TCMD - Earnings call transcript Q1 2019 | Tactile Systems Technology, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the First Quarter of 2019 Earnings Conference Call for Tactile Medical. At this time, all participants have been placed in a listen-only mode. 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 will be available on the company's Web site 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 as well as our most recent 10-Q filing filed today with the Securities and Exchange Commission. updated SEC, to our which be filings in Web may the with are factors from time time our site. Such available on our result no statements events undertake obligation publicly or We to or otherwise. as new of revise a information, future update forward-looking in also GAAP. calculated with call are will financial that accounting references include This generally certain accepted to measures not accordance or principles, as refer financial measures. to these non-GAAP generally We available accordance site. in of most Reconciliations earnings of comparable the with those GAAP presented and our to on are non-GAAP release measures in the portion press the financial calculated Relations measures Investor Web I the Mr. like would now to call over turn to Tactile Medical's Mattys, Jerry Executive Chief Officer. go sir. Please ahead,

Gerald Mattys

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

you and outline discuss that for then quarter. primary performance on I’ll financial open recent call. in me for additional thoughts earnings of which updated during financial results review call of the financial the Brent a your before on XXXX we update will detail XXXX then with highlights drivers operational with provide guidance our this for Let growth. brief progress release our share of today’s we’ve afternoon. commentary press our our in some made we review quarter and closing our questions. a Then, start I’ll I’ll revenue a our brief of the the first provide

for We XX% first in represent revenue performance quarter quarter Our revenue million year-over-year. to a the first the growth achieved start represented of $XX.X strong XXXX. which

increased of and was quarter $XX.X million. in our Our driven our first to revenue Flexitouch which systems, year-over-year sales rentals XX% by growth

revenue to rentals contributions systems from Entre XX% sales $X.X year-over-year we increasing our Actitouch of saw Additionally, and and million. with

adoption our first compared by quarter the Our XXXX. XXX, of same a compared quarter increased ASC Even year. ASC and new without results percentage XX% for and the change, by the of benefitted impacted points Revenue his adoption the first to grew the our is to during XX first accounting last our total quarter. quarter guidance quarter a XXXX. with reported from revenue accounting leases. of This on impact favorably standard XXX XXXX four The line were revenue XXXX remarks. of year impact in start reporting top financial its the growth primary drivers prepared full Brent will standard discuss great accounting during

time of continues of our to First, use, design Plus more better patients. to Flexitouch disease. ease patients features for and The for benefits because treatment of their bilateral its the third generation growth Flexitouch fitting allowed of system, Flexitouch with reduced consider prescribers and drive new garments this

representatives, December of XXXX. of included Second, for exceeded sales team. the sales sales recent our which of than At expansion goals XXX end XXXX, our team more hiring our field the

sales during feet the on first Our benefitted additional performance the street. from quarter the these contribution of

also XXX continued in the first of more sales the We of the year representatives. during with quarter ending team months expansion initial our sales to than the progress make

insurance accounts productive XX% which with least diagnosing high market. at than targeted claims sales in serve analysis medical our diagnosing the as provider the more in diagnosing with one base. representatives Based drive expenses United tailwind facilities covered our adding facilities there under performed of new Medical an going December, of patients of out-of-pocket This an business States. plenty as the opportunity as performance we fourth, most our these commercial had our clinician plans. X,XXX payers high important accounts which on selling strategy earliest our the on in Third, Tactile facilities high Nearly were focuses lymphedema data, customer of commercial during end lowering continued for growth in of leaves XXXX. increased by to existing to these deeper us And in-network coverage while to by to with

Specifically, expected during new of the the with that first contract payers quarter. from top one upside in-network five important coverage our expanded was volume a of an higher source than largest commercial

signed which new price. previously in-network to provides we accessed all The commercial payer’s of with large some at by we with covered direct contract buying in a claims contract previously discussed, effective access XXXX. last payer their a became of had lower through contracted patients this plans a As new We us this July year direct group.

