later this year in support of a FDA filing in 2027. As you can see, our innovations across Tandem's pump systems, applications, and insights continue to define why our pipeline is the most exciting in diabetes.

Finally, our third main initiative in 2025 centered on reshaping our business model, which is expected to be one of the most impactful levers to deliver both market growth and profitability. We took significant steps to advance our pharmacy strategy across United States.

Pharmacy access is widely associated with the significant advantages to offering customers with lower average out-of-pocket costs and easier onboarding. It also provides benefits to healthcare providers through a streamlined prescription process, and a benefit to payers by providing access to technology that improves member outcomes with enhanced data visibility.

As a result, manufacturers like Tandem typically receive greater economic reimbursement when serving customers through the pharmacy channel. Our first year of experience with pharmacy access proved these assumptions to be true.

Therefore, in 2026, we are accelerating our efforts to increase pharmacy coverage for both t:slim X2 and Mobi platforms, and plan to drive utilization of the pharmacy benefit for all our customers. A key aspect of this acceleration is our decision to adopt a pay-as-you-go reimbursement structure, which creates a near-term offset to sales, while significantly strengthening our business model over time.

Our business is distinctly advantaged in making this sort of a transition, as we have more than 300,000 existing customers regularly ordering supplies in the US. By transitioning these customers to pharmacy, it provides them the channel benefits faster, while helping mitigate Tandem's near-term impact to revenue.

We considered a pay-go business model when we first launched into the pharmacy channel in 2025, and based on the experience we gained in payer interactions throughout the year, have decided it is strategically the right move for our business now to drive market expansion and profitability. With the addition of pay-go, Tandem will be best-in-class in all ways, with products, outcomes, service, affordability, and accessibility.

Now I'd like to ask Leigh to provide additional detail on the 2025 results and expectations for the year ahead. Leigh?

Thanks, John. 2025 was a record year for Tandem, which is highlighted by our milestone achievement of more than $1 billion in worldwide sales and multiple records in Q4, including our highest sales, gross margin, and pump shipments.

In 2025, worldwide sales grew 12%, our second year in a row of double-digit sales growth, based on a 10% increase in the US to $707 million, and 15% internationally to $308 million. Focusing on the fourth quarter, our record worldwide sales of $290 million represented 15% year-over-year growth.

This is the strongest sales quarter in our company's history, and is of particular significance, as it was achieved during a period of commercial transformation. In the US, our Q4 sales increased 14% to $210 million.

This growth was driven by more than 27,000 pump shipments, our highest quarterly achievement. Renewals from our loyal customers made up more than half of the shipments, and MDI conversions represented approximately two-thirds of customers new to Tandem, consistent with trends across the year.

We also benefited from a greater portion of our supply sales through the pharmacy channel. In all, sales through the pharmacy channel nearly doubled from Q3, growing to $16 million or 7% of total US sales this quarter.

Only a few percent of our total installed base ordered supplies through pharmacy in Q4, creating a meaningful opportunity as we expand awareness and accessibility for our large existing base of over 300,000 customers. Internationally, we grew 17% year-over-year in the fourth quarter, delivering $80 million in sales and 11,000 pump shipments.

This marks our strongest Q4 performance to date, driven by growth in both pump and supply shipments. We also realized benefit from favorable FX, offset by $4 million associated with our transition to direct operations, primarily impacting pump sales.

For the full year, the total distributor destocking and inventory buyback impact was approximately $7 million, slightly lower than the $10 million we had estimated, due to a partial delay in timing from 2025 to the first quarter of 2026. Turning to margins, we delivered on our commitment to improving profitability in a meaningful way.

We expanded gross margin by 3 percentage points to 54% for the full year, and reported our highest quarterly margin ever at 58%. This achievement stems from success in reducing product costs, driving manufacturing efficiency, and executing on our pricing and channel initiatives.

We managed our Q4 operating expenses well, as they were essentially flat year-over-year and sequentially. This reflected investments in SG&A to support our commercial initiatives, offset by planned efficiencies throughout the organization.

As a result, adjusted EBITDA was 11% of sales in the fourth quarter, a 10 percentage point improvement over the prior year. Additionally, we generated our first positive operating margin since 2021 at 3% of sales in Q4, which is an improvement of 15 percentage points over the prior year.

One key contributor to this leverage was a reduction in non-cash stock-based compensation to a reduced quarterly run rate of approximately $20 million. We exited the year with nearly $300 million in total cash and investments, generating free cash flow in both Q3 and Q4.

We have great conviction that the combination of our differentiated portfolio of products and business model changes provide us the ability to achieve our long-term objectives of accelerated sales growth, with a gross margin of at least 65%, and an operating margin of 25%. Demonstration of this momentum was evident as we exited 2025.

As John discussed, we are entering 2026 in the US with a new value proposition, as we transition to a pay-as-you-go reimbursement model in the pharmacy channel. Pay-go can be a key driver for accelerated pump adoption, as it eliminates the upfront payment at time of pump purchase, which has historically been one of the top barriers for adoption.

