TCMD - Earnings call transcript Q4 2017 | Tactile Systems Technology, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter and Full Year 2017 Earnings Conference Call for Tactile Medical. [Operator Instructions] Please note that this conference call is being recorded, and that the recording will be available on the company's website for replay shortly.

Before we begin, I would 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 involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our most recent annual report on Form 10-K filed with the Securities and Exchange Commission, as well as our most recent 10-Q filing. 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. include in certain accounting accordance GAAP. also are measures principles, will calculated not with call references financial to that or This generally accepted generally measures. non-GAAP We these financial to refer as the Reconciliations non-GAAP website. presented accordance Investor press GAAP of with Relations earnings measures available the on financial to in in those are release calculated most measures portion and comparable the our of to would call the like Mr. turn now I to over Medical's Chief Executive Officer. Tactile Mattys, Jerry Please sir. go ahead,

Gerald Mattys

quarter welcome, today Thank year and our you, fourth afternoon to joined full call and earnings the everyone Chief operator. by I'm call. XXXX our Good Blake, Financial on Officer. Lynn

XXXX fourth Let's to discuss financial followed our detail, for XXXX, discussion agenda cover quick through will we periods performance release. of quarter of and these intend accomplishments. first by drivers operational this XXXX, during that the I'll growth that Lynn year and walk results revenue you a major we our press get underpinned and our in quarter started financial today. of our afternoon guidance an fourth for the with our overview introduced review our of primary financial in items then year earnings full which review full and greater

concluding Following call XXXX before strategy to thoughts Lynn's opening your share discussion, and I'll some the our on outlook for questions.

million, announced revenue million, press For the third XXXX full of range $XXX.X as as January. estimate to growth well range on we of provided XX% November, representing via our $XXX to $XXX.X the These total XXXX, we earnings quarter year-over-year. in in exceeded call that release million we preliminary that of year $XXX the guidance of $XXX revenue results both reported million million

enabled in to respect to This that XXXX performance Flexitouch in Field provides. account X growth increasing our targeting and clinically-validated reflects Our System was and our X Flexitouch in-network increased years. Flexitouch us of million. coverage. XX% achieve of with grew market XXXX in awareness team primary to our sales lymphedema by recent of record sales exceptional strong have our expansion, revenue successful have that focused record benefits contributed year-over-year to to the $XXX.X elements the drivers growth of Flexitouch sales These strategy in sales which execution the systems, commercial due our growth

minute detail. Let more take me these now in a each review to drivers of

remain investing in direct we the of XXXX First, U.S. past of improve to coverage over year-over-year. to sales force In our XXX over successively full XX approximately we market. representatives in our representatives, on sales time full-time sales to we . force field from up our our expansion expanded XXX XXXX, This sales focused XX% team the direct sales grew year,

to and and customers, rapidly products Our patient are direct the training expand quality support our components direct company. allows This together patient on a to advantages throughout provider sales our personnel reimbursement area establishing approach, processes. strategic provide and with and of our them base educate and trainers clinician of in-home relationships patient service the approach reps, and us by of key of our our differentiation network reimbursement of to for our

strategic Administration. prioritization coverage force decision adding We years sales important relations contracted, XXXX, And to by was in XXXX our from deciles of claims products recent and and sales medical another through payers X we the this both contributor Veterans to growth highest improved we has in our began clinicians reps that our enhancing teams. expanding in-network group XXXX Recall that in effectiveness Second, sales those data during with sales million of further sales we our the gross specialized by focused payer our and our finally, on potential the focused complemented XXXX identified margins focus focusing our made with from enhanced the organization, an XXXX U.S. patient productivity our productivity the in patients. selling reimbursement our clinicians top growth our our these our we in years. diagnosing of clinicians in revenue XXXX, made growth efforts productivity that analysis. commercial of on the on to to to and XXX lives, and access XX% sales that enhance during performance benefited Notably, the targeting In resources, progress improving include on XXXX, profitability. impressive and of benefited a number strategy lymphedema important over

full $X.X $X to year the of X.X% of a XXXX. total was marked XXXX well. by generated of total year, progress adjusted operational EBITDA in million or X.X% compared or as strong million For we revenue revenue

Let Flexitouch XXXX. me most some recap important obtained XXX(k) in We commercial to to product take and our pipeline, Plus, the a of for in full achievements. prepare for clearance a launch moment next our began

for XXXX, our the of System our customized, XXXX recent lymphedema in for the Flexitouch Plus and progress in therapy important, later of patient this enhancements, interactive experience. of middle allows represents a garment launched programs. modified the to allows also that Flexitouch patients facilitate primary same in of upon color the a reminder, times two to and head for that user of In remarks. include a head my treatment the set, discuss our system neck easier feedback, are at treatment on controller, the and display, the reduce and improve we put features opportunity year. off, important an enhancements creation take for and X next-generation that preset time, reasons. based neck to As use, an I'll redesigned treat limbs organization outlook These ease and for Flexitouch long-term