from able and that by impact the channel. payer access to During expanded the offset in patients saw to new the we more were to than this leverage our to increased contract contributed volume which first we covered growth the this drive ASP quarter, sales strong commercial

first with to contributions contract related these Medicare our new the large payer. higher our order volume of the sales expected Entre/Actitouch drivers, the manage our to to from quarter decision from productivity primary transition to addition Entre/Actitouch to sales also these our shift team strengthened from from and products field team channels. to revenue is Medicare Strong of lesser specialists the results channel Clearly, in-house increasing orders than dividends. and benefitted extent our VA reflects a to strategic to strategic processing internal commercial a the In paying

important quarter, new contract the VA We our Recall performance have complemented and September purchasing Flexitouch and system Plus our within the National XXXX to the our a improvements effectively reps strong VA dedicated the has VA Schedule staff helped profitability. months. been for VA of We awarded performance due hospital U.S. efforts in our with gross we revenue the sales in Federal continue the of growth Department contributor Plus of in XX% in channel that during Acquisition the clinicians Affairs. an to Center the our recent process part for margins and Supply our more Flexitouch market quarter Veterans of during in streamlines the first Having on contract were also by in to of VA who specialists see the system.

net we discussion of reported and now performance the to year loss a of income turn adjusted our was Our quarter. during $X operation QX of in compared I’ll EBITDA of EBITDA adjusted compared net a XXXX. to $X.X last million the million first to $XX,XXX $XXX,XXX quarter

quarter, first our commercialization respect static Head to our products; make and of Plus, the to and latest Neck we progress product. Flexitouch the During compression Flexitouch Airwear continued with

As clinician we It from we strong launch year had product our the our over primary anticipated demand coming a growth. be now to XXXX, for to the Plus driver revenue the been this since customers. and existing both see system of and continue continues new into system Flexitouch of has

enable lymphedema in of treat is Flexitouch with with legs the very generation advantages in required important latest ability and extremities simultaneously the is to system patient that resonating time lower clinician the our of This One this one to their customers. features cutting both of half. well prescribers their is potentially its patients treatment

patients to our our and lower number past, As a introduction referrals in our we performance Plus. directly in with recent not referred The uptick Flexitouch for in first a with the result, in was attribute products the had of consistent lymphedema the referrals in the quarter the the of months that expectations. we’ve Head the Neck which including of many extremities product Flexitouch seen notable from clinicians

in and in selling existing and lymphedema on continue Flexitouch focused low the call survivors Neck study Flexitouch XX expect With in on and we Flexitouch imaged clinics In of VA, into lymphatic second Neck Flexitouch researchers the cancer with drainage. the that Head points, on neck Head remains our Neck Head January to team objective sales before and sales Our and Neck head clinical in our Flexitouch and obtain reimbursement therapy support. of of to Head lymphedema percentage this mind, as could on after treatment clinical system our XXXX. for revenue focused coverage mid-single using and were Head and been Neck, comprehensive XX, Journal and the In study, so order to broad-based establishing the and portfolio Neck impact total Surgery. published digits we Head a assess of Otolaryngology this our a we’ve

demonstrated Neck, backflow. weeks single dermal dermal of areas the key study all use After subjects disappeared impaired Importantly, lymphatic of entirely a with that or and of reduced optimum of daily initially the in Neck eight Flexitouch backflow, drainage. were of a after Flexitouch with either enhanced and Head circulation presented treatment subjects Head of measure two six

focused manuscripts this clinical support which Head in Flexitouch for Neck culminate in clinical two and of further teams will XXXX portfolio additional on submission year. expanding our the Our completion and

and are We fourth Neck to and develop our to sales neck longer-term quarter of Medical outside points head year. expand under strategy the also call Flexitouch of of working during and professional joined Tactile marketing dedicated our a Head traditional the last of direction our who commercialization

begin Airwear new is of We formally we Airwear launch in an of chain compression represents supply of last in portfolio since acquired our our product. perspective a intellectual to as property compression exclusive will and the product with as for in our license innovative of before to pneumatic addition of most us the products be the insurance what are to with patients the The their our required we purchase relationships conservative try static early often of production Airwear pathway part therapy use from in headway make compression our to Scientific. therapy Aero-Wrap Sun Lastly, patients building of believe devices. on year agreement technology cover important enable their easy securing market. preparation October will to to the one known treatment for continue Airwear,

for we the afternoon’s updated our Airwear results, first before the Brent? call With I’ll to over review sales product by release. guidance expect of year for in the our this end. it year financial We quarter of which a to Brent second organization during to XXXX rolling limited this launch of our out a of our press entire review begin half that, turn