A pay-go business model also lends to a more predictable revenue stream, as customers purchase supplies over time, unconstrained by renewal cycles. In transition from a model where revenue is typically recognized upfront, 2026 sales growth may be more moderated.

We have the added benefit that can come from shifting our sizable existing installed base into pharmacy to lessen the near-term impact to sales. In all, this transition positions us well for meaningful long-term value creation.

Our new pay-go contracts are expected to be effective beginning late in the first quarter. Importantly, in 2026, pump shipments will be the key indicator of our progress in growing the market, while expanding margins.

Pump shipments in the US are expected to increase 10% to 11% year-over-year, returning to new pump growth led by MDI conversions. Renewal pumps are expected to comprise more than half of total shipments.

The catalysts enabling this growth are new technology in expanded markets and pharmacy channel access, building off last quarter's momentum and scaling across the year. Contribution from Mobi Tubeless is not included at this time, as its benefit will depend on FDA clearance and launch timing.

We will be providing additional metrics this year for greater visibility into the pay-as-you-go transition, which we will discuss at a high level on today's call. More details on our assumptions are provided in the earnings call slide deck posted in the Investor Center portion of our website.

Starting with pumps, we anticipate that pump orders through the DME channel will still make up approximately 80% of our shipments in 2026, while we scale pharmacy access. Over the course of two to three years, we expect the ratio between the channels to flip, and the majority of our shipments will be through pharmacy.

When serving a customer through pharmacy, there will be no upfront reimbursement for the pump. Sales will be recognized consistent with recurring supply purchases, which are anticipated to be reimbursed at a premium of more than four times DME, pricing in line with what is seen in the market today.

The sales impact of this transition between the channels is anticipated to be the most pronounced in 2026, while we build up the percent of our installed base ordering supplies through pharmacy. Exiting 2025, our US installed base was approximately 325,000, with a low single-digit percent ordering supplies through pharmacy.

As a result, our 2026 US sales are expected to be in the range of $730 to $745 million, based on growth in pump shipments of 10% to 11% year-over-year. This incorporates $70 to $80 million of pricing headwinds reflecting our adoption of a pay-as-you-go model.

Pharmacy sales are expected to be approximately 15% of total US sales in 2026, up from 4% in 2025. In the long term, sales through pharmacy are expected to make up more than 70%.

When thinking about the cadence of US sales across 2026, total pump shipments are expected to follow a seasonal curve similar to 2025. For example, in Q1 of 2025, we saw a nearly 30% decline from Q4 of 2024 due to DME deductible resets on January 1st.

The pharmacy penetration rate is expected to start low in the first quarter, similar to levels we saw exiting 2025, and scale linearly across the year. Turning to our international business, we began direct commercial operations in Switzerland, UK, and Austria in the first quarter of 2026.

Sales productivity in these countries is expected to scale across the year. In the fourth quarter, we plan to transition to a direct model in additional key European markets.

In the direct model, ASP premiums will vary by geography, expected to be at least 30% higher than our current pricing in the individual markets. These ASP gains will partially offset an anticipated $15 million associated with distributor destocking and inventory buybacks.

As a result, our 2026 international sales are expected to be in the range of $335 to $340 million for the year. Direct sales represented approximately 5% of total international sales in 2025, and are expected to be similar in the first quarter of 2026 as we scale our direct launches.

For the full year of 2026, we expect direct sales will be approximately 15% of total international sales. Overall, worldwide sales for 2026 are expected to be in the range of $1,065,000,000 to $1,085,000,000.

This incorporates $85 to $95 million in total sales headwinds associated with our strategic business model changes. Worldwide sales are expected to be in the range of $236 to $240 million in the first quarter.

This includes approximately $10 million of headwinds split between the US and international. Our clearest indicator of success in 2026 will be market expansion as measured by pump shipments, and will not be evident in our sales growth expectations as we progress towards a more predictable and profitable revenue stream.

We also maintain our commitment to delivering meaningful margin expansion, reflecting benefit from our pricing strategies, a focus on product cost reduction, and continued spending rigor. Gross margin is expected to step up to a range of 56% to 57%, scaling from nearly 54% in the first quarter to 60% in the fourth quarter.

Adjusted EBITDA is also expected to demonstrate leverage in the range of 5% to 6% for the full year of 2026. We anticipate adjusted EBITDA to be -2% to -1% of sales in Q1, due primarily to US seasonality, returning to positive in Q2.

In summary, we now have multiple levers that can grow the business, independent of new product cycles. In combination with our expansive product portfolio, we believe these business model initiatives provide the opportunity for us to deliver accelerated growth in 2027 and beyond.

Thanks, Leigh. As you can see, 2025 was a year full of tremendous accomplishments that positioned Tandem for increasing success.