American lymphedema for Medical. this over the consider and XXX,XXX will treatment requiring a of neck opportunity Against the head published in Society. neck with a to develop head and backdrop, neck diagnosed that lymphedema, of Over have according been cancer Research cancer Lymphatic First, Tactile represents the of Cancer in and Biology. people the and U.S. study, according to head XXXX XX% patients Journal sizable

the neck progress two need is Flexitouch the our with a XXX(k) clearance lymphedema points, speaking. Head clinics of launch only and debilitating can Head the progressive Second, to the condition. lymphedema treatment head clear FDA lymphedema experience can specific may this and pace and that third, months Flexitouch patients VA. is chronic, neck and a And home. swelling. with pneumatic difficulty for Neck clinical in options the swallowing been breathing, with and compression also neck at and patients of the and traditional of treat device It is and a use result pleased of indication our and call following within commercial in We've condition, head

resulted system published in medical the support in initial our also journal significant and The head session the edema. for XX% neck face patient We participants in Moreover, November. Flexitouch and to study our home. statistically Flexitouch neck likely of studies at Neck, treatment head in would with that of reported the clinical and reductions found that a they XX-minute efficacy and use Head -- Flexitouch single the neck be

the our become the to evolve, strategy growth continue XXXX contributor years to the and follow. to more to a system As portfolio for our and meaningful product we in expect commercial clinical

O'Donnell new Board, management two market, our highly-qualified and In strengthened as in and Chief products to our bringing our we Pegus Dr. addition added the Officer, Ray senior with to our progress Directors team, Dr. addition to Cheryl our Medical Thomas Huggenberger. of

our brief of follow-on I'll represents were review our able the we turn $XX.X contribution. quarter million, brought a With base revenue the of we September, close business, a performance. to broaden representing of pricing growth I'm successful to of our our to entirely quarter shareholder in with fourth comprised to with XXXX the terms XX% that, report of seasonality Lastly, year in largest strong a of of to shares. total offering quarter year-over-year. pleased that Due fourth revenue secondary the

Flexitouch grew $XX.X growth driven quarter. XX% by System, to our Our sales the year-over-year fourth which of in million was

prepared our in the In performance fourth the earlier primary product addition two outlined factors. additional that benefited Flexitouch drivers to my remarks, also in of quarter line from the three I

navigating Due was impressive in that especially pipeline quarter direct caused Coast and representatives fourth patient by with given Houston hurricanes. disruption their the the during million to challenged less our performance our million the of had quarter earnings third compared this call. the performance $X $X.X Gulf regions this were anticipated of Our our an to the to QX to on our ultimately impact group, the range on resourcefulness that we

strong our efforts team VA saw We continued the this specialists Flexitouch a year. field segment penetrate sales leveraging market hospitals our to of to also that dedicated by fourth of Administration earlier the we the the reflecting Veterans added sales quarter, during in the success of the into

continuing call in among and turn and quarter delivering Blake suffering the to performance of therapies to our fourth home Looking at our the speaks performance and detail full full additional over now from to to swelling. awareness organization patients of Lynn the and year. for our year back, fourth healthcare the chronic XXXX during increase financial on our success lymphedema in insurers, quarter some Lynn? I'll providers clinically-effective, the the

Lynn Blake

Medical's for $XX.X increased quarter revenue Jerry. million $X.X total Thanks, to Tactile fourth million. or the year-over-year XX%

year-over-year or Flexitouch quarter Entre Flexitouch revenue XX% the by the XX% sales as coverage XX% of year-over-year the treatment of in and or by options, increased with $X approximately $XX.X our The and fourth the primarily and Gross quarter increased decreased Our the XXXX sales revenue $X.X $XX.X in was XXXX. and Flexitouch of by contractual System, of for of was million with revenue physician partially to million. sales XX% expansion growth ACTitouch insurance million its to or driven in performance XXXX. profit was payers. XX% Flexitouch awareness national $X.X year-over-year offset the million our of our fourth by which of growth compared sales accounted for increased System, patient of to along of regional $XXX,XXX force, our revenue quarter which lymphedema fourth quarter sales well to driven condition as million. increased

Fourth including Fourth sales G&A due of the a increased year-over-year year-over-year million R&D XX.X% million or of quarter and of this to fourth was primarily the compared R&D quarter tax marketing with year. $X.X to Flexitouch margin or primarily expenses. to of share investment $X.X expenses increased the study million in revaluation fourth quarter associated product Income of XX% Jobs Fourth increased tax year-over-year of by sales combination year-over-year and Tax facilities and driven XXXX. operating higher to impacted to or driven year-over-year, primarily quarter of the XXXX. of costs, was year liabilities, assets by by System. quarter and of approximately clinical a to adjusted $X.X our compared quarter EBITDA sales. incremental points the favorable increased in expenses Reimbursement, quarter sales Our year-over-year Operating general resulting increased larger million. approximately $X.X expenses sales. year-over-year gross to for operating increased expense XXXX $X.X compared fourth by points million. development sales increased tax by and December commissions, performance was and or including margin of increased income X% the expenses to expense, or XXX of Operating approximately of represented $XX.X as fees Flexitouch by lesser approximately increased $X.X from the enactment sales tax $XXX,XXX XXX marketing the tax XXX product XX% next-generation extent, our expense, $XXX,XXX margin due costs XX.X% fourth $X.X and company administrative and XXXX. Cuts margin due Act field related to continued development rate a XX% million million professional The XXXX. quarter increase to increased year-over-year, marketing XX% and gross points to or increased variable team, million expense sales XXXX incremental total XX.X%. basis to year-over-year, to mix, expenses. $X.X XX% of expense basis by deferred for expenses increased basis increased for expenses of as prior income $XXX,XXX was our Fourth income expense quarter the for Sales Adjusted in expansion of reimbursement, EBITDA million, and to the