Brent Moen

to to the Total XX, compared ended for first March Jerry. increased XX% Thanks, quarter for million XXXX. the quarter revenue $XX.X million $XX.X

in physician driven million largely the Flexitouch XX% lymphedema of regional awareness performance insurance channel, which million. with growth driven of treatment was and $XX.X systems, the the the The in increased Flexitouch contractual increase sales by patient sales for rentals in and $X.X our VA and was options to force, revenue increasing rentals and expanded national total coverage year-over-year our system Our and by of quarter expansion continued payers. Medicare and or sales

effect year-over-year payer for mentioned, on than first sales As which and XXXX. in XX% pricing Flexitouch million went Jerry or a and the and XX% accounted approximately that the XXXX. and the exceeded of contract, increased large our quarter experienced new $X.X into total related million more sales to commercial impact rentals revenue X, the XXXX July of our of expectations we sales both $X.X offset Entre quarter. strong to expected Actitouch volume in

large new from continues higher Our strategic both well quarters from in-house these manage product commercial to as than contract. our in XXXX from payer category performance expected to volume in this the the as contributions benefit decision the

by revenue for from total payer during recognition which VA and the commercial, quarter First that growth quarter first compared year. benefitted accounting respectively, XX% revenue practices XX% is the to important XX.X%, XX% to It rental Medicare X.X%, standard our changed and our was XX% new sales. a last of adoption note revenue

not life agreement. does of a require products the from for revenues versus XXXX any not reported over lease a rental rental our past of quarter periods revenue recognize to and up adopted on standard, quarter revenue first prior impact XXXX are new amounts. of restate of arrangements spreading modified agreement rental length. reminder, to portion new January the us rental the on that the commencement requires periods. a comparable XX ASC derived effective upon with accounting in obtain first the We under of us is the our basis retro-respective to rental guidance that months accounting which Accordingly, As our XXX, to became X, XXXX our patients The practice lease of

X, total First begin in revenue which new agreements XX, prior the leases upon that rental and rental as recognize to Revenue for requires standard in recognition sales-type December commencement is reported XXXX. with January be rental accordance different reported revenue agreement. of XXXX quarter XXXX of accounting to the all agreements place the is after rental

revenue as anticipate completed, be recognize an to which of those month-to-month year. operating a we lease we agreements For this are continue the fourth until they basis on will quarter in to

accounting lease XX The quarter total new revenue growth points. benefitted by financial the the our first impact of of adoption percentage standard

was revenue Finally, sold previously rental the from the revenue. XXXX. This accounting, new our sales revenue classify customers as of to lease revenue as now first it relates we rental in quarter as garments beginning to classified garment

included and For associated an we the to Relations from and for the details unaudited was garment appendix gross with with and our fiscal agreements revenue of rental gross and consistency To Web years reporting, our have into profit from revenue revenue new section in as aid by this composition and site revenue sales to first the and re-classed comparability, our well and schedule rentals in afternoon. our profit XXXX This corresponding in sales the supplemental quarter Events comparison XXXX. as rental Investor of as revenue quarter for of X-K results previously filed gross total reported an revenue profit XXXX. rentals schedule

garment also was from amount have of aid go-forward revenue convention. in our to rental included the comparison that We sales revenue with reclassified to reporting