Our ongoing dedication to innovation and improving our customers' lives continues to motivate us to reach new milestones. I want to thank every member of the Tandem team for your steadfast pursuit of excellence, collaboration, and adherence to our shared mission.

Your contributions have driven our success and will propel us to another year of meaningful progress, impact, and growth. This is an important and exciting time in Tandem's journey.

We are well positioned to deliver best-in-class technology to our customers in a more streamlined and cost-effective way, while advancing our global business model and creating meaningful long-term value for our shareholders. Thank you, everyone, for joining us today, and I look forward to updating you as the company continues to progress.

Hey, thanks so much for taking the questions, and congrats on a really strong finished year, both top line and on EBITDA line. I think you're going to get a lot of questions here around the new model.

Appreciate all the information in the slide deck, kind of spelling it out, laying it out. It's certainly something that folks have talked about and thought about just in diabetes generally, that moving in this direction, particularly for automated insulin delivery systems.

One question I guess is you gave pretty good guidance on Q1, which was clear. For the full year in the US, the OUS growth with the $15 million headwind is sort of like a 9 9% to 10%, and underlying is the right way to think about that, kind of in the mid-teens.

I guess you have low double-digit US shipments, mid-teens OUS kind of underlying growth, to get to sort of like a low double-digit underlying sort of performance metric for next year, absent the pay-go changes?

I think that's correct, Matt. I think if you look at the overall revenue growth or shipment growth for the year, it's going to be in the line of 10% to 11%.

It's going to be double-digit growth in shipments. We're also expect to see a return to growth in new shipments.

I would say that is the best indication of our performance next year, including the profitability, because when you look at the revenue numbers, the revenue numbers are impacted by the headwinds from the pricing that comes along with pay-go. This is a very impactful change in the business.

We're very excited about it. I think when you look at it, basically we double or more than double the revenue, the lifetime revenue from a patient.

That's a substantial change. While at the same time, we are going to substantially reduce their out-of-pocket and improve the experience.

That's a real win in both sides. Like I said, we're very excited about this.

It's going to be impactful. I think when you look at the impact in the P&L, certainly there's a revenue hit from the pricing headwind.

When you look at gross margin, you look at adjusted EBITDA, we do show solid performance there. As I said, a shipment growth is the real numbers to look at in 2027 for 2026 for us.

Good afternoon, everybody. Can you hear me okay?

We can, Matt.

Great. Appreciate you taking my question.

A lot to chew on, a lot to ask. I guess I'll ask the expectation of 20%, roughly 20% of pumps in 2026 going through the pharmacy.

Can you give us some context on where you are from today on a coverage and contracting standpoint, and where you'd expect to be exiting the year? Just trying to reconcile the 20% mix versus maybe where you are on the contracting side, what progress you've made there.

Thank you.

Sure, happy to. I would say there are two ways to think about coverage for us.

We do have contracts with all of the major PBMs, the top three, which gets you about 80% of covered lives under contract. What we're really focused on is the formulary access where we have roughly a third of lives covered today.

Think about that as just the beginning, as we're launching into the pharmacy with the pay-as-you-go model, which those contracts would be effective late in the first quarter. At the very beginning here, I would expect low volume, but it will continue to scale up across the year to average to that 20% point that you mentioned, in terms of pump shipments going out the door with a $0 upfront payment.

That's a little bit separate or different from the amount of our installed base that we expect to be ordering through the channel. Think about this as a complement.

While we have that headwind on the upfront piece, we have the ability to mitigate some of those headwinds by transitioning or shifting more of our current DME customers into the pharmacy channel. Similarly, that percentage will start low.

We came out of the fourth quarter with less than 5% ordering through the pharmacy channel, and we expect that to scale up across the year as well. On average for the year, you can think about that as roughly 10% of our customers across the year that will be ordering their supplies through the pharmacy channel.

Good afternoon. Thanks for taking the questions.

Congrats on a nice quarter here, and on the bold move here. As Matt Miksic said upfront, this had been, I guess talked about for a long time, John, this pay-as-you-go model.

My questions are really, why now? Why is this the right time?

The long-term pharmacy goals, why is 80% the right number in two to three years? I assume that excludes Medicare fee-for-service.

How are you thinking about attrition changing with a pay-as-you-go model? Thank you.

We have been thinking about this for a while, and I think in the fourth quarter, we gained a lot of experience just in our pharmacy business. We've had conversations with a number of payers.

We think it's very doable. We've talked about pharmacy for a while now, and I think it's absolutely the right time to make this transition.

We've got a number of other things that are very positive when it comes to the business. As I said, this is a very impactful decision for us, but it's the right one and we're very excited about it.

I'll take the question about the goals and your question on attrition. As we think about the goals, this is just the beginning, and we're working to build up additional formulary access, and as well as within the formularies that we have, to build up attachment from the downstream payer plans.

What we see is over the two to three years is what it will take for us to build up to optimal coverage, if you want to call it that, where at that point we probably will have at least 70% of our sales going through the pharmacy channel. That's a complete flip of our business model obviously from where it is today.