or XXXX, the the EBITDA our $X.XX respectively. As decreased earnings we X% in to of of compared GAAP to provided fourth million income million reconciliation or net used of average a and quarters $X.X for today's to income approximately quarter Net release. fourth for share adjusted have reminder, quarter to $XXX,XXX diluted $XX.X diluted million and XXXX per press fourth or EPS $X.XX a XXXX share. per for shares million compute diluted were the $XX.X Weighted $X.X

total was year for $XX.X compared primarily million. approximately or to products XX.X% pretax our income XX.X% year, Total XX% XX% of margin by XXXX the brief to this gross Full primarily for X.X% $XXX.X financial $XXX,XXX, revenue company last decreased the company the XXXX to year-over-year of incremental when year. driven or increased to compared for year operating year X% performance year costs million. summary only was revenue full months Full the our last by compared XX of as $X.X year, XXXX, of XXXX. months XXXX to to year. X XXXX represented to margin a of year the Full was year-over-year, public Turning mix public X.X% which full revenue Flexitouch XX% total shift compared to driven last System, million

year of million. to activity a by $X.X $X.X increase the share-based compared increase XXXX in due million this year XXXX increased previous to XXX% full significant benefited million income benefit Full our tax-deductible, for increased tax expense net as EBITDA that an $X to The was of income million, XXXX tax compared year prior current year. The to $X.X was driven to income the year. XX% adjusted income million or our year primarily million. While $X.X net $X.X or benefit year-over-year, year-over-year tax compensation an in results,

year-over-year. of adjusted XX Our X.X% up margin was basis EBITDA sales, points

which to in cash, totaled $XX.X million I'll earnings at at The turn our our outstanding at company had of a securities this Finally, $XX.X review XXXX, release revenue equivalents of our end the compared December guidance, now December year. marketable we million no debt last XX, and afternoon. XX, XXXX. introduced to cash XXXX

XX% to growth For the we million a XX, of compared the $XXX.X million, million $XXX representing of December range to to in expect full year XXXX. year-over-year, revenue revenue of XXXX, ending $XXX XX% in

expect be XX% by our to approximately we XXXX, of year total year-over-year company in to continued full revenue expect we growth sales which increase products, the For growth driven XX% primarily Flexitouch XXXX. in to

sales in of grow in ACTitouch and Entré the single expect We digits to XXXX. our low products

million. to XXs, compensation adjusted in non-cash and of rate deliver to low of approximately continue expect gross margin our for XXXX remain margins the we approximately expect full EBITDA year stock period, the We XX% includes to $X which

per the lastly, We to share in purpose rate year for of the be approximately weighted the fully expect expect full our share, GAAP be shares. tax million And to XX% count earnings we diluted for calculating range. year average for XX the

to XX% have like Historically, volume quarter first with experiences revenues investors over approximately I'd move Finally, year, X year. that year our QX our business last respectively, smallest QX largest revenue. and the our total quarters, representing into annual each XX% quarter new each significant revenue and ranged years, seasonality from remind to the we as of

some year we revenue of at revenue, would 'XX, full end be given seasonality. of range For QX in expect moderation the that to higher our

for XXX years, as do for we loss full period, deliver margins up an year-over-year, our Jerry? we reporting first With adjusted given percentage basis XXXX to prior in points to additional of XX% back year Importantly, call in quarter. of sales operating EBITDA approximately the approximately that, the some the turn Jerry closing first I'll in while remarks. quarter, expect lower anticipate

Gerald Mattys

Thank you, Lynn.

