TCMD - Earnings call transcript Q3 2018 | Tactile Systems Technology, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Third Quarter 2018 Earnings Conference Call for Tactile Medical. [Operator Instructions] At the end of the Company’s prepared remarks we will conduct a question-and-answer session. 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. to result or events of obligation statements our or no a as new undertake publicly revise update forward-looking otherwise. We information, future measures in will are accounting call also references GAAP. certain This include principles, or not with accordance financial calculated generally accepted to that refer those to generally non-GAAP financial We measures. as to of non-GAAP on in measures the press most release calculated our GAAP and Reconciliations of those with available those presented Investor are portion Relations the website. financial measures comparable in accordance earnings over call the Mr. turn to like now would to I Jerry Mattys, Officer Tactile Medical's Chief [ph]. Financial go ahead, sir. Please

Jerry Mattys

Thanks earnings operator. Financial Good by the quarter afternoon and welcome Chief to call. call our third Officer, our on XXXX Brent Moen. I’m joined today

Let’s discuss begin call. of the a overview on topics we today’s quick intend to with

our quarter, quarter I’ll during few Neck, and the update of financial a a nine and that months start the you with products of primary XXXX, of in new Head October. of our first each license performance including period. commercialization also the I’ll contract on in Sun VA operating First, reviewing of Plus Flexitouch some the third we by a Scientific, revenue performance drivers with new and from of Flexitouch the brief with our discussion and agreement highlights lights key announced the high

$XX.X over the of months systems of XXXX, today’s our discussion, growth our the of questions. XXXX continue in earnings million, and year-over-year. through that remarks Flexitouch guidance Following the to for We Sales million. nine our XX% balance Brent our greater generating call to providing representing which will afternoon. outlook by an of slides we updated on press $XX.X conclude achieved sales financial detail for the be year-over-year I’ll in increasing results driver prepared open performance walk before XX% impressive a review growth, for primary we this revenue XXXX, the our few of first financial release

Actitouch contribution systems, Entré positive to sale which increased of from year-over-year and $X.X million. our XX% also We saw

XXX to our impact the These further insurers primary in coverage XXXX, increased of nine the our that productivity over the the significant making growth commercial growth of by products third, since easier the of field patients three lowering end than these continue sales more of out pocket months most first and year. each benefit from achieved the We afford. will calls outlined productivity of nine include, drivers over XXXX; of includes we enhances sales in-network the we which our sales accounts; expect growth the strategy growth our to of years, the fuel thus have strong size representatives, second, recent of that And double the drivers for team productive sales our expansion which for drivers of that our believe to foreseeable future. they with performance in months expenses this have essential focusing to that organization, sales now Our XXXX. of first during was on reps our team, previous maximize earnings continue by to we our

approximately our XXXX sales to VA the In XX% Sales addition the strong continued the first months our of nine benefit XXXX. to over XX% into the revenue, drivers, nine first very total system. into compared Administration these representing in Flexitouch months sales primary of healthcare XX% Veterans growth growth of year-over-year, approximately from increased to

their more system. has local the VA efforts in in from expertise enhanced marketing sales the our performance sales VA VA specialists. sales These of understanding become our specialists representatives into the by factors. year, benefit of team two to and Our of deep the last a at dedicated a and selling building effective VA VA possess early Beginning we continues selling helped network

more not organization VA in copayment our insurance nine sales during patients the our patients quarter. covered of obligations, be the do notably year heavily Because focus months VA deductibles. and with commercial have first plans tends by also annual first on than seasonal most their the the We activity less to purchasing

shown is of has we in experience that Our increasing drive by of year, time when sales the our in weaker. the year salesforce during can focus calendar commercial the the early VA higher productivity the channel seasonally

growth, million, on same first our year. margins XXXX nine compared additional last our our revenue In also and gross improvements with during million period and operating million $X.X approximately generated year-over-year, profit our to adjusted months the in improving to up our maintained to $X of strong profitability, we $X.X significant EBITDA