Attrition is a question that we're often asked as we think about pharmacy channel at all, where people don't necessarily have what you would call lock-in periods like they have in DME. What we've seen in our experience in the DME channel is that even though people stay with us for four years because of that warranty period, we see people staying well beyond the four years, whether it's through another pump purchase or just staying on the pump outside of warranty because high quality of the pump, it just keeps working, there's no need to transition.

We feel comfortable that when people try out our technology, they stick with it, and even in this model where maybe they won't have the same sort of dynamics in terms of restrictions from switching from one to another, we think they'll stick with us.

Thanks. Appreciate all the information and the different metrics this quarter is going to be helpful to track these initiatives as they go forward.

John, I wanted to ask about the international transition. When you first started talking about this, it seemed like it was largely going to be a 2025 headwind.

Now it sounds like it's going to have a significant impact on 2026, and possibly even beyond, depending on sort of what other countries you're getting into late this year. Can you talk about why it's such a protracted process, and how do we think about the point at which you've completed this transition to direct?

I think that first of all, I think our team did an amazing job this year. When you think about it, we've made the transition from the distributors.

We actually began to hire sales force in the new markets that were going into. Then we built and installed the infrastructure that will enable us to actually ship a product and bill for it.

All of those are major tasks. I think that we're biting off a significant amount of operations when we go into these new countries this year.

Of course, we're going to three this year, and I think that trying to do it all at once would be just too risky. I think that putting it into a two-year period is the right way to do it.

As we did progress this year, we essentially got all of that done. We are now live in those three countries.

We installed all of the infrastructure to do that. We're basically using that as a playbook now, and we're going to do the exact same thing this year for the next countries that come in 2027.

I think that we feel good about it. I think it's staged properly.

I think that when we get to 2027, I think that that's the majority of the transition that we plan to make. I think sort of in the long term, we intend to have a hybrid model where we do have direct business and we intend to continue to work with many of the fantastic distributors that we have in the international markets.

It's gone very well, and I think it's going to go just as smoothly in '26 and '27.

Hey, good afternoon, guys. Thanks so much for taking the question and really congrats on a good quarter and for making this move here.

I guess, Leigh, just on the leverage, that was really nice to see in the quarter, good to see in the guidance and the commitment to that. I'm just curious what the different levers are here.

Obviously, ultimately, pricing in the pharmacy and the significantly higher ASP there is helping. Maybe talk a little bit about the levers going forward in '26, but also as you think over the next few years.

Thank you so much.

Sure, thanks for the question, Danielle. You named probably one of the biggest levers we have right now, which is pricing.

As we look at the value that can come from this transition that we're making in the pay-as-you-go model, that will continue to bear great fruit for us in the next couple of years in terms of a growth perspective on revenue and profitability. Also still important to remind that we do have a number of product cost reduction initiatives in place.

One of them really comes from Mobi as we continue to build and scale that part of the business. In the long term, Mobi, and we're getting very close with the pump to being at scale, the manufacturing cost of a Mobi versus a t:slim is 10% to 15% lower, so that's one piece of it.

Then as we continue to build up the cartridges and think about that contribution, that will be 20% or lower or higher, I should say, reduction in costs versus the t:slim. As Mobi continues to grow in scale, that will continue to drive gross margin benefit too.

Then you can just take that forward and think about any new product that we launch. Part of our design principles in the R&D process are to consider that new products need to have a better margin profile than the products that we have in the market today, and continue to improve upon the products that we have in the market today.

I would say between pricing and our initiatives within the manufacturing and R&D areas, that's really what's going to drive that leverage in gross margin. Then think a little further down the P&L to the operating margin.

Similarly, we continue to look at our infrastructure and think about what's the best way, how to be most efficient. We're constantly looking for opportunities and ways to reduce the need to hire more people in the future and just better serve our customers with a lower headcount base going forward.

Hello, afternoon. Thanks for taking the question.

Love to talk about the acceleration that you're expecting on the new pump shipment side here in '26. It's one of the better numbers we've seen over the last several years.

I know you have Mobi coming out with Libre 3 Plus and then the 15-day, but you're not assuming any benefit from tubeless here in '26. Why the confidence in the ability to do that without, especially that patch kind of product here in '26, and maybe deconstruct how you get there to see that kind of acceleration?

Thank you.

I would say that, while we don't have Mobi in the revenue plan, that's typically the way we've done it in the past, a little bit more conservative when it comes to uncertainty. I would say that we have high confidence we're going to get this thing approved this year.

When you consider Mobi will now have multiple sensors integration, it'll have Android and it'll have iOS, and then it'll also have a tubeless implementation. There's nothing else like that on the market.

I think as you look at the build-up just to get to the tubeless product, we are adding a great deal of functionality to these products. We're also expanding Mobi into the OUS markets, and we're expanding FreeStyle Libre 3 into the OUS markets as well, which has been a point of competition.