revenue least continuing themselves our by respect again execute this goal we've this dedicated life into XX% for growth helping With for remains growing drivers to solutions to caring improve at committed globally to at with XXXX, of to provider a of people of mind, recognized clinically-effective of Medical As look ahead quality diseases, to by growth. primary overarching we delivering home. Tactile in our their year, organization chronic

we Specifically, $X reminder, in U.S. the we at driver our target our market aim our alone. the remains by in Expanding team few approximately success XX%, expand in past estimate our years. the consistent sales with than as a XXXX, to most which resources our addressable long-term of more annual over penetrating opportunity, billion important selling

lymphedema resources by by and We on of market productivity highest VA the clinicians our specialized continue to focus dedicating the sales channel. in targeting U.S. will diagnosing maximizing the to the team,

in than data performed XX-month this was discussed million the increasing dramatically, XXXX, for of with period, ended diagnoses more we the and performed the diagnosis call, XXXX. the X our during XX% another The increase compelling As XX, time the medical ending awareness over revealed that lymphedema of the June QX a analysis on we months data XX of were last claims XX, diagnoses XX and months analysis. number December extremely

number high-diagnosing total in are as the there a we analysis the than believe more States. Importantly, increase look of lymphedema facilities showed an U.S. that and in increase clinicians Simply we data at the the work of -- market high-diagnosing new stated, the clinicians diagnosing at number around an X,XXX approximately clinicians. XX,XXX today, number United

While we're in market the proud of and reported addressable of stages that awareness of remain penetrating growing, in evidence that opportunity mounting we've early the growth U.S. the we is recent strong indeed years the lymphedema the the in large

of as a Tactile business does with XX% at at-home We're more the treatment And of that X,XXX intently high-diagnosing little years. of to continue XXXX, facilities finally, the facilities differentiated, estimated we Medical. focused on least the Specifically, widespread of to high-diagnosing in will introducing one with clinician option commercial end than our leverage coming insurers. these in-network all coverage our have lymphedema

commercial Flexitouch the The the with new In With adjust full the Plus the Plus the company. offers chambers, focused pressure an Plus. take pressure Most prior Flexitouch significant garment's promising. Flexitouch with are pleased this begin the reported applying on controller Flexitouch off patients driving are generation the been our to and better pleased importantly, in to the the that in product to sensitive that and to-date to Plus wounds to XXXX surprising controller and two end or generation, very Likewise, ability And growth is increased these and provide that treatment commercial of market contributor a conducting versus head patients by to our head Plus Plus treatment The to the drivers, our has patients. Flexitouch expect future to important pressures Flexitouch train treating limited Flexitouch therapists our of of We've new is our release easier and be market growth. to XXXX release product of our from and report summary, very existing Flexitouch and put significant can prior has establishing controls received areas. by enhancements times, the to more respect and to garments we been finding a plan lower individual for Flexitouch our our the to praise strong markets, beyond. these affected both, launch of limited penetration allowing from and I'm We limbs while growth intuitive pleased of on. perform reduce the been lastly, the patients system's with next are has from release. products, improved fueled have Flexitouch addition new which primary to addition In generations. introduction account are pleased this Flexitouch clinicians are QX, easier neck, coverage will on market a during at and introduction clinicians and limited extremely our Plus response by simultaneously, our also enhance neck. feedback to extent be Plus, we the and trainers and clinical The System, the compared also support customers areas in-home

will expect first sales in we our of our side, outside refine call of points and this XXXX. dedicated existing half a of commercial the target the effort assist resource to to focus, hire strategy to areas On in

in our call, to studies, On expected profitability the the like opportunity continue initial with support committed remain results plus publication market open of improving front strategy to follow we're that's a concludes tailwinds on neck next prepared and by employees, one with and to demonstrated this ability growth congratulations in of everyone with our second their in drive XXXX. XXXX. half years, a business the support I'd year. the impressive again growth to and in thanking afternoon clinical remarks study, we'll a for our large conclusion, end recent in our of That very you, our on now questions. us, side, tonight's and of remarks. aim we the and head my additional to in In past directors, Flexitouch XXXX. XX% confident very successful Operator, this investors our -- call for Thank multiple

Operator

with first comes Thank you William Malgorzata from [Operator question Blair. Kaczor Instructions] Our

Your open. line is

Malgorzata Kaczor

taking good guys. Thanks for afternoon, Hey, the question.

one The big is of me first for kind just picture.

that? a about growth color drivers XXXX, But meaningful. said, or and you As us significant what realized? to And impact. talk give about think similar it's we Plus, But a going some think quickly have and of maybe which should head over that You for be will can can how how about comment for Flexitouch guidance throughout be mentioned neck? we you significant

Gerald Mattys

Margaret. Around Thank for the growth Hey, XXXX you, and Lynn Jerry here. drivers. question.

to and sorry, put add, our the to actually we we're products. a I new contributes growth I that to put Plus that head going single driver in number be think, thing biggest of most planning is XXXX of think organization. be the growth will as Specific field our We our in expansion to the the impact Flexitouch in specialists The to bigger 'XX. having XXXX. -- actually

You product. as a should think of it replacement

to veterans, is actually get patients. to our commercial our the well say Flexitouch need Flexitouch I as the it supply onto we eventually as can federal that the because Plus make schedule it So we replace so only eventually to available going System. to

percentage such, has from in expect a But a of the and our as -- success been next of big we neck low-single Flexitouch point impact. Head XXXX. digits kind of the have to even that, So biggest up ended revenue view. in

very, very low from that to expect while So base. substantially, a increase it's we

contributor to will So XXXX. our a continue it be is in expectation

aspect be hospitals. of trying more commercial out Veterans call 'XX, lymphedema the the it'll of traditional those patients sort beyond the so think as Administrations points reach in to our we and I clinic

Malgorzata Kaczor

Helpful.

up, commentary to largest So, on being organization field expansion maybe of driver. follow the on the your the

But the specialized think head guys organization. percent neck, sales XX% and I increase referenced potential then the also a head and you you in referenced neck in had increases organization.

