## 1) Q4 was less about “the number” and more about **proof of operating leverage** Tandem’s Q4 2025 print signaled that the model can flex when volume and mix cooperate: worldwide sales were a record **$290.4M**, paired with a record **58% gross margin** and **positive operating income** (about **$8.3M**, ~3% of sales). ["Worldwide sales of $290.4 million"](0001438133-26-000009|1) ["Record quarterly gross margin of 58%"](0001438133-26-000009|1) ["Operating income of $8.3 million"](0001438133-26-000009|1) The “tell” is that record revenue coincided with record pump units—**38,000 worldwide pump shipments** (27,000 U.S.)—which matters because it expands the future supplies annuity that the coming PayGo pivot is explicitly designed to monetize. ["Worldwide pump shipments of 38,000"](0001438133-26-000009|1) ["United States pump shipments of 27,000"](0001438133-26-000009|1) ## 2) The 2026 guide is intentionally conservative—because Tandem is **choosing** to reset near-term revenue optics For 2026, the company guided sales to **$1.065B–$1.085B** while still targeting **~10%–11% shipment growth**—a classic setup where unit momentum is expected to outpace reported revenue because the revenue model is being re-architected mid-flight. ["Sales… $1.065 billion to $1.085 billion"](0001438133-26-000009|1) ["Shipments… increase approximately 10% to 11%"](0001438133-26-000009|1) Management is unusually explicit that the U.S. shift is about building “more predictable and profitable revenue” that “may not be evident in our 2026 sales expectations,” i.e., they’re prioritizing lifetime value over near-term reported revenue. ["more predictable and profitable revenue that may not be evident"](0001438133-26-000009|1) ## 3) PayGo/pharmacy is a deliberate trade: **lower upfront pump economics** in exchange for a larger, stickier stream Tandem’s latest 10-K frames the strategic core: moving pump reimbursement away from upfront DME economics and toward a pharmacy-based “pay as you go” structure that **eliminates upfront pump reimbursement** and shifts economics into ongoing supplies purchases. ["eliminate the upfront pump reimbursement"](0001438133-26-000010|0) The alpha “between the lines” is that the company is telling you reported revenue and gross profit can dip at the moment pumps ship—even if lifetime economics improve—because pumps have historically carried higher gross profit per unit than supplies. ["may initially experience a decrease in sales and gross profit when pumps are shipped"](0001438133-26-000010|0) ["pumps have historically had a higher gross profit"](0001438133-26-000010|0) ## 4) Quantifying the near-term drag: the guide embeds **an $85M–$95M transition headwind (computed)** In the 2026 outlook, Tandem breaks out **U.S. PayGo headwind of ~$70M–$80M** and **international direct-transition headwind of ~$15M**; together that implies **~$85M–$95M** of total 2026 headwind **(computed)**—a material gap that can mechanically reverse as the new model seasons. ["Pay-as-you-go headwind of approximately $70 million to $80 million"](0001438133-26-000009|1) ["Direct transition headwind of approximately $15 million"](0001438133-26-000009|1) That drag is concentrated in the U.S.: 2026 U.S. sales guided to **$730M–$745M**, explicitly “reflect[ing] transition to pay-as-you-go business model in pharmacy channel.” ["Sales of approximately $730 million to $745 million"](0001438133-26-000009|1) ["reflects transition to pay-as-you-go"](0001438133-26-000009|1) ## 5) International: 2026 will look “messy” on purpose as Tandem takes control of the channel International 2026 sales are guided to **$335M–$340M**, with the company flagging transition preparation for direct commercial operations in select countries. ["Sales of approximately $335 million to $340 million"](0001438133-26-000009|1) ["transition to direct commercial operations"](0001438133-26-000009|1) The 10-K confirms the strategic direction: Tandem began direct sales/training/customer support activities in **2026** starting with **the U.K., Austria, and Switzerland**, and intends to extend the transition across 2026—another near-term volatility creator that can expand long-term control over pricing, access, and customer experience. ["starting with the United Kingdom, Austria, and Switzerland"](0001438133-26-000010|0) ["intend to continue this transition… across 2026"](0001438133-26-000010|0) ## 6) The “hidden” long-term setup: gross margin expansion is being underwritten while they transition Even while absorbing the model change, Tandem guided 2026 gross margin to **~56%–57%**, after