XXXX, Moving third to the year-over-year. revenue for we third achieved $XX.X a review which in of the represented quarter growth of quarter, our XX% of million performance

was our million. grew sales growth of which contributed Actitouch year-over-year $X $XX.X our year-over-year XX% quarter. million of system to the revenue Flexitouch Our in our and XX% also QX performance driven systems, growing to Sales Entre third to

drivers performance by commercial Flexitouch and detailed earlier, our same sales targeted the continued increased our Flexitouch our and our QX in I progress channel. salesforce, strategy VA was propelled for selling in the Our expanded system coverage specifically

year. view a of QX net and margins compared in to $X.X EBITDA Our be adjusted strong continues clinician XX% million, positive. early QX a generation the product to market we the of the very of quarter. second growth to XX% launched We generation Flexitouch revenue future Flexitouch patient tailwind system, our we growth And gross be the income, of in Plus, third Flexitouch also our and with beginning latest Flexitouch million significant Plus at growth. benefits increase to The the $X.X our the to quarter adoption benefitted of which from with the last response next complimented the

in performance, terms strong also had a highlights. addition of quarter financial productive In we our to operational

Neck call Head lymphedema commercial only and continues professional Neck, completing Head launch term charged be last First, we and The we marketing relevant to specifically the positive now new of our been and Neck to goal to with development year, has on very selling of sales hired in our and clinics that other system of in respect neck existing May are full was of to the commercialization product, Flexitouch response the our and since focused team and dedicated, the Flexitouch head our and of expanding have call new who longer execution and a Head report points. commercialization Flexitouch the clinician VA. happy sales points,

evidence treatment We this body. lymphedema to our of for unique from invest continuing for also region are strategy suffering in clinical portfolio of in building the long-term this support patients reimbursement our option to

results study months, the once discussing publication clinical available. expect coming of We Flexitouch look of details are forward and and to this in study the the another Neck Head of

of Moving expected. we milestone our quarter, credit team reimbursement delivering on other the highlights critical to for earlier than

to the much the quickly. VA veterans clinicians National for supply Center, our benefits thereby were and clinician staff the Veterans U.S. to a customers is access we new VA Flexitouch Specifically, of a features device, an more patients important and contract offering that of serve. makes order Plus they that milestone federal Department the that Flexitouch by it our Affairs. and on the awarded begin contract and Being Plus Flexitouch system easier FSS included This our enables to for to Acquisition allowing us schedule

contract the sales quarter growth to toward new beginning an when our XXXX first into of channel. be in shifts We the expect important mix this tailwind our VA

license we Brent, end, product provides based rationale cash gradient on on for their lower a initial and an States and Scientific. We with million exclusive Scientific the intellectual would of payment therapy the made the acquisition stockings subsequent property of shortcomings and future clear. compression royalty comment over while like to of Before turning to $X strategic compression I Aero-Wrap conventional the compression an quarter this developed benefits United to our call announcement the are patented, unique, of technology sales. Sun The agreement acquired and the cleared in Canada leg, wraps. that overcoming Sun and known FDA to

differentiated the represents unique and First, Aero-Wrap technology.

this us agreement most rights exclusive to gives what is innovative, fact, product today. the we compression believe available static In

complementary Second, products. current to is highly the Tactile’s Aero-Wrap

dynamic, product current be The of the that a intermittent a apply compression, during can one is day. used applied about the wearable treatment Our that's Aero-Wrap compression hour per products day. for rest

Aero-Wrap form already the today call serve condition. to call patients to Aero-Wrap. we their we manage Third, selling directly points. Almost products prescribing static fits some compression recommending that and current or on are our static model clinicians that into of similar The use the all compression

candidates gain Flexitouch and Many agreement patients importantly, of insufficiency license millions disease lymphedema, be in perhaps venous the most in chronic treatment patients current entree allows future access access us with Finally, agreement in these or and chronic may also patients chronic to people this There larger the insufficiency. venous our us pathway. to products. U.S. progression. their and of earlier Actitouch This or are for portion earlier to a ability of from ulcers, venous lymphedema, gives their wounds suffering