So there's is picked organization points Number neck were it 'XX. two And X, terms seem up of sales to XX%? question. you in amount specialized the quarter the X, head in the of the up included and that increased guys like in fourth number of sales reps the

impact come reps So do those as the well 'XX new as that'll online?

Gerald Mattys

right. you're had, sales for we And based the had we of XXXX. sales organization. of to had see we were are the in the that reps of end add endeavor to much we going today, be also at At than that our year-end number number following The number as our number. the we up larger to of So, mentioned end brought leads and you if further of QX, And opportunistic a on even we reached objective could QX. is heard successful on that actually in XX% adds

another So off XXXX. we the organization, intend add to of coming to XX

call help talking to is -- points. really patients The those to that's what the we're our is about trying traditional determining go total and talking some find neck head those numbers. in how that about resource after are outside included So number. And in of we're we're

to help head that, and we determine We're of specialists. same We're hires number one, call go current the the start going one product to not. first their large our of impression neck organization the half that's We current VA the and to were because be these determine how a to in take I want it's able with with like that going sales don't to going with they start points. our So hire -- beyond did XXXX. to were approach and leave with first able

Malgorzata Kaczor

Great. for one last me. And

it it'll For referenced going into existing pretty a for be to Flexitouch sale was going maybe your like going seems into Plus, you 'XX, big accounts. easy you since be deeper guys that driver another

those you've would big to helpful. getting new patients a of previously that So products maybe maybe it talk piece now what those be it about Any products additional us of getting Is weren't that are weren't are? Is and color now seen? patients that accounts?

Gerald Mattys

bet. You

think, the patients. during so market far the So I product limited more has willingness been try a what release, seen on we've to

didn't the Flexitouch So where put And easily, ability the those our willing on and garments to for think had Plus, the for those patients they patient with to they're patients off provide same that, they that. use the their be product disease, think in with didn't able Plus that Flexitouch hours, those two the to hour. of the patients of would bilateral ability for to do the treatment one

-- So timeframe before. that our has appealing Flexitouch for clinicians our and Plus that the using is a much -- for reduced product population part Flexitouch didn't Flexitouch of at Plus looking that they necessarily of think

Malgorzata Kaczor

Thanks, it. Jerry. Got

Operator

Mills with Jason Canaccord. Your comes next from question

open. Your line is

Jason Mills

Congrats okay? quarter. me you Thanks. Hi, Can a great on Jerry. hear

Gerald Mattys

Yes.

Lynn Blake

Yes, Jason.

Jason Mills

doing we to statistics made an And high your question, just want on business are So, for diagnosing Jerry, great giving presumably, you what to clearly that growth? update extent progress. those piece it market you're about on think us and And that three the for of the why robust are that you're that's I And or facilities. if you how go biggest that XX% that. remaining Thanks, That just to docs. the to would begs can targeting? market, you in that fairly adding a sort as you're be your the other doing? XX% are sense your how to deciles those XX% or fruit mentioned what could the low-hanging whether you give not am of future But percentage of should remaining the consider fashion. us wondering a of contribute this said, force it you in the in to XX%, player XX% sales

Gerald Mattys

bet. You

good So Jason. questions,

top deciles. all, the X,XXX we of three the that in are First all facilities referenced

that that's So seeing more -- are aren't facilities are as these as beyond facilities many patients there seeing.

So as you this we if call see point, the most will. lucrative

do giving them with, lymphedema XX% facilities And either may they're a other with of to a things or these Or facility. them minimal of sending some doing of a home not a compression relationship basically relationship care. one competitor. sending these competitors, patients. likely, see may have them we them of certainly these have the are where we to while They're with. using most with The therapist, the or not facilities They're three typical profile sending that's stockings

XX% the and deliver that to this see point call we've able points, as in projected. to we This this XXXX So VA two to if primary primary us. as our increase you call on will, for XX% the be revenue

Jason Mills

helpful. that's Okay,

that, something portion up Jerry. a philosophical follow that of of a would more Flexitouch a that sort pneumatic relatively having Do a be is in put ultimately, some compression -- you XX% specifically large chunk or that think Or there a remaining that -- customers a bucket Just XX% do of of on -- you generally therapy? philosophical Medical? Tactile you will against of device

Gerald Mattys

think our momentum years. by we rate the B, the solution, clinicians is few our in past have and I A, over problem, about, the educating evidenced growth

And we've at those that working clinicians. get once we're worth to them, to been getting I So actually we very them think good convincing doing with.

