Q3 2019 Earnings Call
Sort it I would now like turn the conference over to your host Mr. Klausner from Westwicke partners.
Thank you operator, good morning, and thank you for joining us for Neurogenetic third quarter 2019 conference call. A replay of this call will be available on our website for 30 days joining me on todays call or Internet Ics, Chief Executive Officer, Chris stature in a chief financial Officer, Steve for a long.
Before we begin I would like to caution listeners that certain information discussed by management. During this conference call will include forward looking statements covered under the Safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including statements related to our business strategy financial and revenue guidance and other operational.
Issues and metrics.
Actual results could differ materially from those stated or implied by these forward looking statements due to risks and uncertainties associated with the company's business.
For a discussion of risks and uncertainties associated with new robotics business I encourage you to review the company's filings with the Securities Exchange Commission, including the company's annual report on Form 10-K filed on March 15, 2019, and the Form 10-Q expected to be filed later today.
The company disclaims any obligation to update any forward looking statements made during the course of this call except as required by law.
During the call. We'll also discuss certain financial information on a non-GAAP basis that includes EBITDA.
Management believes that non-GAAP financial information taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain non cash and other expenses that are not indicative of our core operating results management uses non-GAAP measures to compare our performance relative to forecast and strategic.
Your plans to benchmark or performance externally against competitors and for certain compensation decisions reconciliations between U.S. GAAP and non-GAAP results are presented in tables accompanying our press release, which can be viewed on our website with that it's my pleasure to turn the call over to Normedix, Chief Executive Officer, Chris Patrick.
Good morning, everyone and thank you for joining us on todays call today's call I will provide an update on our performance during the third quarter, followed by an update on a few operational aspects of the business ill then hand, the call over to Steve to walk through our financial performance updated guidance for Q4, and the full year after which we will provide our closing remarks before opening up the line to take your.
Parsons total revenue in the quarter was 16 million an increase of 16% over the prior year, primarily driven by 18% growth in the U.S. Northstar advanced therapy revenue, 11% growth in U.S. treatment session revenue results during the quarter were at the lower end of our expectations due to slightly lower productivity in our legacy customer base.
This quarter was another very positive quarter for our Neurostar advanced RP system and was the sixth consecutive quarter in a row that the active installed base increased by approximately 20% over the prior year quarter. This demonstrates our ability to consistently execute our strategy and the significant potential and what is still a relatively untapped market on.
Today's call I'd like to focus my remarks on the follow on topics. The ongoing expansion of the BTM CPC and CTC field sales forces trends among into two customers and in particular, Tms only providers marketing initiatives designed to raise awareness of Northstar advanced therapy. The early progress, we're seeing in Japan and our play.
And to expand into new indications beyond major depressive disorder.
According with an update on our BTM Salesforce our goal remains to bring our total BBM territories to 59 by year end, which would be an increase of 15 versus the end of 2018 in the third quarter, we filled an additional eight new territories and now have 13 of the 15 expansion territory spilled year to date, bringing our current BTM territory count.
To 57.
We have also been continuing to build the number of Cpcs are clinical practice consultants and Ctcs, a clinical training consultant inline with the growth of our installed base.
These teams are an important part of the value proposition that we offer customers to ensure that customers have supported in training and building their practice to maximize the utility the Northstar advanced RP system as of the ended the quarter. There are 33, Cpcs and 15 Cpcs in the field and both of these cohorts are inline with expectations for the size of these groups at the end of two.
Thousand 19.
Going forward, the CPC will be referred to as a neurostar practiced consultant or MPC better recognizing the value they bring to our customer. This team's primary focus is working with our customers to help them drug treatments session volume.
While we are trending well with new provider volume growth, we've found that we need to spend a bit more time with their legacy providers as they are not performing as well as acts as expected. We are revisiting our call point cycles and anticipate this will take some time to optimize.