I think when both those products are there, it's going to be a completely different picture. I think the pipeline is certainly a big piece of it.

I would say that a lot of the work that we've done with the sales force in terms of improving their productivity, as we mentioned, we have a brand new system coming online here next month, basically. That's going to substantially improve their efficiency and productivity.

We expect to see that contribute to the new starts. Then finally, I think that pharmacy is something that we think is going to have an impact on our business this year.

I think when you look at that, really it's the new technology, it's the sales organization and the improvements that have happened there last year, and then it's also pharmacy. I think the combination of those will drive the growth that we're going to see in 2020 2026.

Hey, everyone. Congrats on the great quarter, and thanks very much for taking my question.

Maybe to start, just wanted to circle back on some of the tubeless Mobi commentary. Did I have that right?

You said planning on submitting the 510(k) submission in the second quarter of this year is the first part?

That's correct. Yes, we plan on submitting it in the second quarter.

We have had a great deal of very responsive support from the FDA, and so we do feel highly confident that we'll get it approved in the second half of the year.

Hi, thanks for taking the question. I get your comments on pharmacy shift and going to flip in a few years.

Can you talk about at a high level how that's going to impact the P&L and sales growth in '27 and '28 in more detail? It's a little bit confusing as you're going to continue to have that shift through the next few years.

Sure, happy to. When you think about we're talking about the headwinds this year, this year is where we expect that to be more pronounced as we're just launching into it and we don't yet have what I would call the cover for it coming from the supply sales or the reimbursement on supplies.

You can think first of all for every pay-go customer we get into the model, we're going to be getting reimbursement on supplies more than four times what we get in DME today. As you build up that base of customers who benefit from getting a pump with no costs upfront, that's going to be a tailwind on revenue in the next couple of years.

Then add to it that we have over 300,000 t:slim and Mobi customers today in our existing installed base, and the opportunity to shift those people from the DME to the pharmacy channel will also create a tailwind. That's an immediate benefit from one day when they're ordering in DME to the next day when they're ordering in pharmacy, you'd immediately see that appreciation.

I think what's really important this year is even though this is a near-term headwind and it does have a moderation effect on revenue growth, we're still demonstrating margin expansion at the same time. It's showing the power of what this shift can look like in this first year, and just you can imagine how much better it gets in the coming years.

Great. Thank you so much.

I was wondering if you can shed some light on cadence through the year. The $70 to $80 million revenue headwind, how do we see it through the year?

I think you indicated that this would be effective, I believe you said, in late Q1 '26. Anything you can share on cadence on sales and margins, that would be helpful.

Thank you.

Sure. I think the way to think about it is, obviously, in this first quarter, it's going to be a very low percent of our shipment volumes that will have this effect from the pay-go reimbursement.

The bulk of those headwinds are probably going to be hitting more in the last couple of quarters of the year. Think about it as low single-digits percentage scaling up to a number that averages to 20% for the year.

In margins, also, so as we have the same opportunity to transition our supply customers, similar to what we've seen in years past, margins will start lowest in the first quarter, call it nearly 54%, getting up to about 60% in the fourth quarter of the year. You can think about that scaling pretty linearly across the quarters this year.

I should add that in the first quarter in particular, we factored in about $10 million of headwinds worldwide, and you can think about that as roughly split between our international operations and the transition to going direct, and between the headwinds that we could see in the first quarter for the pay-go transition.

Great. Thanks, guys.

Good afternoon. I'll pivot to international, and maybe, Leigh, you can talk to some of those moving parts.

It seems like you've got call it 300 call it 3% revenue growth from the extra 30% price and an incremental 10% of volumes. I'm guessing your FX tailwind, I don't know, is 4%, 5%.

Then you got this headwind from the move to direct. Maybe you can just flush it out.

What's the underlying growth? Seems like it might be 7%, 8%, high single digits, and compare that to how you exited the year, which seemed on a really, really good trajectory of mid to high teens.

Thanks for the question, John. You're right, there are a lot of moving parts.

I think at the highest level, I'll just start with the fact that we're actually very strong in the international markets, and continuing to expand that market. Majority of our shipments today still come from new customers, and we're just beginning to see a more meaningful contribution from the renewal opportunities there.

Then you take some of these structural pieces, and you think about it. As you come into 2026, we have the benefit from those markets that are going direct already, that are going to provide that price appreciation.

This year, you're not going to see the full effect of that 30% that you mentioned. That's a way to think about long term.

Any market that goes direct, we should see a premium of approximately 30% in any given year. The pricing when you blend it this year, direct to distribution, it's probably mid-single to high single-digit price increase, building up across the year as we transition into those markets.

That is, if you will, funding the headwinds that we're going to see in the additional markets that are going to go direct this year. As we think about that headwind, we've sized that at about $15 million.

Thinking about, as I just mentioned, roughly $5 million-ish in the first quarter, and the rest of it majority will be hitting in the back part of the year, probably the fourth quarter. Underlying all of this, we're very confident and excited about the opportunity we have in the market.