Turning rest P&L. to the of the

attributable decrease new to of in related related margin profit Sun to the incremental $XX.X the million Gross and margin addition quarter was to related to payer from assets the fall. of gross large by first commercial in sales the as million lesser to as to the of new the well compared by amortization related when a gross to Gross quarter Flexitouch non-cash with XXXX prior million was a Supply year, primarily Plus’ extent Federal to First increased to the last $XX.X first the of Schedule XXXX. contract expense headwinds compared was pricing by and revenue or product also The sales XX% $X.X to intangible payer mix compared quarter in XX% last impacted margin pricing Scientific. of XX% to composition year. licensed

loss first XX%, due XXXX last expenses quarter tax-deductible $XX.X first year. tax benefit XX% for continued compared reported driven million of the operating primarily million We quarter expenses year. $X.X expenses first The XXXX activity. income of or and related $X.X benefit impact quarter by the to of of to income quarter tax or $X.X quarter compared the decreased operating investments stock-based operating the of team million, the $X.X million, Net increase an Operating increase sales $X.X in of of year. to increased for compensation XXXX an for tax in the million the marketing was benefit compared or increased quarter first the of increased primarily recognized of and million average first last the field to in on income in per XX.X diluted First $X.X share, in year-over-year first XXXX per initiatives. million was for to loss sales or to to of $XX.X million XX a XXXX. compared shares diluted of The XXXX a first used and $X.XX or $X.X X%, spending $XX,XXX, respectively. marketing million last to to share, quarter net loss quarters compute were the income million $XX,XXX, $X.XX for and of net Weighted per million share XXXX, to

EBITDA adjusted first XXXX. quarter of EBITDA the at First to million in in adjusted $XXX,XXX $X quarter came compared of

Our first quarter in adjusted compared EBITDA in margin year. first the was to X.X% the quarter X% of XXXX last

our non-GAAP a press GAAP As reconciliation to earnings certain a in measures we reminder, provided of measures have release.

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

total For million, compared revenue $XXX outlook XXXX. of XXXX, million prior growth $XXX.X million which guidance revenue $XXX.X $XXX.X of million. compares of range revenue our $XXX the XX% expect we range XX% This to in in of to million now year-over-year, represents revised to to to

guidance revenue Our updates. two XXXX total includes

from or points of volume revenue with effect to total the $X approximately be the growth contribution second, large of of into And year-over-year. X which estimated in leases, expected of impact increased payer approximately accounting July standard adoption our First, the percentage a is that went to commercial new stronger related million to first to related revenue the XXXX. quarter than contract in

approximately increase revenue rental growth previously XXXX, the total revenue of to increase approximately guidance increase in of and is in in to rental of million for to XX% Rental the XXXX reported quarter XXX reclassification XX% year-over-year representing $XX in our the of XXXX, approximately XX% revenue rental re-class increase the adoption in the rental compared sales through year, revenue revenue year units increase for in of which year-over-year be will fourth upon XXXX year-over-year million million impact updated range in would have of for representing approximately adoption XX third growth to the all total increase revenue of is million our By assumes assumed calls guidance of revenue revenue we ASC Under rental of year extended XX% into revenue components for of rental quarter full of impact line XXXX new a rental XX% our and standard. of Flexitouch product, approximately XXXX guidance rental representing ASC garment had the this total sales in item of The lease in of we fiscal revenue new And $X half commencement XX% revenue range range one in products The many revenue increase range be to our quarters second, continue to was be revenue of $X XXXX revenue. the following guidance the of of rental XXX, rental of the rental revenue sales to XXXX. the those of of $XX.X by; driven XX% operational of to over $XX.X during XXXX. XXXX. sold range will move $XXX would impact Sales million recognize amortized in and compared the of the includes revenue prior as the $XXX.X XXXX. the $XXX months. The the assumptions. XXXX. of million year-over-year includes one the to the our expected over to of agreement that of Entre/Actitouch Our million agreements sales period to products be The XXXX up million to guidance garments revenue XXXX. sales in revenue we for

sales In percentage the XXXX. in as to contribution total terms products, of a expect we head Airwear expect to low-to-mid-single continue the to anticipated we immaterial neck of and be new and digits continue our of sales in of revenue

in to XXXX, full for our margin year remain the Lastly, gross range. we expect XX% low