shouldn't see to candidates Tactile sorry, X,XXX no all as So become be reason X,XXX, of they we be. Medical, these all look yes, that facilities customers and of at

Jason Mills

that's Okay, helpful.

maybe, product gross few get for -- back margin. follow-ups The queue, ASPs Jerry. and Lynn, sort combo a and a Just in you I'll of on

on price And sort as Flexitouch think, were single the average compression, ASP you numbers With XXXX, generally basis. our for gross margin see of margins a modeling the of tick general? some that we sort impacting quarter quarter ticked to beat every in market gross in the I and of Plus, down every year-over-year with Flexitouch during up the how launch for do

XXs, a can the you which point recent But low broad Flexitouch, is average ASPs and specificity trends given a respect XXXX? for more saying for launch still XXXX. range Flexitouch You're to And gross fairly give of margins? the the with put us franchise finer across to maybe,

Gerald Mattys

I'll start turn Yes. it first, over Thanks, to Jason. Lynn. then

we see and expect that we Plus. any to difference contracts same use code. Flexitouch with foremost, Flexitouch And for code. and the First both the most the payers pricing billing They have in place don't between

terms the in we of difference price a see will don't that we two those charge. So between

to Regarding margin, gross let I'll that Lynn one. respond

Lynn Blake

Sure.

quarter the margin, observed, said, basis the was Biggest Flexitouch or to the quarter year, mixed Jason, basis both ACTitouch. there, versus Entré as was parts the increase gross year. and you XXX shift, strong, XXX on we depending for driver in really in as points and So

don't we expect that year. shift this same So

remain we XX-plus to expect a high Flexitouch However, to gross margin and profile. contribute percent

we and over As full be to new accounts the headwind until impact scale some our Flexitouch could to Flexitouch Plus, the get converting product, far rollout as of we Plus suppliers all certainly and there of ramp cost to fourth the sold expect we full of be to from this gross scale. margin, there to get goods our as year. by But perspective, a quarter of

for XX-plus the gross are So with year. margin comfortable rates that percent

Jason Mills

Thanks, Lynn. Jerry. clear. Thanks, That’s

Operator

comes from next Your from question JP McKim Jaffray. Piper

Your line open. is

JP McKim

X every start couple is Like, had and us system I new that could the insurance question. Flexitouch of would taking Thanks got remind here. it back you upgrade up for how Plus Flexitouch years if into go the for of how system. Hi. old you X amount first a patients an that? quickly. the offer wanted where I sold the Plus and upgrade? an are often to years on kind you who the to you Trying and you cover And that ago, call could four get could it of patients idea could covered

Gerald Mattys

of durable for Plus upgraded in in question. medical the need appreciate a Thanks the jumping any or Flexitouch gets JP. call Hi, event bet. equipment and Yes, for on medical product the category of change patient. only new the You the of

out physician that they developed anxious upon disease automatically and have years. wants payers could is number some based pay to we're it have of need of be be could has Having be health had equipment. our bilateral a to plans reason that unilateral to them for certainly has not anything what their after our just users product There a So worn disease the treated. any medical patient way it this medical will equipment. most be which durable for life, the said equipment Most upgrade the before, five-year existing or that use or for expected that, to has medical really from that is

market get backwards might need to to so them to of up look under-penetrated this is their equipment, able now to offer to really don't incentives to that trade But Flexitouch being So we're contemplating access them Plus. to new step right in a get patients. some we that

one been condition putting with small the up have going focus that's that, terms that We are of this forward. diagnosed very last year, in numbers million patients over be the going to our

JP McKim

Okay.

now them you back time, at that a further? still reps them. just and So have have that about can new same the that percent your treat hiring bilateral. it's you system It's to patients not both can things go of X you like, more penetrating And are

Gerald Mattys

way we're at the it. Yes. That's looking

JP McKim

controlled Flexitouch Okay. Plus, pressures. thought be then on by different chamber each interesting And I again, can now that it's

a if can way lymphedema, technology it control wondering chamber each is new pressure? leading at now? beyond can this I'm take indication a maybe a you different that where now into So maybe that Or

Gerald Mattys

Plus Flexitouch pressure of really And from elements a the to of clinicians. feedback those I think based of we was got kind wounds the we the that soften areas limb. around designed patients the upon desire sensitive feedback or one and around of

use based surprisingly, upon. product But why we mechanism what of that use mean was patients. And has our think we surprisingly, the -- that's a think other impressed to it things of It for. things to in place. just their of haven't alone, use other feature to we we therapists, it has us, or that's lot again, on So pressure-controlled doesn't more for it of to think, that for build thought can't

accessing again, our more the back than will to to getting our more did. us Flexitouch that market, think So Flexitouch of do Plus allow we

JP McKim

me do but bottom understanding should appreciate one when for the the G&A when Okay, really we margin the to 'XX, reps, X we line see guide for margin, but that -- very I in terms on how guidance looking year you're have? growth, I from I'm for draw team in last sales Lynn guys really a mean EBITDA you the to place. hire the a reimbursement next model of years, in and the XX% going more and continue out over to expansion my helpful X leverage, that some lot of EBIT see into