I would now like to discuss some trends we observed a few of our larger HBT accounts. As you may have seen through recent press releases were experiencing rapid growth would Tms only providers, who take patient referrals from psychiatrists in the community that don't currently offer Tms they do their own local marketing and efficiently convert our DTA.
See efforts in September we announced that are 100 system was installed with Brean Brooke Tms endorsed our advanced our two provider with 82 treatment centers centers across the US in October we announced that we have agreed with success Tms to be to prefer Tms technology. It over 21 locations across 20 once they were.
Please that these large providers, which are multi million dollar business entities are choosing to partner with us over other companies in the Tms space.
The as these and other large providers expand they often place multi unit orders, which would require significant cash outlay. As a result, these customers are choosing to utilize rent to own agreements for norstar advanced RFP systems, which spreads the cash outlay overtime and allows them to expand more quickly. This has led to a significant increase in other norstar revenue during the.
Quarter. These rent to own systems are accounted for a sales type leases and have a lower ASP than our traditional capital. So.
During the quarter. We also saw a significant uptick in other treatments session revenue. The primary driver, which is the rapid increase in a number of new systems being activated for HBT customers, who utilize fixed price purchase agreements. We view this as a positive indicator of the demand for our therapy. Among these high volume centers and we'll continue to opportunistically.
After this pricing model to customers, who feel that they can drive high volumes of patients and thus multiple new system purchases overtime through their practices.
We're pleased with how our HBP strategy is playing out our ability to successfully partner with larger providers will allow us to continue to expand our install base and drive predictable high margin treatments session revenue.
To help support practice utilization, we're continuing to utilize DPC marketing campaigns to expand awareness of norstar events therapy, We recently ran and national TV AD campaign in conjunction with National Depression awareness month, the leverage the spotlight on MDD to increase the awareness around Northstar advanced therapy, and how we can help patients who are suffering.
As a reminder, there were over 17 million adult Americans and over 300 million people worldwide that are depressed however, less than half will seek treatment.
Which is why increasing awareness of depression in the treatment options is critical.
Tober campaign was one of our most successful to date appointment request increased 64% and physician locator searches increased 33% over our May 2019 campaign.
While we were thrilled with these these results we continue to look for ways to optimize the financial return these campaigns.
We're about to take those learnings and embark on expanded DTC pilot test for mid November through January of next year. You may recall that in May we ran a very successful pilot test where potential patients who responded to a commercial were directed to a call center.
The clinical consultants at the call center determined if the patient would be good candidate for Northstar band therapy, and if so booked the patient and appointment directly with the nearby Northstar psychiatrist. The purpose of this new pilot will be determined the ROI on our DTC campaigns with a call center component before deciding how we best move forward.
I'd like to update you on expansion of our global footprint.
As we announced earlier this year norstar events therapy received national reimbursement, Japan, which went into effect on June Onest. The first patient was treated with Northstar van therapy in July subsequent to that we've had good early commercial traction Tagine plays another multi system order in the quarter as they are beginning to get early adopters up and running the.
All of these systems was factored into our guidance for the year, Although we were not sure whether the sales would occur in the third or fourth quarter. We currently don't have any additional system sales built into our outlook for the fourth quarter in Japan. We continue to view, Japan is a high potential geography, but do not expect revenue, but do expect revenues to be lumpy over the near term as you work with our.
Partner stage into we create awareness get psychologist trained on the system gets systems installed and ultimately drive treatment section revenue.
Lastly, I'd like to discuss the future expansion of indications for use for the Neurostar advanced RP system. We're currently working with yesterday determined to best regulatory path forward to expand our indications include bipolar and PTSD. We expect to have some clarity on this pathway in early 2020, and we'll be able to share more at that time.
The Tms market is still in its nascent stages in the technology continues gain popularity among psychiatrists healthcare providers and patients were enthusiastic about the success, we're having with their HBT strategy in a rapidly expanding active installed base. Overall, we believe that we remain well positioned to continue to drive topline growth in the business.