Our will which of of XX depreciation related accelerated This remarks. adjusted the compared stock of And I’ll higher expense back Jerry related to $XX share, the count of And comprised earnings is expense of compared expense million, million XX% in adjusted approximately margin lastly, planned approximately of P&L. estimate year. range way calculating to diluted XX% range average the the headquarters approximately EBITDA of our EBITDA XXXX purposes be to and both for to to shares. prior we expect compensation expense turn $X facility be the now year only $X approximately $XXX,XXX million reminder, occupancy With assumes previously. on and remaining XX% million $X from to some the the is facility call impact year to at our of in new for our expenses move Jerry? full million. a for comes the of new expense rent this the current quarter per By corporate of third moving fully XXXX our expected to to share weighted current that, now closing approximately

Gerald Mattys

Thank you, Brent.

and stronger marks results than able the for the quarter year full start first revenue the to guidance raising that our year expected achieve. in we were revenue during to we performance account part are a Our to promising

lymphedema as growth the revenue diagnosing and Looking drive we ahead, in by continue benefitting sustained see for our us Furthermore, VA penetration achieve productivity market expand highest period. that our in-network to we’ve focusing sales payers. ability deliver opportunity expanding multiyear XXXX accounts team, we’re on in over field confident their to commercial obtained reps and we to enable to tailwinds broad the in increased our from from that our important products a the will growth ample continue in and the coverage strong insurance

forward the of the in currently the broadly, Tactile last XX% of dedication their the to analysis the that and our expand see data, awareness of patient compounded deliver we the our now with in high lymphedema and with five mounting And for demonstrating In we we patients to employees tonight’s the high As of call our open end our customers estimated commitment are and U.S. qualitative increasing not continue number Medical. to to for its on XXXX. look U.S. products treatment. will we entered we $X facilities diagnosed and leadership more to Operator, latest as questions. annualized years. earlier, I of for our share market quality to Thanks in mentioned claims growth of continue XXXX, lymphedema their Medical and also on diagnosing service of everyone more in customers. and X,XXX than clinician the Tactile evidence as Based year over interest lymphedema hard call to we work billion

Operator

you. Instructions]. [Operator Thank

with first from comes Your question Pasquale Guggenheim. Chris

Your line is open.

Chris Pasquale

quarter, guys. and Thanks great congrats on another

Gerald Mattys

Thank Chris. you,

Chris Pasquale

question My on the is first guidance update here.

So you X the beat X is related backing million accounting after out here million the change. X.X about accounting by and in million of XQ increase

seem like that saw here strength continues doesn’t assuming you balance credit giving first really extra that quarter the the of over in yourselves for year the So that momentum? continued it the you’re

Brent Moen

payer. from come calls, your We demand our our million did estimates payer large us see we’re to unsure math fact quickly that remember as from accounting give and is would change to may of a additional expected up volume. And of say million past of how that the would X volume the that. better you is Chris, and that X related correct, in than I speed

of we’re that our adding million So XXXX. taking and volume for about it guidance into X

Chris Pasquale

suit from on can first can about Jerry, there initiated the Anything that where in qui competitors? of provide you any then, one stands? your say was And legal update the the you back action quarter, tam that Okay.

Gerald Mattys

I’d we you we’ve and I’ll are where previously let know Sure, Chris. today. said just reiterate then what

and suit. was of join sealed of XX. in March were That brought with a to the suit U.S. was competitor or we discussed Texas we southern As this XX district unsealed a on served in district year. the the the suit – intervene The declined XX-K, by complaint February U.S.

we’ll ourselves. We continue the without and defend to are merit believe allegations vigorously

this we further motion April until a suit in about details year. a filed is to we get not details, as additional of on litigation But for fact, In standing X our to policy the the dismiss process. discuss little

Chris Pasquale

There in-home network Understood. it’s Thank related your trainers. confidence worth business? operating of to which to that complaint you. aspect and Maybe just was it’s a that to why your one minute spending its on structure, in legality important the particular particular

Gerald Mattys

not Yes, the the present to going items We the any Chris, any litigation. have single certainly discuss forward of merit. And we’re to that opportunity don’t case. we’re were in looking brought up allegations those to that believe