Lynn Blake

Great question, JP.

before, a there. formal have target As think for that don't I we've talked model we out about it,

and G&A that say, lines anticipate to say, time the certainly on in we would seeing I the looking or year to in we're X teens to However, absolutely I X-year And frame, expand today. largely -- next the leverage two P&L. that high the XX% teens, the would from the in reimbursement in margin into one rate

Operator

from with comes Chris question next Pasquale Guggenheim. Your

Chris Pasquale

do math, like a about on if quick Jerry, your I some are sites it looks piece. calling reps XX

So by take X,XXX, that divided if I XX% just the XX%, sorry, of XXX. the or

need business some this to about would you longer That ramp? expect that think start we do do remain to at some serve individuals Or sales to imply XXX more approaching force you get you economies as term, point, consistent? you that As the scale a of market.

Gerald Mattys

that, that Hey, Yes, the two I we're add from to continue Chris. about -- we need have to there's to have Having we to kind that Appreciate do said question. of perspective, from a number facilities sales the think high-diagnosing of about. an think think clinicians dynamics expansion going these reps.

XX% penetrated. we've to we've that XX% terrific continued go. and number We're the there got growth. for That's is first The

the that though from and prescriptions is XX,XXX other facility. facilities is clinicians, each X,XXX in getting The in, dynamic that not there clinician we're we're

within well as facilities. So breadth of as go, ways a to facility, each we have to get more depth

about dynamics penetration there's So two that kind of thing.

come these clinicians. of high-diagnosing our increase the of because know solution penetrate If from as that facilities awareness X for are problem will more get we what long we they As a productivity. we'll because increase really where prescribe, facility But we clinicians get obviously our the or organization. drive X prescribing, to to solution, more X and each the our any from of leverage can we see or field these really time folks that's clinicians awareness is, don't have

elements. you're to aware just of So there's both. want two I make sure

Chris Pasquale

sales helpful. eventually need that's think national do sort terms of full to long-term in bogie in terms No, But of coverage? a the you we of be will X have force

Gerald Mattys

that double sales size organization, We've could plugging still been the kind we all. with the the of and idea along not them reach of

that's of bring on facilities a XX% to year hiring on. lot train picked why So We've board, runway pace. we we left, pace. think the bring We But the think really in we and do right can bringing terms of that number. got we've and that's a recruit, productivity shown these

can we the sales think do force. we double of size So our

Chris Pasquale

And to get how to schedule? that on to take Makes sense. you federal maybe, sort And expect for it then, plus of a Lynn. corollary the long for supply do you

perspective? disadvantage system, the While you're are a of producing margin at a versions you both from

Gerald Mattys

with adding to schedule start trying federal the or to We're engaged have. supply supply Flexitouch contract with I'll schedule add the on we question. federal Plus now that them

the Our estimate going the rest get year underway. is that it's that we to before of take

for products the So plan. we'll be running rest both with of in current XXXX the

So I'll turn question. that back to Lynn margin on the

Lynn Blake

Sure.

product. is to say, that production in as Plus That we well as I of percent. headwind our gross on contemplated converted earlier, XXX% until a Jason's the sales So, to to the on volume It margin XX% Chris, get Flexitouch yes, new XX-plus full-scale to as does standpoint. of commented of a I'll question bit represent guidance

expect be we So midyear, anticipated working as as we're past that, QX. into some get through headwinds that have to transition we there,

we rate. know, the you As year guide of full to kind

that helps. So, hope

Operator

[Operator next Kalia The comes Securities. Northland Instructions] Suraj from question with

Suraj Kalia

side. rates the So, rental And your remarks. your Jerry, contribution Did missed couple segment of I maybe provide in prepared and the this questions my from you from thereof? growth

Gerald Mattys

talk We did rentals. about Suraj, not, the specifically

model we moving on the a seen So represent we've seen any of that in of It at And I'll comment percentage the single-digit the from change now. our that At least toward haven't enjoyed change payers past. to roughly haven't purchase material it rental certainly product revenue. all. high continues a in we

Suraj Kalia

thank it. And broader in Jerry, Got terms of the very the you, market. And you some interesting gave commentary same. for

trying reconcile in us pretty that a X, roughly, least XX,XXX XX% At could got, you is, prescribing Or -- say, Tactile" head a X, in with clinician? clinics have I in you month, Jerry, the go if the prescribing at sales And -- think through what that sales -- So patients the else, is next existing Flexitouch, is one force. if already within clinician I the find is, patients clinician Flexitouch. clinics, saturated? specific on clinician Flexitouch What "a look better? and this clinic. You Going to you who's to versus that XX% increase trying penetrated. with X I'm to or next much your little would is he the help differently, I high-diagnosing prescribe guess what same-store did how on nothing I they let's clinician, after clinicians? numbers the XX next it come be guess, these this deep many if the using