Brent our Brent? We following With expect our our on for call. limited of quarter of guidance of review market release sales turn to top forward handful for quarter over conference a third on begin look the our that, our fourth to a sales I'll the and product quarter updated XXXX for a call Aero-Wrap sharing first in reps our expectations financial meeting details this more and XXXX. the national to with of results

Brent Moen

XX% for revenue Total $XX.X Jerry. or to $X million third year-over-year increased quarter million. Thanks the

Medicare to to increase Flexitouch and productivity our performance insurance to Flexitouch profit XX% $XXX,XXX total options the $X.X the expected system to increased third and year-over-year and revenue year-over-year last Actitouch team contractual $XX.X in than expansion Entre and time in to third patient We are XXXX, orders $X national process a compared reflects have performance awareness increased driven of Entre XX% overseeing XX% Increase activities physician revenue house. related reimbursement and quarter reduce to regional the of XXXX. of of year. sales in Veterans increased largely our channel, increased Our to or approximately the year-over-year an system sales Flexitouch growth million Administration systems Gross managing in $X.X of internal these their in was was XX% by million necessary salesforce was million. to strategic shift the quarter. and or lymphedema, or sales the experts Actitouch expanded by in experience now XX% for driven better coverage they of in million $XX.X accounted and the This quarter our for these sales, million in quarter treatment with leveraging orders. which payers.

rate to year XXX in XX.X% prior year-over-year compared points basis to margin the gross XX.X%, approximately period. Our decreased

As anticipated, gross Plus. Flexitouch the the continued launch of was rate margin period, current by impacted

quarter third margin increased to in by gross million or $X.X the total $X.X primarily XX% year-over-year in compared in also higher also increase in impacted period. increase of to million to with was The contract expenses million million. by XX% related was expansion pricing team commercial expenses new year-over-year third large initiatives, and The field operating a stock commissions expenses The of expenses the sales marketing by a prior in the rate headwinds in quarter revenue. increase to driven payer an incremental Operating expense sales quarter increase on in or compensation operating and due XXXX continued year. and $X.X investment for the third a included increase marketing $XX.X

the third benefit performance an quarter of the The of quarter approximately tax on the XX% year-over-year income tax compared $X.X quarter a basis third for of of the an Our XXXX. by was decreased points $X.X in of quarter XXXX, year-over-year million tax quarter basis. to flat Operating compared the XX to benefit million, income income margins to third benefit $XX,XXX last third third of of operating increased the the income recognized of operating and year. activity to per sequential net used Operating in third of XXXX. third million quarter recorded diluted was in quarters of We income improvement X.X% $XXX,XXX for $XXX,XXX to margin an income based respectively. $XXX,XXX XX.X net million third of share the quarters of driven compared XXXX of million income shares XX.X $X.XX XXXX XXXX to or compute XXXX. stock $X.X and million approximately both per XXXX per and $X.XX average for share to in for quarter periods. $X.X year-over-year diluted diluted share, period for tax were increased by of deductible or XXXX Weighted compensation impact the third Net

XX.X% XXXX. EBITDA to in Third margins million quarter basis of of points $X.X, increased quarter to to approximately adjusted XXX or million of $X.X XX% quarter improved third the adjusted EBITDA compared EBITDA approximately third in XXXX. Adjusted $X.X the year-over-year

to marketable at we equivalents As Company borrowings provided million, XX, $XX.X and in adjusted $XX September have a million on net securities revolving XXXX. our of income million XXXX. cash September cash, no reconciliation XX, its a reminder, press credit earnings XX, at facility XXXX, release. The $XX.X EBITDA GAAP compared were At had outstanding to December

As we increased credit agreement with to for agreement order the XXXX, a provide reminder, commitments over accordion Bank a provides pursue million. financial credit facility for with gross the with a senior secured company to on Wells It a entered its allow The August X, into the in total strategies to credit $XX Fargo up Company to flexibility $XX a also revolving time. the expand $XX million three-year includes could feature, which to facility million maturity. credit

our Let we me updated earnings review now which XXXX revenue release in of this guidance, turn to our afternoon.