Operator

Your next Piper from Jaffray. with question comes J.P. McKim

Your open. line is

J.P. McKim

start taking afternoon. my you Thank just to rental, the over first change. with Good Hi. to want the questions. I accounting change the for

compensation anything more it payers does all? at way and reps plan that first the would customer? customers before Firstly, more to does they I behaviors do now and with sales affect in And guess affect any why rental it acquiring period it to or have their give the

Brent Moen

It’s XXXX. I’ll why question take we January the actually actually Hi, Jerry and effective that for of us can X, now, to related the did on. it required adopt as add J.P. change Brent. it accounting But was first part

anything for quarter relative couple we became follow-on nor take that first accelerated It quarter then fundamentally which it ASC at you compensation bit, back sales and to us, accelerated our to new it. middle a accounting required perspective operationally quite it there. business a to one how to standards organization from our change the all. team. XXXX in out were that in to relative those of adopt is XXX revenue so our became sales doesn’t just approach elements first the a change we which does accelerated doesn’t So we within the And adopting items honestly items large of change the filer a

Gerald Mattys

the up as certainly add, XX% still up stripping very accounting unaffected is so were the And revenue revenue, a for change we business. J.P., But on Brent by quarter. positive on impact accounting business said, I this XX% the the it just would change. did out, base reported base have

J.P. McKim

I also on the – that an can Then plan. access through whole as they those get book they’ve I helpful. that flipped this assume large of Medicare around that Does interesting payer a but the so made in That’s that you. restrictions now ask Got more plan to payer business, wanted the large or within comment network Medicare advantage guys you sense? you that the Medicare the patients if allow Flexitouch, same now Medicare makes to LCD does have patients got

Gerald Mattys

for a certainly and the say about up up I would this our I or makes very sizably, have to commercial that excited on choice has I Medicare’s their business. the follow patients in see payers you It the sense. of to own think they in say our Medicare of products. want more that whether a each were Medicare so onboard. of give that was new first as they reflected that quarter and we having Advantage requirements payer will It Medicare did us putting to patient one business access our

J.P. McKim

Got it. Thank you.

Operator

Margaret from Your next William comes Kaczor question Blair. with

is open. line Your

Margaret Kaczor

the afternoon, Good Thanks questions. for everyone. Hi. taking

on bit a the having I me first how was much of some think bit rec quarter. kind tertiary channel, referenced Can of in a within more this the of focus which of detail XX% strategy The the of a down some Plus and VA color within about Flexitouch still It’s that little around maybe be showing that because there some full around roughly year-ago guys the VA us you rev sales on changed centers nice maybe may the growth XX% of but maybe and the the the little give period. first you the for sales so of in impact then change then quarter call? one that mix, last that gaining is the momentum maybe total from is

Brent Moen

Thanks Margaret. for Hi, Yes. the question.

this business we which Medicare up it quarter year. XX% of expected and excited to XX% again see was represent we’re Our did last sales instead of

see channel year have comp so successful. last specifically the XX%, of may bit remember so see channel last drop we tough was higher VA a third up our growth new first ASP quarter here quarter than You rate did Schedule did year. Federal we in in for We being the signing the of revenue did by shipments and contract that the our last some year in Supply

did pretty anticipated for adjustment ticking our reflective as total. still XXXX and which we for our of along volumes think year this We a it’s guidance So plan price in see little part the I nicely.

Margaret Kaczor

us forward data single the relative of give any hospitals of of additional the diagnosing then in the centers tertiary may maybe compare to outside clinicians? let’s that can other VA some of terms within you And say, to moved high guys of at size they looking Okay. more the centers how of regards departments, VA there, the in the kind VA or strategy has to that those scale hospitals

Gerald Mattys

as have terrific use in get out still order to to hospitals and the Yes, get we are commentary. And VA still it’s I’ll we’re the We and that a minute. see into those an penetrate of to opportunity deeper with us are to some there. yet good Strategically, onto VA having sales opportunity hospitals back an those relationships there give where helping of come specialists the us. us a growth that for already