Part of the reason for going direct in these markets is this puts us closer to the customer, better able to sell and the benefits of our technology and bring more people over to Tandem.

Hey, thanks for the question. I wanted to ask about the quote in the press release.

We are talking about accelerated sales growth in 2027 and beyond. It's been a while since I've seen you guys talk about a year ahead.

Just wanted to see what is driving that visibility and confidence, how much of that's pay-as-you-go versus tubeless, and as you kind of look forward and plan ahead.

I think the most impactful element is going to be the ongoing implementation of pay-as-you-go. We do have the headwinds this year, but we are going to be making substantial progress.

As we move and get more and more of our install base, more and more of our new customers into the pay-go model, the revenue impact of that is substantial. That's going to grow in time.

I think most impactful is certainly going to be the transition to pay-as-you-go. As Leigh mentioned, in addition to the pumps and their supplies that come along with the new pumps, there's also the opportunity to convert the 325,000 people who are existing customers to pharmacy as well.

Both of those are meaningful. We also have a very exciting pipeline.

We have a lot of technology coming to market this year. We will have the first extended wear patch on the market, and that's going to be meaningful.

I think that right now there's nobody competing with our patch competitor. We will have a device that has the same form factor, it'll be in the pharmacy channel, and it has a better algorithm.

We expect that to do quite well. Then beyond that, we've got a very exciting pipeline that's going to continue to come, including our move to a fully closed loop system, with hopefully we see that in the market in 2027 or 2028.

I think all of these things add up to a confidence as a management team that we will see growth going forward in 2027 and beyond.

Thank you. Good afternoon, guys.

I am on a train, if I break up here, I'll just jump back in queue. Leigh, you mentioned that the pharmacy pricing going to be consistent with what others are out there on a tubed pump side in the pharmacy channel.

Just to put a number on that for modeling purposes, $450 a month, is that a reasonable price to dump into our model as we try to build this out? You talked about some of your installed base maybe starting to get their supplies in the pharmacy channel.

I think from your comments, it sounded like they'd get that same price for their supplies, but ostensibly that higher supply price is also supposed to include some amortization of the pump. If I'm a current user that jumps into the pharmacy channel, am I also going to get that $450 a month or whatever the right number is there?

Just help out. Thank you.

A lot of good commentary and questions there, Jeff. The way I'm asking people to think about it this year is we're just getting going with this, right?

We're launching into the market with these new contracts effective here late in the first quarter, and there's a mix of contract terms, I would say, within the contracts that we have. Think about the dynamics could be whether we have preferred or non-preferred access, which influences what the rebate looks like, how much copay assistance we use.

Long story short, what I'm suggesting to start with this year at least from a modeling perspective is to think about it as about $350 per month per customer. That's going to give us the starting point as we take the time to monitor the trends to see what is the real utilization and mix across the contracts that we have, and further inform you in the future for how to think about where that average state could be.

I would say that's a really good starting point, and that alone is a really great benefit versus the DME pricing that we see today. When you think about this, asking about what does this mean for people who already got a pump versus people are getting a pump for the first time, it's almost like a reset, if you will.

Basically going forward, the whole business will be structured, I would say, agnostic to whether they're getting a pump today or not, and it will be consistent pricing across the customers, if that makes sense. Again, I would start with about $350 per month as a modeling point, and we'll continue to inform you along the way as we get more information.

Hi, this is Elena for Jason. Thanks for taking my question.

I wanted to ask a question on type 2. Could you please give us some color on the progress there?

There is also an update to the ADA guidelines recently on C-peptide testing. How does this new guideline help with your discussions with CMS, and can this lead to an inflection in type 2 new starts?

Thanks.

Hi. We're excited about the type 2 market.

It doubles the size of our addressable market, and both the US and OUS. In 2025, we obviously got the indication.

We ran the pilot, and we went to full commercial availability in the fourth quarter. We learned a great deal in the pilot, and we actually saw a pretty significant bump in starts between the third and fourth quarter, the quarter that we actually had full organization working on this.

As we look at 2026, it's basically a core that we intend to focus on type 2 and invest in marketing and also some research relative to PCP and OUS markets. I think we've got tailwinds as we enter the market with FreeStyle Libre 3 and Mobi implementation, obviously Mobi Tubeless, and pharmacy channel is also going to drive uptake.

Relative to the C-peptide decision, it's also a potential positive force, as the Senate has asked CMS to review the NCD and make a decision on in August of 2026, which is not that far away. Certainly having that go away will substantially improve Medicare's access.

We have one quarter's worth of data, and it's very positive. I think that we're looking forward to seeing good growth in 2026 based on everything that we've got going on.

Hi, this is Felipe on for Rich. Just in the context of renewal pump shipments, we get a lot of questions about a potential drop-off in 2027 just 2027 considering the prior four-year drop-off in new patient starts.