million. in compared to the million to of This $XXX total the $XXX of compares consistent ending we year-over-year expectation sales guidance $XXX which prior expectations. XX% now year our of XX% revenue prior guidance XXXX. XX% X% to increased XX% our of approximately compared Actitouch $XXX XX% to million of year-over-year, year-over-year a December million assumes year-over-year. prior guidance guidance million, revenue XXXX, increase XX, XXXX, our Sales our Entre range growth This of to outlook in expect and revenue products of the For products $XXX.X represents in revised to range increased to to range Flexitouch revenue with XX% our

remain With our average count weighted million. in year share fully stock approximately Adjusted full earnings call calculating excess margin the to in shares. I'll approaching to year back noncash for per Jerry? of for diluted expect expect closing some of be gross for expense to million expectations a the share, now XX% be XXXX, we including low range. compensation Jerry for that, purposes to lastly, XX% Additionally, of turn XX EBITDA $X our of And we the the margin remarks.

Jerry Mattys

and the have increased including Thank we're our of operating XXXX, our of time this nine strong now expect guidance In months grow year-over-year now to to expectation profitability. XXXX, sales proud the revenue first you, growth and to at year XX% performance improved XX% of summary, XX% XX% in over of year. compared Brent. third for of financial XX% to year start the original and fiscal the We our

of our driver our high our ability driving with selling focused Plus system powerful accounts continue Flexitouch strategy, in we're we of of commercial primary insurers. veteran's salesforce administration Our of and to remains expanding strong coverage growth targeting in maximize volume as the expansion in growth combination and confident network an the channel

to leadership plus clinically In providing Operator, for positioned for our and it are now will we participation your for Aero-Wrap that billion incredibly lymphedema share questions. $X the today's of we the we for product market year. the to as to enhance early well the you of will call. open continue addition, look represents. U.S. an opportunity our introduce market continue all quality Thank conditions grow call the range on of their with them life our at-home treatments patient We of next believe by chronic expanded proven, we customers

Operator

Piper question open. our P. Please J. Thank will McKim from line you. from your come ahead, go is Jaffray. first Instructions] [Operator And

J. P. McKim

to with for with afternoon of good first questions. and kind for taking Hi, given I wanted thanks the how QX strong guys the guidance start months you implied this grew of year. the nine the through just

your we terms we more looking are this had nothing salesforce. just I pronounced there's it’s tailwinds earlier I of. nothing that payer of thinking in if growth. into want QX around sure sure I should be wanted make the focus coming QX year. just should seasonality, my be than side to at is there's think more XX% we that understand with make to to in But right, of XX% math there's the I from that

Jerry Mattys

Thanks J.P. the Jerry Hey for here. much question. very

It out, you again guidance upped As quarter. which to up million year-over-year. XX% fourth does million to guidance, point we've our imply revenue million is $XXX $XXX million, a about $XX of its in the to $XX in XX%

this up new ago, to improving year our which expectations implied the XXX now sales growth our continue from reps targeting to the driven sales That in over in field VA. see is confident success XXX team. be and drivers larger productivity growth a primary very continuing are by We by guidance. with We're

shift payers saying what end commercial behavior. You're dynamic the that toward that deductible quarter. does in in more That the correct year is QX drives fourth mix

I well quarter effective gross margin. this of on want July the make as think could the impact is commercial be in sure understood signing we both fourth to did will thing $X revenue That that the year. million that and this we ASP growth payer, is impact paced which large by as a of big X be this

that headwinds QX. So of the that's up we're for one against

J. P. McKim

just guess salesforce. front – you XXXX to. make don't that about guys you some But nothing now. the don’t I want time, But you grower other one kind as I guys of just as you headwinds payer XX% these expand Understood. to thought alluded you changes I know guidance And of always out, plus looking give than we've sure on

Jerry Mattys

previously. their that give a now a is to payer. contract this driver gross their us, has impact. plans, and for of headwind of until of us which impact right X plus access all us to was a but happen is news next margin will volume are short-term are year. five of ASP of July which of direct I in in it going for with. access as directly we effective long-term as now the the big is at buying we a the be largest The a we've payers and us that it's grower. good remain price about top-five plans effect contracted signed group the lap through contract, that XX headwind What contract We end thinking The this some You percent last But talked of that with does about will QX

the contract down what we’re other with for brings are what other large large paying particular this ASP new the in payer payers or So, line paying.