delivering **58%** in Q4 2025 and **54%** for FY2025—suggesting the company believes manufacturing scale + mix + channel strategy can more than offset near-term friction. ["Gross margin is estimated to be approximately 56% to 57%"](0001438133-26-000009|1) ["Record quarterly gross margin of 58%"](0001438133-26-000009|1) ["Expanded gross margin to 54%"](0001438133-26-000009|1) ## 7) Pipeline/catalysts: product breadth is quietly turning into a distribution advantage Recent disclosures highlight tangible product and integration momentum: Tandem began a global commercial rollout of **t:slim X2 integration with FreeStyle Libre 3 Plus** and initiated **Android mobile control for Tandem Mobi**—both supportive of conversion and retention as CGM choice and phone-centric control become table stakes. ["rollout of t:slim X2… FreeStyle Libre 3 Plus"](0001438133-26-000009|1) ["Initiated launch of Android mobile control"](0001438133-26-000009|1) Meanwhile, the 10-K outlines a roadmap toward more form factors (including a **tubeless/patch-like option for Mobi** and a next-generation patch pump leveraging **Sigi Patch Pump** technology), which is the kind of platform expansion that can matter disproportionately once PayGo makes “getting in the door” easier. ["tubeless… option for Mobi"](0001438133-26-000010|0) ["next-generation… incorporates our Sigi Patch Pump"](0001438133-26-000010|0) ## 8) The real risk (and opportunity): **execution risk is the price of unlocking a better business model** Tandem is explicitly warning investors that the pharmacy-channel strategy could fail to achieve its intended outcome and could materially harm results—this is management effectively acknowledging that 2026 is a high-activity transition year, not a smooth compounding year. ["If our pharmacy channel strategy fails"](0001438133-26-000010|0) But that same risk language also signals conviction: Tandem believes lower upfront friction can “accelerate market adoption” and increase supplies volume over time—i.e., they are leaning into a larger installed base and higher lifetime value per customer, even if the accounting makes the near-term look softer. ["lower upfront cost… accelerate market adoption"](0001438133-26-000010|0) ["increase the volume and sales of our supplies"](0001438133-26-000010|0)

## 1) Q4 was less about “the number” and more about **proof of operating leverage** Tandem’s Q4 2025 print signaled that the model can flex when volume and mix cooperate: worldwide sales were a record **$290.4M**, paired with a record **58% gross margin** and **positive operating income** (about **$8.3M**, ~3% of sales). ["Worldwide sales of $290.4 million"](0001438133-26-000009|1) ["Record quarterly gross margin of 58%"](0001438133-26-000009|1) ["Operating income of $8.3 million"](0001438133-26-000009|1) The “tell” is that record revenue coincided with record pump units—**38,000 worldwide pump shipments** (27,000 U.S.)—which matters because it expands the future supplies annuity that the coming PayGo pivot is explicitly designed to monetize. ["Worldwide pump shipments of 38,000"](0001438133-26-000009|1) ["United States pump shipments of 27,000"](0001438133-26-000009|1) ## 2) The 2026 guide is intentionally conservative—because Tandem is **choosing** to reset near-term revenue optics For 2026, the company guided sales to **$1.065B–$1.085B** while still targeting **~10%–11% shipment growth**—a classic setup where unit momentum is expected to outpace reported revenue because the revenue model is being re-architected mid-flight. ["Sales… $1.065 billion to $1.085 billion"](0001438133-26-000009|1) ["Shipments… increase approximately 10% to 11%"](0001438133-26-000009|1) Management is unusually explicit that the U.S. shift is about building “more predictable and profitable revenue” that “may not be evident in our 2026 sales expectations,” i.e., they’re prioritizing lifetime value over near-term reported revenue. ["more predictable and profitable revenue that may not be evident"](0001438133-26-000009|1) ## 3) PayGo/pharmacy is a deliberate trade: **lower upfront pump economics** in exchange for a larger, stickier stream Tandem’s latest 10-K frames the strategic core: moving pump reimbursement away from upfront DME economics and toward a pharmacy-based “pay as you go” structure that **eliminates upfront pump reimbursement** and shifts economics into ongoing supplies purchases. ["eliminate the upfront pump reimbursement"](0001438133-26-000010|0) The alpha “between the lines” is that the company is telling you reported revenue and gross profit can dip at the moment pumps