And build upon our market leadership position over the long term.
I'd now like to hand, the call over to Steve to discuss our financial performance.
Chris.
Total revenue for the quarter was $16 million, a 16% increase over the prior year quarter US revenue was $15.3 million, an increase of 13% over the third quarter of 2018.
Outside the US revenue was approximately $700000 an increase of approximately $490000 versus the prior year quarter.
You asked in Aerostar advanced therapy system revenue for the third quarter of 2019 was $4.6 million, an increase of 18% over third quarter 2018 revenue of $3.9 million.
As a reminder, this revenue line is comprised of Northstar capital revenue, which is revenue from systems sold and other Neurostar revenue, which has three primary components sales type lease revenue.
Operating lease revenue and revenue from upgrades to the 3.0 treatment coil.
As Chris discussed there were a significantly higher number of sales type leases in the quarter, which led to other neurostar advanced therapy system revenue of approximately $1.6 million during the quarter as compared to approximately $500000. During the third quarter of 2018, representing 200.
40% growth.
Neurostar capital revenue in the quarter was driven by 6% decrease in capital units sold and a 10% decline in average selling prices as compared to last year on a sequential basis average selling prices declined by 3%.
During the quarter, we saw our active installed base increased to 1032 units and net increase of 174 units or 20% from the third quarter of 2018 and a net increase.
56 units sequentially as a reminder, the active installed base includes capital unit sold sales type leases and operating leases.
US treatment session revenue was $10.3 million for the third quarter of 2019, an increase of 11% over the prior year quarter.
The increase was primarily due to an increase in other treatments session revenue, which represents our fixed price treatments session revenue.
Click treatments sessions purchased in the quarter grew by approximately 8%.
This increase was partially offset by a 6% decline in treatments session ASP fees due to pre determined volume pricing discounts within our existing customer base.
During the quarter other treatments session revenue was $1.4 million up from $512000 during the third quarter of 2018, representing over 170% grow.
US service and other revenue was approximately $426000 and 9% increase over the prior year.
Gross profit for the third quarter 2019 was $11.8 million, an increase of $1.1 million from $10.7 million during the third quarter of 2018.
Gross margin for the third quarter of 2019 was 73.8%, which was lower than the third quarter of 2018 gross margin of 77.9%.
The decrease in gross margin was the result of a higher mix of Neurostar advanced therapy revenue and lower average selling prices as a result of a higher portion of new systems placed as sales type leases.
Sales and marketing expenses for the third quarter of 2019 were $10.4 million, an increase of approximately $700000 over the prior year. This increase was primarily due to the increased size of our salesforce as well as spend related to marketing campaigns.
General and administrative expenses were $4.3 million, an increase of approximately $1 million compared to the prior year.
This increase was primarily driven by increased compensation related expenses.
Research and development expenses for the third quarter of 2019 were $3.5 million, an increase of approximately $1.4 million from the prior year period. The increase was primarily due to product development costs related to the continued development of our next generation platform and higher.
Personnel costs in preparation of the clinical trials.
Net loss for the third quarter was $6.9 million compared to a net loss of $5 million in the third quarter of 2018.
EBITDA, which is a non-GAAP measure for the third quarter of 2019 was a loss of $5.6 million compared to an EBITDA loss of $3.8 million and the third quarter of 2018.
Moving to the balance sheet, we ended the quarter with cash and cash equivalents of $82.4 million compared to $104.6 million eight year end 2018.
Turning to guidance.
For the full year 2019, we are reducing our guidance of total worldwide revenue to between $62 million and $63 million, representing approximately 17% and 19% year over year growth, respectively down from our prior guidance of $63 million and six.
The $5 million.
The primary driver of the reduction in full year revenue guidance, the slower than expected average selling prices.
And lower than expected volumes in certain existing customers.
For the fourth quarter of 2019, we expect total world wide revenue of between $16.7 million and $17.7 million, representing 7% and 13% year over year growth respectively.