It's it's pursue to us right big absolutely we because for expect this from of strategy So volume that the impact. the payer. a gain in long-term

J. P. McKim

the on Thank into your That's on, and people for head opportunity me but to depends really in neck that, that up head place, can you to us for you you neck. help talking person we last one helpful. guess people XX I just zero the is plans you. one uptick were sounds started see for some hire it or things more, Then size like It how and XXXX. have

Jerry Mattys

J.P. thanks Yes,

and product, the sales about an reps this for number great another and the that growth out quarter the update product. we're that good very marketing don't in specific success we neck neck We was have of the are success those will for a which having growth excited on for we're prospects product and very points. but on we points today, bringing specifically, on call. certainly will focused think that On head necessary the do provide that calling QX of our to expect of be and line, reach call in we beyond a on By head solely XXXX executive call

excited the the to contributions So rest sort she we're about us that very, very of after get in market. how can that helping through of make terms

J. P. McKim

you. Thank

Operator

from ahead. from Please Your next Blair. question Malgorzata comes go William Kaczor

line Your is open.

Malgorzata Kaczor

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

of going First fourth keep going the on quarter implied guidance to here. kind all, of I'm

payer it than payers. like more price either by from you it from other from a change payer, saw So few a commercial was offset seemed the in last guys that times volume

of all, gave in is that first around? assumed case the be why it guys time this wouldn't guidance that So you and

Jerry Mattys

volume. agreement one as see when that, as get of us always the coverage computer We quickly, of of fast. time payers do contract big our to don't plans. of it couple all terms the [ph]. said in a make of particular We this Thanks, with in vendor signed quarters improve and place the over policies past the to the details Margaret They're good getting taken the expect quite these very but five we from at their their has volume actually pricing different Having in they in welcome done the there see the it question. quite

call. So do we pretty but wanted on for payer, out expect this come the volume from is to we that on price the see QX and material to impact point

Malgorzata Kaczor

Okay.

from you've third training got And field got that's Plus, in math. you've you've rep in token, then by quarter let's the adds Flexitouch direction. take the up brand with headwind you've Flexitouch of a be And associated other force quarter, of the my it you lack on or headwind So trainers a same Plus. year-over-year sales year-over-year price referencing rep new maybe XX% comp an and the fourth got the on your the your got the product easier to sales relative

numbers benefit us very maybe things? maybe of from, through what's in So or those your of walk assuming you're again, implied kind maybe not, a not much

Jerry Mattys

reflected We fourth is did actually guidance. and we the feel – now the quarter of our beginning than reflected better QX that in is at about that

launched terms trained commercial, in up dealt this to have the go was with schedule them We trainings, trained, commercial were trainers XX% of have big of to but we think that are can did We – a normal do the remember of to quarter terms that still in clinicians we as in the patients factor product. business. headwind of introducing that when supply we there get on you end who those the Plus some we and to early. And don't frankly. a the headwind in at Flexitouch the federal XX% of surprisingly contract course XX% may Medicare We

expect a little headwind have We to in that Q$. of

in to given. also good reflected we million But $XXX the we've year. million for that's again So the $XXX that about feel very guidance

Malgorzata Kaczor

growth patients that been Flexitouch Plus we've systems? the of features? you trainers a accounts this And prescribe your is And see not those the then of did at of maybe of you Okay. excited of focus thanks. to kind just And give existing pushing fact you more all kind actually said previously sense last than how can wouldn't of you bit which because seen prescriptions into Flexitouch quarter? So growth, awareness if little to have at doing in lack in Flexitouch of whether headwind maybe terms then mix and they us Plus, Flexitouch Plus, of of at, the related pretty that about on Plus prescriptions new more look least question in Flexitouch of training accounts or some of a certain at