I'm just wondering if you could help give us some context on how you're thinking about, I guess, out-year pump shipments, and how that fits into your strategy with pharmacy, and maybe any potential offset you can get in pharmacy if there is a potential drop-off in pump shipments in 2027. Thanks so much.

Sure. It's a great theme that I'd like to highlight.

As you do think about it, I think people have looked at our model and seen that when you look back four years ago, the number of opportunities will decline here in the coming years a little bit from what we've seen before where we were on an uptick. This year in particular, we still expect renewal shipments based on the normal model and the waterfall that comes with it, that renewal shipments will still grow double digits year-over-year.

We have that tail of opportunities even though new opportunities in 2026 are flat versus what came to market in 2025. I think it's a great tie-in to pharmacy.

As we look ahead and think about this model, it greatly reduces the reliance on renewals as a driver for the business. It's important that we retain our customers, and we have really great retention rates, but we don't have to worry about going out every four years and if a patient's comfortable with the pump they're on and it's working just fine, trying to convince them that they should buy their next pump, or worrying about insurance cycles that come with it.

I think for us it's really important to transition these folks into the pharmacy channel where, for them, it's a lower out-of-pocket, it's easier for physician to prescribe, and there's none of this worry about when I get my next pump. As we look ahead where the opportunities in the US at least will start to decline, that won't be a concern about our ability to grow the business.

You didn't ask about international. It has nothing to do with pharmacy, but I just want to underscore our renewal opportunity outside the US is growing and becoming a more meaningful contributor there, and there's a lot of room to benefit from that in the coming years.

Thanks, it's Phil on for David. Appreciate you taking my question.

Probably directed at Leigh. I wanted to double-click on the gross margin trajectory.

A lot of emphasis, and fairly so, on sales and sales cadence moving forward. Logically there's a headwind to gross margin this year with the sales transition.

Can you talk about sort of the trajectory or the exit rate from maybe this year, or when things normalize in '27, for underlying gross margins, and help quantify what the headwind is maybe this year that's going to lift next year or beyond? Thanks.

Sure. Maybe I'll just start with the fact that in 2025, before we even had a meaningful pharmacy opportunity, we already stepped up gross margins substantially year-over-year by 3 points on an annual basis.

In 2026, I think important to understand that even with this moderated sales growth rate, we can still expand margins another 2 to 3 points. We expect to exit this year at about a 60% rate.

You make a good point about the headwinds putting a little bit of pressure on margins. That just means that it gives us more opportunity to expand those faster in the future.

We're very focused on driving that. It's a very important part of our business.

We've always been focused on sales growth, but what we want to show is that we have the ability to drive margins like you see at competitive levels up across the market.

Hi. Thank you so much for taking the question.

There's a lot going on in 2026, both in the US and outside the United States. You've sort of addressed how to think about the first quarter, but can you help me understand revenue and, I guess, gross margins, the progression throughout the year?

Not to give specific second, third, or fourth quarter guidance, but maybe ratios or something just to sort of lay the groundwork so we set the models up correctly. Thank you.

Sure, I'm happy to help with that. I'll start with the US.

I think that's where you see probably where you're trying to untangle all the parts and pieces and how they might influence the year. From the perspective of US shipments, let's start with that.

Remembering that still 80% of our shipments will be through DME this year, I would expect the same seasonal curve on pump shipments. You think about the lowest point in Q1, the highest point in Q4, and that has a heavy influence on gross margins, and I would say the way our margins have been structured historically.

Where we've always seen that pumps have the highest gross margin and supplies are meaningfully lower than that. That's why you can expect a similar trajectory of gross margin across the year, starting at about 54%, scaling up to 60%.

When I say scaling up, I mean measurably stepping up across each quarter of the year. Because even though we have these headwinds, if you will, on the pump price, with the pump going out the door at zero dollars, we have that opportunity to continue to fuel margin expansion with the pricing benefit that will come from the supplies and the supplies we shift into the pharmacy channel.

We also have the OUS business to help there. We're going to be scaling up our direct business across the year, and that is also positive and beneficial to gross margins, despite those headwinds that we expect to see there.

I would say, when you think about the revenue models and the margin models, this year not yet too dissimilar from what you've seen from years past. We do expect, as we look ahead, as pharmacy becomes a bigger piece of our business, it will start to level out those seasonal curves to some extent.

For now, I think I would start with similar assumptions to what you've seen before.

Great. Thanks for taking my question.

If you could help us out with this transition on the pay-go model, how many months to break even on that in your models? Then I don't think you talked about free cash flow in 2026.

Do you expect free cash flow positive in '26? How should we think of the quarter cadence of the cash burn?

Typically Q1 is a heavy cash burn quarter. Just so there's no surprises.

Can you help us with that? Thanks.

Absolutely. I'll start with the break-even question.