For the full year 2019, we continue to expect gross margins to be in the mid Seventys range inline with our previous guidance.
For the full year 2019, we now expect operating expenses to be between $73.5 million and $75.5 million down slightly from our previous guidance up $74 million to $77.5 million.
I'll now turn the call back over to Chris Chris.
Thanks, Steve we continue to be very excited by the opportunity for North Star event therapy held a significant number of patients worldwide, who suffer from major depressive disorder. We're pleased with our success in partnering with some of the largest HBT providers and enthusiastic about this segment of the market and our leadership position continue to optimize our industry leading commercial infrastructure.
To support our expanding customer base and a marketing efforts to raise awareness of Tms as a treatment for those suffering from the pressure.
Longer term, we're enthusiastic about our ability to expand indications to bring relief to an even greater number of patients suffering from psychiatric disorders with that I'd like now to open up in line for questions.
At this time, maybe I'd like to ask a question. Please press star to the number one and our telephone to withdraw your question. Please press the pound or hash key.
Your first question comes from Margaret Kazoo, <unk> with William Blair.
Hey, good morning, guys. Thanks for taking my question.
Add one more question for me.
Morning.
First question for me.
Along the lines is guidance I know you guys aren't providing 2020 guidance, but I.
Yes, what im hoping for as you can provide us a little bit of a sense of the moving pieces. As you go into 2020 should we assume that growth similar to what you're saying the second half of this year.
Better than that kind of walk us through the moving dynamics for this leasing utilization et cetera.
Yes more growth thanks for the portion.
So were to your point, we're not going to providing guidance on Q4.
So we can talk a little bit more im sorry, we're not going to talk about next year, we can talk a little bit more about Q4 zeolite.
But the primary the primary softening in Q4 is a function of lower utilization rates in some of our legacy customers and we expect our north star system volume to come in.
As we.
As we expected to our guidance, but the issue is is that the rent the owns or significantly higher and those are at a lower ASP. So those are the fundamental those are the fundamental drivers or.
The us taking down the guidance next year.
Sorry in Q4 this year.
Got it yeah, so, let's maybe hit on those two items at that.
So first of all legacy nervous or accounts, you reference that maybe you're seeing some lower productivity than you expected.
Have you given orsini.
Consistent reasons, why maybe a sense profile or scale and then does that Q4 guidance assumed that utilization within these let's see accounts improves from what you've seen in the third quarter stay the same or gets worse.
Right, yes, so so the.
The lower utilization really is a result.
Our over index shift of the NPC team.
Towards the recently sold systems, if you think about it.
We've installed 174 systems.
In the last 12 months, which the new systems and 280 over the last seven quarters and what we're revisiting right. Now is the NBC coal cycle is been shifted towards those 280 systems and we need to go back and re circle on our legacy customer utilization.
I don't see this being over long term issue.
User experience users, who we need to revisit and review their practice development plans.
Okay, and then just one last one in terms of leasing dynamic.
As we look out do you see these sales type leases increasing going forward on how should we really look at the mix of sales versus.
Leases.
ROI.
Thanks.
Yes, so so we offer the flexibility of a rent to own option for these reasons is to minimize the upfront barriers to these larger accounts.
So we can Ics so they can expand to new sites faster, which ultimately gets us to more treatment session sooner. We would expect this this trend to continue and I think this.
Further validates the.
The strategy I would not categories. This is a fundamental shift in our strategy, it's really a partner and execution of our existing customer segmentation strategy, but you can you can expect us to continue to move forward.
Just to continue into Q4 and beyond.
Thanks.
Your next question comes from Jason Mills with Canaccord Genuity.
Hi, Thanks for taking the questions several questions, we'll turn the limited little bit.
Chris talked about the competitive landscape, we've seen growth slow here and we've also seen.
New competitors coming to the market in the last 12 months or so.
Has that had any impact.