Brent Moen

in You on bet, than ahead to Overall, orders We orders our frankly. were clinicians as say very of is bilateral that happy headwind Flexitouch overall comment who Flexitouch a use Plus. that for well running patients, expectations of gross us on one. well. orders we talked that experience having seen treat I patients Plus patients Flexitouch simultaneously all third the positive bilateral over were was that as the a rather transitioning of we're quarter, it as XX% Plus. Plus prescribe to we non-VA are the didn't had the now margin shipped to Anecdotally, those both out Plus the lines with about the would that Classic. shipped But product out still have quarter, in their

that just have before. So to picking additional access we prescribers didn't up are we

of So shipments. And Flexitouch in XXXX. in good we all come terms think to getting more to things expectation in on of Plus the all, ahead

Malgorzata Kaczor

much. Thank you very

Operator

ahead. Please comes Chris the Your Pasquale line from next Guggenheim. go question from of

is line open. Your

Chris Pasquale

into went quarter. Jerry, strong on one place of the with at Congrats a just start with, the I start guidance item The wanted July. to contract clarify regard to Thanks. update. to

correct? that is XQ, guys more third there that than any you reason is impact in you throughout And that were the as well, with quarter? in So the headwind fourth did quarter should it dealing

Jerry Mattys

reason And did be start quarter some impactful Chris, Hey we Yes, the question. joining thanks there time. QX in call them a would took then did correct the in take QX. time third with payer the It dealing place. in get to It it for pricing for the more some well. is contract and that this you're the as

quarter. throughout the the and So that were into pricing for their the price that system. are actually will part be quarter of pricing, we them now came we members. full the new price the shipping their new is effect old This charging first a QX of for that it's quarter the And on in

main the that's difference. So

Chris Pasquale

Okay, then like speak existing as about though, your fits one that's targeting a and does sounds there's bit Actitouch the what same designed It some those to And overlap how what you portfolio. is being helpful. you to into whether between really that do. little somewhat product Aero-Wrap that You another? patients complimentary with see or talk about and here? substitutable Can you're talked

Jerry Mattys

Aero-Wrap, Entre, and That's question good Flexitouch, even really very a is believe whole on though similar. observation and to our complimentary your range, Actitouch, good part. look a product we even they

move Our conservative current how a intermittent they'll that the to therapy reimbursed. products meets a deliver therapy. Flexitouch. compression definition Almost advanced on trial of as And like has payer they're every conservative or before a of and that's more that Aero-Wrap requirement therapy Entre Actitouch

get in treatment to earlier their patients can access we So paradigm.

patients. every And stockings, can that on almost whether a hosiery, patient, mentioned compression those of uses solution wraps. also for our the Aero-Wrap or the utilizes a be I patient that's As many static compression one of devices product, every intermittent call, compression

Meeting. do that products year current disrupt at to we quarter not to going And of products, as Sales mix in the get next a have. to of compliment that's our something current after look we a limited National we're first So planning our market it release the

in with cadence happen reps organization. do first to is And a the and XXXX. that products release Our should usual sales whole our with to top new then expand limited

Chris Pasquale

Thanks. Great.

Operator

go from Jason the question line next Canaccord of comes from Please Genuity. Your ahead. Mills

Your line is open.

Cecilia Furlong

Plus schedule. supply follow-up and getting Brent. on Cecilia federal kind is it on for Flexitouch Jerry, Furlong of after This Hi just actually Jason. on to And wanted I the

looking out this you're of a production ASP, to seeing able margins, the single to at kind impact offsetting too. have fully looking that you're what on being line? XXXX to timing just out And shift then terms Just in of could the impact

Jerry Mattys

Great, Cecilia Flexitouch question Plus. the for thanks. of on couple Thanks A things.