QX from. or as the CBOCs the see coming those where we orders Outpatient a didn’t in change big Clinics, Community-Based were Regarding to

our in So uptick is we an about say saw the and see in not which that last year. I will year Head a itself something did the we VA late same we in ago. Neck proportion the business saw year as

helping our new I reps would to our call points attribute target VA. So local would VA what I that within call the specialists

the neck they’re where in getting head ago. whether speech we and VA, success a So they’re that’s getting have whether having to year at some we’re didn’t onto therapists that VA, surgeons the surgeons,

Margaret Kaczor

for it sales Good. and should impacts reps you me, in like lastly terms about hired maybe productivity? first in you how good give And quarter. then are this think sounds are on. Can seeing ramping? hiring those you us another of color then maybe just those quarter When any that folks coming – the referenced some team new And the the we folks from XX

forward Thanks. so and typical come on applying additional folks the that seeing maybe are about you Tactile? more and flexibility have think above are you As good the for coming XX% candidates based that,

Gerald Mattys

Yes. Thank you.

the XXXX, end team of just were the the people over look if On a back expansion, the quarter of in first you to we sales field. year XXX

XXX. over now are We

we’ve that in to year, that the coming we field in speed of this So up so in two were biggest quarters productivity. XX impact year and of XX first at and quarters hires last expect the the two rates last is of varying Many XXXX. to of organization last two added really the the

additions than more, I The the of challenge our As the is the to identify think ever we’re that say topnotch another XX hiring will is, hiring are where organization for sales good of it’s opportunity and because in on we top able for people looking actively are we of economy is really harder to to or first XX what been, the quarter news frankly. that.

growth the process and drivers to key to are we continue try effort employment doing hiring behind ago, into of field one lot this sales that the resource our of more because much our more as putting nature competitive of a have country. of frankly we of year Compared a in team So expansion hiring. to drive our

Operator

Canaccord Jason Your Genuity. question from comes with Mills next

open. is Your line

Jason Mills

Hi, Jerry you great me to the Thanks congrats taking the and year. and on Brent. a questions start hear Can for okay?

Gerald Mattys

Thank for that. you Yes, Jason.

Jason Mills

Super.

and obviously as a for going balance to year. note us the million help revenues to you’ve about forward we of of couple model, X is question and a perpetual just the accounting the or perhaps all X look the took of. One I things to change so added be So million is

said way your how the produce your they not within sales or are incentivized force, You reps changing it’s system. sales that also

haven’t why ask given I’m presume it. XXXX guidance, you about I to going So

XXXX about business and this we assumption? As terms fair our think for it as much change be sounds we think model. change relative to there of how Is beyond growing models your in relates to about accounting XXXX, our shouldn’t it in that a like

Gerald Mattys

yet, quite Jason. So on we’re to not ready XXXX guidance give

around share little terms that that driving you In onward we are into rebuild off. talked about some to will a continue we’ve our piece more accounting accounting think change really XXXX to particular XX% change model and takes midyear today that of will guidance we year-over-year. puts of in was other XX% words, need around A and got the as that a what in revenue that 'XX bit fall of I dynamic.

basic a plus So harping we’ve still profitability, on ourselves been the we’ve it see margins a XX% view on been and company. top a for We hasn’t two half years of grower really improving and changed public gross our future. the strong as with which XX% line in now range the

Jason Mills

the comps to it the maybe I of listening a fair everyone Okay, that when we’ll so think we growth that be but would the quarters to to faced going want call for going sense these in are XXXX. year-over-year and take reported that to get it’s the are be offline optics

I’ll sure and what congratulations that. guided just other chime ask I like payer early everyone that than the next question better you’d so would you guess you’d the maybe appreciate little on commentary that, But ramping they’re to my large I’m if Clearly And to. on any secondly, success in with a added. around

and Jerry. as that several speaking you XXXX opportunity relative years that As we it particular in payer that payer and it forward, well? of you reap large benefits for should think as the voice will comps to again the your into progress relates in as of as having to that on look this tenor to that grower difficult penetrate that your XX% we sounds extend impact any with continue based Would payer that think you and guidance or XXXX moving to you in within – them do to continue of the that about think Thanks, generally work. face payer’s we expect again