Or been one of the reasons, we've seen slowing growth could you comment about.
Wins or losses in the space and whether or not.
Seaney regrettable.
Departures of large customers or its competitive.
Hi, or is having any impact on your business at all.
Yes, good morning, Jason Thanks for your question. So so the fundamental competitive dynamics really hasn't changed very much as we look at how we're performing in the marketplace and I think thats really indicative of this is now our sixth consecutive quarter, where we've increased the install base by 20%.
And so we feel like we're operating pretty well in the marketplace.
The primary drivers to the lower than expected guidance.
In Q4 is just a function of have not lower systems placed and sold into the market. It's really around the asap around those systems in the market and in a softening of our existing customers.
We have really when you think about the growth rate that we've had over the last seven quarters 280 systems placed.
Putting a lot more demand on the mpcs and in a lot of business, particularly in the pharmaceutical business you have a salespeople rotation with your reps and you need to keep reinforcing behaviors and what we're starting to recognizes we were under index with our legacy customers and we would expect it to now.
Get better in Q4.
And we're moving the MPC team on increased full cycle.
For our existing customer base.
Moving forward and we'll see how that we'll see how that that plays out within that group, but this is not a this is not a competitive issue I would say that this is.
When you look at the fundamentals of this business.
So base has grown 20, the clinical performance is strong it's still a nascent untapped market and this is just growing things.
As we rapidly expanded and penetrating new customers and we got to get our our coal point.
Ratio right between existing customers and new customers and we'll just a little bit a little bit off at the moment.
Okay.
That makes some sense, Chris so how long do you expect maybe you could give us a peak.
Kurt just a little bit.
I'm going to push a little bit on 2020, because otherwise.
The street is going to give value as a 10% growth.
Given fourth quarter guidance and it sounds to me like you see yourself with something north of a 10% growth.
And over the longer term, but I guess the question is how long does it take to sort of just not changed the business model, but adapt to the business model from a sales force perspective with these mpcs. It sounds like the models changing the legacy providers were sort of left.
On their own solution and sort of the full down, but the slowed down and they need a bit more handholding for lack of a better way to put it.
And it sounds like you expect that once those changes or instituted in you are providing better support for legacy customers that you see growth accelerating within those customers, which at this point in time is still relatively material piece of your business, which is why it's being reflected in lower guide to the near term, perhaps you could.
I think about those dynamics, a little bit more and talk about what is a prudent way to model.
Growth in the overall franchise in 2020, given the puts and takes and understanding or even give official guidance.
Thank you it behooves you talk at least Directionally.
Right. So so let me see if I'm going to try to help you out as best I can.
Jason So so what are we doing right now so we're assessing our deployment as part of our annual operating plan process.
And we know we know for sure that we're going to Ed in 2020.
Got to rebalance similar MPC territories, we do this every year because.
On equal disproportionate number of new system sales going into one rep versus another so we're going to add more mpcs.
Next year, we did at this past year.
As you know and I think the other thing is we need to look at either adding more ctcs and nbcs.
Because the install base is increasing 20% just by definition that means we're selling more systems year over year.
When you're when that bases, increasing 20% year over year and we've got to funded better balance. So were very thoughtful as you know so we're going through a process here over the last last several weeks to understand our call cycle frequency and and how we should move and then we're going to have to test and reach us and see how fast we can move the needle on it so good news.
As is right. This is not customers that we've lost this is customers that have trended down.
They have a system, they're committed to it and we just got to get back in there and revisit review their practice development plans and re engaged.
So this is more of a behavior.
Versus I would I was told material environmental issue around the business. This is what I'd call just growing things and we ship the team potentially too hard to the.
New customers. These 280, new customers and we got to we've got to we're going to revisit the call cycle.
So this is going to take some time first to figure out and test we test and we'll give you a better insight into it.
But let's be clear I mean, you can project, but from Q4 revenues and compared at the Q1, Q2, and thats not going to be a 10% growth.