Gerald Mattys

It's observation, Suraj. an interesting

I Let the think sure said. you numbers I captured Because don't what me same talking we're though. exactly about make

previous the XX ended So substantially data we period. over analysis that time analysis. the That's June of from year, was patients. last showed we the -- see did, did this diagnosed not the this XX-month million that up And we only patients do one number

them. diagnoses who We also see

of these those stratify X,XXX clinicians million -- finding diagnosers. XX,XXX Those one the into in X top seen clinicians the in of or the clinicians million X were XX,XXX were We So then that number that worked of understand facilities. total patients. high-diagnosing we those there clinicians have of And patients. deciles deciles top

XX,XXX not facilities. facilities, So X,XXX

clinician ordering -- -- one product least So about that we XX% those of ordered facilities from so at have at Tactile. least have

real XXXX lymphedema. units though more million is, one XX,XXX not continue facilities So year within order we're penetrate to and from each to get service those or here same-store from we also that that is on us, another vernacular, same-store are to from use And our to objective can of us. facilities, about. of clinician of those we your that's those, key basically year, we that that clinician get them clinicians put account order can want in only more this last but have The to facility, to ordering the patients talking facilities for that

what's we clinician, So will or this the that a of to growth whether a it existing it we anyone pathway else, company. get under-penetrated in is lead clinician new from market important so long for are an

Suraj Kalia

Fair enough.

I'll this the And, in for be up sorry numbers. and the might -- as Jerry, And keep screw this question. last my

chambers? fluid the fluid I guess color in in happens one And this that gradient other that is me Different a the your of created, or gradient I the the there change movement, pressure the movement? interesting, dumb of be does in is a found for me, intermittent comments I'm one Flexitouch question, what to on different trying any mean drainage but would great. just chambers. wrong, is, I analysts. is Forgive Forgive like could be to there a that what gradient? pressures Jerry, understand in also it change heard if is

Gerald Mattys

You bet, Suraj.

the question, understood the throughout ability gradient So that maintain to limb. have we built into the Flexitouch

I enjoy it one to maintained. So if reasons not were the clinicians able what or of pressure to not think, looking our that, We that is you gradient the usual get distal concerned make our this when you usual will and of lower is a not this appealing them think a product the that change at the flexibility, to had for concerns we're use, type clinicians pressure, if added be lower that us the of they gave it. that some for of adjust would about pressure it feedback type with disease. so chamber, a the And chambers the patients that's in again, more other

for. asked So customers. our I think they that's we've And given that flexibility to what

Operator

Mitra from Ramgopal comes question with Citigroup. next Your the of line

Mitra Ramgopal

Jerry, more sheet look offering, if for you you? are to if external Plus you your to as to with product are have, internal opportunities, on look some of inclined tremendous Or continue there more to you're the given maybe you the at development? any inclined balance expand the focus this out there year, introduction Flexitouch

Gerald Mattys

are developed Appreciate question. Yes, to the at we looking market, at outside. been have continue fact, Mitra. here whether products and looking bring to other to opportunities look We've in both. Hey, been they or

a channel that products know for have product in that might the products some into to for. business those put into early So looking been platform the we've I to get resources important behind fit have built that We think products and to our paid leverage get do And other XXXX. we development it's home pipeline.

come It's that our next developing product. we out are in late expect to next-generation We the product XXXX. ACTitouch

not the attractiveness one in -- as that's pay. a that to we to can business those, can one control, has we're a So only come match, is to we And side expect pipeline. together. you the well appreciate, development as own always willing don't Unfortunately, the price market both our as

we important to believe So to external. it's our But look on continue as continue continuing well. opportunities for internal work to and development we're us also,

Mitra Ramgopal

should just cash And up year. a give know I also of XXXX? little Lynn, Okay, expect that's it for you us great. can a ticked terms what on And we last sense flow. CapEx if maybe, in of quickly,

Lynn Blake

Sure.

correct. So CapEx, you're

items. For we've seen level of XXXX, at than different definitely higher A a was function a historically. few

well filed there our moved we is infrastructure be operations to in that group year did there. there well shortly and should the as year. additional pretty repeat year. this as make significant facility are a to investments this new a don't A of bit facility that I other IT We discussion next in XX-K some couple Our unique in items as But expansion. expect

the So we say, of X/X XXXX. Probably saw I in of in XXXX. what lower range a would in level

flow. cash For

results close the to a proxy well. We XXXX flow. But in can more expect operating more for that again, cash would guide say, discussion I specifically. on don't for adjusted as the to flow We the fairly to you positive. is reference us, cash continue XX-K be EBITDA

Operator

presenters. call further There I'll at turn this over no questions back are to time. the the

Gerald Mattys

the you. in very that'll call. your for everyone, thanks listen, the And Well, Thank Medical. questions. we conclude interest Operator, Tactile certainly appreciate much

Operator

your conference our conclude Thank today. for does participation. That for you

Tactile Systems Technology (TCMD) 27 Feb 182017 Q4 Earnings call transcript