Gerald Mattys

Jason. Thanks,

Brent Moen

it’s Brent. hi, So, Jason,

on So little of let has me the initial to relative what your a XXXX. to ASC XXX just question clarification impact add

I think revenue. what acceleration the messaging put was recognizing is place in XXX that ASC of does

spread it Under of over life recognition revenue we the that of now the ASC we the upfront. historically recognize contract. XXX, So

The So of accounting I your question repeating itself the contracts unique that the recognized a put to be going in pinch itself standard the And out. is is, as to that XXXX? their you that XXXX. place life will does lease. are roughly asking in remaining Because continue of on Those that of XX, the to December question of as think answer million be actually to will to adopted, contracts actually you the $X.X over not that’s piece was were point about And period. perpetuate how acceleration aspect one is the point on is the the yes. related be piece XXXX will revenue

Jason Mills

helpful. That’s it. Got

Gerald Mattys

is them our from the will Jason, flow Now news for is how We we’re with around long come to previously payer? runway predict they’ve we back question, a will volumes the second time. willing But the to account service plans last those extra we to I hard think think and I experienced. to over why contract of do expect your with up the from their plans, we’d expand than access business to us and pass that rest more little which of to do. given about good the And expect our into that this year. the the we QX guidance on certainly continue year we faster continue signed It’s

Jason Mills

both. Great. Thank you

Gerald Mattys

bet. You

Operator

[Operator Instructions].

from Mitra Your next comes Sidoti. with Ramgopal question

line is Your open.

Mitra Ramgopal

do you’re maybe what see next I’m expansion few Jerry us about two high just and to facilities number just of that that wondering force a afternoon. believe that sense or of a ago number early I’m was XX% if over mentioned years? Good you light in could increasing you’re diagnosing year undertaking, you in wondering I and give the sales the the you how Hi.

Gerald Mattys

vary So the when if claims we data. I’m the Mitra, upon question your high diagnosing pull understanding correctly, facilities those depending facilities,

there clinician pull data when of XXXX. the in did than we XXXX the words, we data in when So middle end diagnosing were other groups of did the the in pull fewer high

there’s thinking I we we XX%. the right came comparison left a we as XX%, apples-to-apples really So an we denominator can The around then thinking – give another diagnosing had picked you. well. XXXX existing little We penetrated is were of increased up about high problem XX% not XXXX and into were so accounts we

accounts of So the number increased.

half X,XXX high business X,XXX facilities aren’t. diagnosing in the are it’s means that almost with Now us which today U.S., doing

point a as this expansion $X see market as we into frugal this call for very billion continue So we us opportunity. our

Mitra Ramgopal

Okay, in helpful. mix payer then know should with have a you you the just have we’re payer payers VA. I about increased you on any how wondering seeing today? relative the I that’s And the coverage if – obviously focus and just change talked commercial on very expect to mix, we meaningful the was what

Gerald Mattys

quarter. Medicare. is quarter, much talked really think dollars first will reason year-over-year. million predict a mix up in That the We the is about be the see forward it other where substantially The change correct. little with uptick about don’t moving hard it’s was we couple mix keeps any than up we to But coming given in

So pricing which that we’re in. is impacted by channel

we past, the favored nation mentioned in As the most has VA pricing.

flipside some the that is actually margin of is when of Medicare our is our up, one gross business payers. experiences pressure. So better VA The

margin gross So bit tailwind little opportunity better an for we than get a rather headwind.

So the quarter-to-quarter. the vary that’s year. roughly think be same what – is can over to mix It going we the

Mitra Ramgopal

again Thanks the taking that’s great. Okay, for questions.

Gerald Mattys

You’re welcome.

Operator

participants showing the no you more conclude thank our and for your in does today We queue. are for That participation. currently conference

Gerald Mattys

you. Thank

Tactile Systems Technology (TCMD) 6 May 192019 Q1 Earnings call transcript