The businesses is not going away, we just have a softening in one segment of our customer market and you can see that we're adding systems as fast as we've ever had.
In the history the company so the underlying fundamentals are strong.
Okay, Great and lastly, it sounds like it sounds like just to push on a little bit more it sounds like you're expecting a first.
Half a year to improve modestly relative to fourth quarter levels and the.
Your comps are going to be easier in the second half the year and with the addition of these new systems. It sounds like you you might even see sequential improvement second half 20 versus first half so improvement.
As you're moving through 2020.
My hearing that right.
Yes, Jason.
We are focused on finishing the year and we're in a process of creating our operating plan.
I can't really get into specifics around.
2020 at this point in time.
I think we've got.
Again strong install base.
I've indicated in Q4 that the number of systems that we expect to install are inline with our prior guidance.
63% to 65, but we're taking our guidance down because of.
Lower ASP is associated with those norstar systems as we get into these bigger accounts that the primary shortfall and Northstars in Q4.
And then.
Further softening of our a sub segment of our customer group, which is our legacy customers and then that's going to take some time to square away and I'm not quite sure how long it's going to take.
But its and take us beyond Q4, probably to square that away.
Yes, Tim I'll get back in queue. Thanks, Chris.
Your next question comes from Matthew O'brien with Piper Jaffray.
Good morning, Thanks for taking my question, Chris can you talk a little bit more about those legacy accounts I mean, how do you how do you really.
Qualify what a legacy account is is that some of that youve over for two three years.
Or is it.
And how do you think about what visibility do you have as far as what kind of.
What kind of opportunity you have there if they if they bought a competitive product and how quickly you can turn these guys back on.
Yes, so when we think about the legacy customer group, we think about customers that acquired systems.
Beyond three years.
That they are up and running 101 of the.
Advantages, we have versus maybe some other medical device companies is we have pretty good transparency because most of our north star treatment section volume is done through cloud. So we can see actual utilization trends over a period of time and see their purchases there seat utilization real time versus their purchases.
Our real pot. So what we're doing bad is we're just going back we're looking at these customers. They fall into three groups you know customers that are trending below our expectations at an above and.
What we're going back to is the people that are trending below our expectations that have the highest upon the highest impact is where we're circling our mpcs back to.
We bought we always we always factor in every year.
Number of what we call hybrid customers customers that have competitive product and our product.
We also factor in lost business and we don't feel that those two metrics are off.
This is just a function of and again I'll say that we've seen this before in like pharmaceutical days is you can call on your high volume Docs, but you got to go back and continue to maintain and I think that weve shifted to far towards the most recent installed class and those 280 units that we put in over the last seven seven quarters.
And we just need to spend a bit more time with this customer group and remember this legacy customer group.
Not to high value target group right. These are the customers that we brought on in the early days and we just need to spend a bit more time with them and Thats. Just another reason why will move into these higher volume targets.
Operationally they can keep at Roland.
And these are smaller accounts typically.
We are time and effort makes a difference than those accounts.
Okay. That's helpful and then.
Talk about maybe placements a little differently.
Hi, Steve added maybe over the last year, and then have been using for a year can maybe up to three years, so little bit more focus on the NPC side.
Do you have any sense and I would imagine you do given that it's all done in the cloud what kind of growth you've seen from those accounts on this session side has it been.
Hi, teens, 20% kind of growth on to that group.
Maybe over the last year so.
Yes, we have we havent dis aggregated, we havent disaggregate that on these calls, but I will tell you that relative to guidance, they're performing as we expected those groups.
I will go a step father and tell you that.
Our fixed price.
Contracted customers are growing significantly faster than our average customer in terms of utilization.
Okay, and then one last needed X in for Steve.
When you guys the came public.
The model is different and I think Jason got into some of that the evolving market dynamics I won't go there here, but with more and more of these sales type leases.