ship—even if lifetime economics improve—because pumps have historically carried higher gross profit per unit than supplies. ["may initially experience a decrease in sales and gross profit when pumps are shipped"](0001438133-26-000010|0) ["pumps have historically had a higher gross profit"](0001438133-26-000010|0) ## 4) Quantifying the near-term drag: the guide embeds **an $85M–$95M transition headwind (computed)** In the 2026 outlook, Tandem breaks out **U.S. PayGo headwind of ~$70M–$80M** and **international direct-transition headwind of ~$15M**; together that implies **~$85M–$95M** of total 2026 headwind **(computed)**—a material gap that can mechanically reverse as the new model seasons. ["Pay-as-you-go headwind of approximately $70 million to $80 million"](0001438133-26-000009|1) ["Direct transition headwind of approximately $15 million"](0001438133-26-000009|1) That drag is concentrated in the U.S.: 2026 U.S. sales guided to **$730M–$745M**, explicitly “reflect[ing] transition to pay-as-you-go business model in pharmacy channel.” ["Sales of approximately $730 million to $745 million"](0001438133-26-000009|1) ["reflects transition to pay-as-you-go"](0001438133-26-000009|1) ## 5) International: 2026 will look “messy” on purpose as Tandem takes control of the channel International 2026 sales are guided to **$335M–$340M**, with the company flagging transition preparation for direct commercial operations in select countries. ["Sales of approximately $335 million to $340 million"](0001438133-26-000009|1) ["transition to direct commercial operations"](0001438133-26-000009|1) The 10-K confirms the strategic direction: Tandem began direct sales/training/customer support activities in **2026** starting with **the U.K., Austria, and Switzerland**, and intends to extend the transition across 2026—another near-term volatility creator that can expand long-term control over pricing, access, and customer experience. ["starting with the United Kingdom, Austria, and Switzerland"](0001438133-26-000010|0) ["intend to continue this transition… across 2026"](0001438133-26-000010|0) ## 6) The “hidden” long-term setup: gross margin expansion is being underwritten while they transition Even while absorbing the model change, Tandem guided 2026 gross margin to **~56%–57%**, after delivering **58%** in Q4 2025 and **54%** for FY2025—suggesting the company believes manufacturing scale + mix + channel strategy can more than offset near-term friction. ["Gross margin is estimated to be approximately 56% to 57%"](0001438133-26-000009|1) ["Record quarterly gross margin of 58%"](0001438133-26-000009|1) ["Expanded gross margin to 54%"](0001438133-26-000009|1) ## 7) Pipeline/catalysts: product breadth is quietly turning into a distribution advantage Recent disclosures highlight tangible product and integration momentum: Tandem began a global commercial rollout of **t:slim X2 integration with FreeStyle Libre 3 Plus** and initiated **Android mobile control for Tandem Mobi**—both supportive of conversion and retention as CGM choice and phone-centric control become table stakes. ["rollout of t:slim X2… FreeStyle Libre 3 Plus"](0001438133-26-000009|1) ["Initiated launch of Android mobile control"](0001438133-26-000009|1) Meanwhile, the 10-K outlines a roadmap toward more form factors (including a **tubeless/patch-like option for Mobi** and a next-generation patch pump leveraging **Sigi Patch Pump** technology), which is the kind of platform expansion that can matter disproportionately once PayGo makes “getting in the door” easier. ["tubeless… option for Mobi"](0001438133-26-000010|0) ["next-generation… incorporates our Sigi Patch Pump"](0001438133-26-000010|0) ## 8) The real risk (and opportunity): **execution risk is the price of unlocking a better business model** Tandem is explicitly warning investors that the pharmacy-channel strategy could fail to achieve its intended outcome and could materially harm results—this is management effectively acknowledging that 2026 is a high-activity transition year, not a smooth compounding year. ["If our pharmacy channel strategy fails"](0001438133-26-000010|0) But that same risk language also signals conviction: Tandem believes lower upfront friction can “accelerate market adoption” and increase supplies volume over time—i.e., they are leaning into a larger installed base and higher lifetime value per customer, even if the accounting makes the near-term look softer. ["lower upfront cost… accelerate market adoption"](0001438133-26-000010|0) ["increase the volume and sales of our supplies"](0001438133-26-000010|0)