supply First, for our some we are and that plus. chain of to It go classic on the the for the us Flexitouch orders federal very supply our opportunity schedule. orders now have the vendors, of to had Plus to the convert we excited gave actually placed to some

because Flexitouch shift here come So That, future earlier able were to supply into production that or Plus. we schedule line to got as we the production product we some federal of onto than single we XXXX. be a that anticipated, should

very think in impacts offsetting of we've our digits I around terms in well to average gross talking the some bode for single margin’s declining of few consistently and going years. these that's mid expectations been price about ASP, our pretty improvement next selling So over that the

that plus pace think its entirety keep percent question with or answered gross maintain don't in we margin we that if not. or I know going and your can forward. So XX

Cecilia Furlong

that's then salesforce, could hiring I targeting you're if seeing? No, Thank outlook what you great. well? you. looking And in you're continue for stronger. just to your also, That's reps XXXX seems helpful. lot now right the at just trends, QX to great. what on very a turnover QX type and grow just guess as And you’re And be That'd touch of

Jerry Mattys

Yes, thank you.

more not in I seeing normal are lot did the a did that XXX we in the associates we the were up step big the the our efforts. quarter. end frankly that of first from And now has we say and That's So turnover QX. up returned reps, that and behind over a we more exits report we're would at put levels like to resources specialists we field. where hiring

company. the a at folks very So into aggressively we're going on new bringing

our stated to the We to year sales much by XX% be a get as of the the frankly. And of able hit on end year. number field at pace organization to expect had in increase a of we're there the beginning we better that

in sell driver XXXX that's for to as big to be we So a going growth these up we our speed how on products. expect people to bring that

Cecilia Furlong

very much. you Thank Great.

Jerry Mattys

Welcome.

Operator

comes of question next Your line Kalia Northland ahead. from go from Securities. the Suraj Please

Your line is open.

Suraj Kalia

Good afternoon for everyone. questions. you Thank Can my me you hear all taking right?

Jerry Mattys

Thank Suraj. can you. Welcome. I

Suraj Kalia

Okay.

you the forgive in the quarter? Jerry between in calls. just contribution So me VA juggling Did mention

Jerry Mattys

the We year. for talked our quarter of being versus last about about VA revenue XX% XX% about

contributor a So it remains significant growth. the company's to

Suraj Kalia

neck what it. and from head product Jerry? Got about the And the contribution

Jerry Mattys

Suraj didn't out we that call specifically.

digit come we our fiscal tracking as particular be XXXX. the previously to an that had it's of guiding mid that to progress anticipated. provide low We into in for with we to single on year And had expect We as revenue. talked percentage able total exactly about product update

Suraj Kalia

my a you're would you from FY’XX contract, Jerry, this might it. upon compensate? extent top trying should into think second we XXXX out would more Any be to I question to sort this And be appreciated. what we that Or there for how the it greatly am flows do of what little guidance look numbers but FY’XX from provide get Got pricing perspective? you impact giving should of five taking And through should understand volume in a guess you than just questions. think how is color the would FY’XX temperate? be about currently. not Thank I tricky, half a I the can QX be

Brent Moen

thanks Yes Suraj.

we which directly XXXX. up volume off, we certainly first all So their because temporary all the though, then that is of And impact to Having volume we've plans phenomenon XXXX. sorry, – that once on in these have get give to contracts some pick with we payer, their we're what have with seen giving and we an members. a first not or expect said price half board some access we up payer is a guidance for

anticipated previously year, we changes. price group, but the direct a have contract of to we erosion in mid-single they we part got So, beginning because price buying at our through had guiding contract group that the access a and to scuttle low- This anticipated not as payer place. to and been was particular of to the this elected buying digit

terrific driver that fact us and overcome. and all pain, their will that of our a we volume give have in The margin is if XXXX. for can long-term, access ASP strategy the a short big So there's starting this you company of that will, headwind plans, is an we to a term

Suraj Kalia

you. Thank

Operator

line [Operator next Instructions] of Ramgopal Sidoti. go from question Please comes Your from ahead. Mitra

Your line is open.