Coming out in some of the pricing pressure that we've seen how do we think about gross margins going forward. This is something we thought.
As you are coming public would be a metric there would be separately.
As you move.
Yes, and potentially falling a little bit or how do we think about that.
Feature.
Yes, I think we have a couple of dynamics that will impact gross margins going forward, but.
There is this puts and takes and we really don't see much change from that mid 70 guidance perspective.
The.
Sales type leases will continue its really a function of our partner growth in the future something we don't have a lot of control over.
But we do have control over the expense aspect and we're at the point, where we will be able to leverage our infrastructure.
From a service and support perspective so.
We feel the ASP decline will we'll be able to be offset by the the PNM leverage so.
I wouldn't I wouldn't come off that mid 70 guidance.
Yes, so the biggest thank you.
Just to kind of add on.
Is that the sensitivity the sensitivity around this business at the size.
A couple of percentage shift between norstar treatments sessions in North star revenue because of the large gross margin difference with that can move the the gross margin a couple of points and you can see in this quarter our percentage of Neurostar treatment sessions, a slightly lower than it was this time last year and nor stores are a little bit higher and when.
That happens you'll see a shift down and then you also know that our international sales were up and it's further compounded when the international sales are up and that's going to be a little bit lumpy and that could move us.
500 basis points as well from quarter to quarter. So those are those are kind of the key drivers there and then and then and then we talked a little bit is a little bit about price as well.
Helpful. Thanks, Jeff.
Yes.
Your next question comes from Dave Turkaly with JMP Securities.
Good morning.
Just a onto the legacy customers again, it's going to be clear not any specific geography in the US you said that you don't think theres any competitive impact and it really based on your analysis has to do with how long they've had them. So that had them for longer they're not seeing your reps is often is that fair.
That is that good morning to that that is fair and.
What we're seeing is is that there's a little bit more time to maintain.
As customers than than we anticipated.
Got it and then you mentioned Greenberg.
The success as well like what percent of your business today is covered by groups like that and I mean do we see this moving forward I'd love to just take a gas it.
Where is that going I mean, if they're going to be several more. These do you think that becomes I don't know maybe even more.
A more significant.
Part of your business, maybe 30, 40% over time.
Any color you can give us there.
Yes, so so so we havent really talked about that the number.
Specifically, but when you think about so when we think about fixed price contracts you can see how fast that aspect of our business is growing.
We havent provided specific number of systems or total installed base, but it's a little bit over 10% of our current installed base.
And then that's that's a number of systems out there are in this fixed price contract component.
Got it and I imagine you think that that continues to build over the next couple of years.
As Dave compels grow rent.
Yes, so think about it right.
Customer segmentation strategy is focused on.
Really the top 10% in the market that those three to 30 patients will that leaves 90, other 90% of market coal plants that were not really actively calling on.
And the small doctors need to refer to somewhere and this has given rise to this service provider concept, where dr. needs a place that Tms only where they can refer to.
It's kind of like the orthopedic surgeon doesn't refer to an orthopedic surgeon wouldn't MRI or X ray and many of the largest largest orthopedic centers have that they refer to radiology group. So in this way. The corollary is really the service providers are creating an opportunity for psychiatry, two Tms only facility meeting.
They just go to get treating come back they don't have an option to get CBC therapy or get written for prescription.
And we see this is really a function also of our direct to consumer efforts.
When patients around the country seeing norstar advertise their depressed bill go into their existing psychiatry. So we we all understand that this market is significantly underpenetrated and they will go into these psychiatrists and they just don't have a tms and they're looking to create an option for their patient to get treatment and moving it to.
To these these service providers is is really how they create a continuum of care within their practice.
Thank you.
Yes.
Thanks.
That concludes our question and answer session for today I will now turn the call back to Mr. soccer for closing remarks.
Thanks for joining us. This morning, we look forward to updating you on our next quarterly call.
That concludes today's conference. Thank you for your participation you may now disconnect.