There are actually number of ways to answer that question, but maybe one way that I can help you think about the impact on the business is when you think about a pay-go customer, there's a break-even point for an individual customer as we offer the $0 pump and it takes a number of months in order to cover that with the supply sales for that customer. Because we have this opportunity to shift our existing customer base, you can think about it as one pay-go customer plus two existing customers, you payback within a handful of months.

It doesn't take too long in order to payback or to cover this headwind that we would see. That also does tails a little bit into the cash question.

We did exit 2025 free cash flow positive. To your point, we usually see a dip in the first quarter of a year as we pay out annual incentives, compensation, and that sort of thing.

This year, on an annual basis, taking all this into consideration as we make the transition, we expect to be free cash flow neutral this year. By the end of the year, starting to ramp up back to a positive position as we move forward into 2027.

We're obviously, as we make this transition, going to be very mindful of our cash balance, but I think that's a good way to think about it across the year.

Hey, Leigh, I wanted to make another point about the move to pay-go that it may not be as clear as I've spoken about it a moment ago. As we move to pay-go, we eliminate a significant number of the barriers that we have with DME.

I think if you think about DME today, it's a problem for the physician to prescribe it. His office has to go and jump through hoops to provide information to justify the purchase.

It's troublesome for the patient, because they've got to go back and forth provide information, it takes time. The other thing, too, is one of the most significant challenges I think for people these days in the DME channel is it's a large out-of-pocket.

Starting now, some people might have to pay their full deductible. That can be $1,000 or more.

The benefit of the pharmacy channel is that it eliminates the friction. It's easy.

It's easy for the patient, and it's also very easy for the physician and their staff. It eliminates that large upfront payment.

The monthly payments are also they can be lower. Again it really does address the problems that we have in DME, and I think that it does explain, I think, why we expect to see the pharmacy drive uptick in new patients, and that's going to benefit the business.

Hi, this is Shaymus on for Suraj. Thank you for taking our question.

Can you just talk about what you need to do to move patients from the DME to the pharmacy? Anything that you can do to, I guess, move that faster to that channel?

Then with pay-as-you-go, as you move towards farmer, do you have to account for anything as a percent of bad debt or uncollectible as you switch to those contracts? Thank you.

Thanks for the question. I'll answer the last one.

Nothing particular to think about in terms of addition of unusual accounting treatment, I would say, in that regard. Think about it as a normal revenue stream as supplies are purchased over time.

The question about how to move patients, the first thing we do is we share with them how much better the benefit can be for them from an out-of-pocket perspective. When you compare to DME supplies, they often have to meet deductibles at the beginning of the year, it can mean a heavier out-of-pocket then.

Maybe it's best at the beginning of the year, but on pharmacy it can be more consistent, and we actually have the ability ourselves to help buy down or subsidize, if you will, that copay. The main thing is helping them to understand the benefit and how much better it can be for them financially.

People tell us how much they love our customer service, and they fear this change might take away that relationship they have with us, and we're reassuring them that this is good for you financially, and we will still maintain the same level of customer service that we have today. The only other, I would call, a small friction piece, if you will, is it does take another prescription from the physician.

We do need to get the physicians involved to write a new prescription for that patient within the pharmacy channel. None of these are insurmountable in terms of moving people over.

They're just work. That's why it's not an overnight change.

It's something we have to work on over time. We feel very confident in our ability to be able to shift those customers, and especially as we build more and more access, it can be a broader offering across the whole market.

Hey, everyone.

Mike, sorry you got cut off the last time.

No worries. I should have asked both upfront, so that's on me.

Thank you for circling back. I wanted to ask about the US renewal opportunities.

I think in 2025 it was up around 18% just for the opportunities, if I have my numbers right, and renewal shipments was up closer to around 10%. If renewal opportunities is effectively flat for 2026, what's giving you confidence that you can really grow that double digits this year?

Is there any kind of risk around that?

Great question. First, I'll just maybe give a little more direction on the shipments in 2025.

They were up well above 10%, we did see a higher growth rate on renewal shipments. When you think about 2026, the number of opportunities are flat compared to 2025, so that's one population.

The growth comes from the fact that we have a tail of customers from years past. Remembering how our renewal model works, when warranties expire, over the course of about 18 months, we get to a 70% or better capture rate of people buying that next pump outside of warranty.

What we have are still a fair amount of people from 2025, especially if you think about the people in the fourth quarter whose warranties expired, that we've hardly even talked to yet. There's still a nice sizeable opportunity base coming from '25 and some even left over from '24.

That's going to fuel the growth so we can still grow renewal shipments double digits in 2026. Then just wrapping it up with that concept again about pharmacy and the ability to shift people or transition them to pharmacy supplies, it will take away that reliance on driving those renewal purchases of a pump, and we can just keep them on their supplies as long as they would like without having to worry about that timing of when renewals come to market.

We're very excited, if you haven't taken that away from today, about this pharmacy opportunity for us as a business. This year is going to be a great year of transition for it, and I think you're going to really see some really exciting outcomes in the coming years, and so we look forward to demonstrating those in the coming quarters.