Mitra Ramgopal

lymphedema or head Flexitouch expand I and the a just what know points. good those I looking can give was now to neck. back clinics you the Yes. wondering I said the was the afternoon you're you'd to and Jerry. of Hi, us wanted some on sense to VA traditional new focus call might target of if points initially call in be? come

Jerry Mattys

that. Mitra. I’d to be do happy Thanks

exposed to because normal find our all the other cared the head oncologists, launched who with clinics so to Flexitouch we've for head the rehabilitate address by more speech specifically oncologists lifestyle, of patient delivered therapists are who way as that a the to hospital the system, swelling already and lymphedema to try to to to interferes So therapy in with on neck and VA we lymphedema impacts and that surgical the to, trying that call radiation patients’ we’re from back work cancer. speech points patients ranging neck specialties

why particular some newest points, of or and and setting we So looking whether after marketing the might the sales wanted go bring salesforce we series our layering that's with clinicians business. involved expertise, of through That's these and of head specialists, at it's front are and our those access whether challenge to separate current on other piece specific a neck we call care how sales sales on patients. in up And seeing other channel it's that top of in marketing to executive. of someone the

Mitra Ramgopal

patent thanks. in you great. offering at That's then early now overall think, as June I you acquired product in secondly And with some, back Aero-Wrap had some rights. look Okay, your

right type So Are you be should just to happy now? what of have pretty we I was you offer if expecting some wondering more going announcements those forward? of with

Jerry Mattys

we're intellectual teams’ picked on that we that might today. sales I The question. that to products opportunistic our up looking the product, opportunities or basket, examples for the looking into supplementing current might for be will property to we the continue we're both continue Thanks we to think to fit then call do about look our calling go points kind or and Aero-Wrap the quarter additions. think, I with last And would to at. future of of good expect some are offering

Mitra Ramgopal

the Thanks questions. for taking

Jerry Mattys

Okay. Thanks.

Operator

line of question Sean comes Please BTIG. ahead. from Lavin go the Next from

Your line open. is

Marie Thibault

to Thanks one I just XXXX. three the of taking supply given a had bit year. of curious VA why questions. quarter VA timing Marie Sean quarters start the the the first Lavin. Thibault benefit lot on is of quarter? a timing, that the start But little the here the in we is hit this getting early I just the wouldn't FSS understand on in the for I of Hi in the little at of the for year fourth first end early. instead focus the bit the why wouldn't of the a was quick to one. schedule on Congrats see

Jerry Mattys

supply the to Marie. that access Great call. question The give joining signed we does schedule contract federal for Thanks the VA. us

Going this are by a the of the sales deductibles meant for commercial reason our some in quarter is into of And and these on our of time expiring of dramatically of their our therefore the our That's drops end. equipment by of healthcare for cost the focused of the because very copayments business is commercial their often because many for patients. patients year pretty where patients, consumption force benefit year dollars. serving seasonality an other year

start those business obligations. we So over if the of product of don't all the year, And and by dropping get our copayment with end commercial reset year off. deductibles the they they

the that's reason. So first

that then fourth because is reason payer quarter, VA patient dynamic. the serving the commercial The our more of is first the salesforce in

on go approval have actually did our to The Flexitouch launched the takes of got first time. business. now or we introduce the for, when approval to extra that second is clinician That we and we our the we reason contract the product our when have place, in like side we Plus commercial that got

that fourth don't see largest introducing year, this the our sales reps spending by far in quarter, in lot is our in a something VA every we of quarter quarter. which So time

we a contribution. for question. until VA QX. effort think that We Hope your But not forecast will large be, it's be there us. So concerted don't that's certainly why significant a answers business going to

Marie Thibault

even have VA-focused the sales, commercial to a so a there's understand need team, there enough the you the do though around introduce bandwidth I kind quite just and not obviously of they Yes, seasonality fact product.

Jerry Mattys

I it up sums well think that

Marie Thibault

Okay, thank you.

Jerry Mattys

Yes.

Marie Thibault

you. Thank

Operator

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

Tactile Systems Technology (TCMD) 5 Nov 182018 Q3 Earnings call transcript