Q4 2020 Tactile Systems Technology Inc Earnings Call
Please standby good evening, ladies and gentlemen, and welcome to the fourth quarter and fiscal year 'twenty 'twenty earnings conference call for tactile medical at this time, all participants have been placed in a listen only mode. At the end of the Companys 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 website for replay shortly before we begin I would like to remind everyone on the 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 <unk>.
Risk factors section of our annual report on form 10-K filed today with the Securities and Exchange Commission.
Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events or otherwise.
This call will also include references to certain financial measures that are not calculated in accordance in accordance with generally accepted accounting principles or GAAP.
Generally refer to these non-GAAP financial measures reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website I would now like to turn the call over to Mr. Dan Rivers, tactile Medical's, President and Chief.
I could have officer. Please go ahead Sir.
Thank you operator, good evening and welcome everyone to our fourth quarter and full year 2020 earnings call I'm joined on the call today by our Chief Financial Officer, Brent Moen, let.
Let me provide you with a brief outline of today's call.
Again with a recap of our revenue results for the fourth quarter and a review of our recent operational performance, including an update on the impacts that we saw during the quarter from Covid, Brent will discuss our quarterly and annual financial results in detail and review our financial guidance for 'twenty 'twenty, one, which we provided in our earnings release this afternoon.
I'll then share a few closing thoughts on our outlook for 'twenty, one before we open the call for questions and with that let's get started with a review of the fourth quarter.
In spite of the business disruption that we saw due to Covid. We were pleased to return to year over year growth this quarter and ultimately exceed the high end of our annual revenue guidance range for the fourth quarter of 2020, we grew total revenue by 4% year over year to $59 2 million, a new quarterly record.
The increase in total revenue was driven by strong sales and rentals of our entre systems, which increased 44% year over year, while sales and rentals of our flexi touch plus systems were essentially flat.
Relative to the third quarter of 2020, we saw a 20% sequential improvement in total revenue performance, which we believe is especially notable given the incremental headwinds we experienced in Q4 as a result of Covid.
Looking at our business trends more closely throughout the fourth quarter, we continued to see the impact of Covid in the form of constraints related to health and safety protocols adopted by the health care facilities that we serve.
Survey of our top accounts conducted in early January found that only a quarter of the approximately 1400 accounts surveyed we're operating without restrictions consistent with the results of our October survey.
The addition, or the adoption of Covid related health and safety protocols has continued to impact our business in two primary ways first clinic capacity to treat patients remained impaired with practices operating with fewer exam rooms, requiring additional time to clean and turnover rooms and experiencing extended.
Periods between patient consultations due to impose social distancing.
And second although prescribers have largely restored rep access to them clinics continue to restrict sales reps access to patients limiting our ability to conduct in person demonstrations with patients at their clinics.
As I've mentioned on prior calls providing patients with the ability to try on our system and experience. A brief treatment session is an important part of engaging patient conviction, especially as they confront potential co pays.
In addition to these dynamics during the fourth quarter, we experienced incremental headwinds is a spike in cases around the holidays impacted facilities clinicians and patients during the months of December and into January.
Most notably feedback from surveys of our top 10 customers indicates that many saw notable COVID-19 related employee and patient absenteeism with clinicians missing work due to COVID-19 or COVID-19 related quarantining and high rates of appointment cancellations as patients attempted to minimize COVID-19 exposure during the holidays.
We also saw an increase in sales rep vacancies in the back half of Q4 due to mandated quarantine in in our own compliance with our safety policies.
With this in mind, we believe our sales performance in the fourth quarter was especially impressive given these incremental headwinds in.
In terms of the trends that we saw by site of care outpatient based privately owned practices continue to recover faster and have been among the most resilient during the second wave. We believe these customers are often the most resourceful and their approach to seeing patients while still continuing to adhere to COVID-19 related restrictions.
These dynamics have been the most notable in the vascular clinics that we work with and their continued recovery was an important driver of our growth in the quarter.
Hospital and health system based practices on the other hand continue to maintain more COVID-19 related restrictions. This has been especially the case in the VA, where we continued to see lymphedema patients redirected from the approximately 170 VA hospitals to more than 700 community based outpatient clinics.
Requiring our sales force to expand their focus to primary care physicians throughout these additional sites.
For the fourth quarter of 2020 V. A revenue declined by 17% year over year to $6 $3 million, representing 11% of our total fourth quarter revenue compared to 13% in the prior year.
Against this backdrop I was struck by the resourcefulness dedication and execution of our teams during the fourth quarter, which facilitated our continued recovery. Despite these challenging headwinds.
Our sales force our sales team has done an excellent job of supporting both new and existing prescribers and equipped with some new tools engaging with patients virtually when required in order to navigate restrictions on in clinic access.
In addition, we've made progress in continuing to develop our expanded menu of patient training options as part of our commitment to providing the best possible patient experience during the fourth quarter, we refined our out of box instructional materials, which provide patients with everything they need to begin treating themselves as quickly and easily as possible.
<unk>.
Virtual patient trainings continue to receive positive reviews from our patients are most recent patient surveys. This past quarter have confirmed the patient satisfaction scores are consistently high across both our in home and virtually hosted trainings.
And that patients are equally likely to recommend our products regardless of the training option they used.
Most importantly, I'm pleased to report that we saw continued success in expanding our prescriber base by engaging with new clinicians a key component of this initiative in recent quarters has been our shift to hosting more professional education events virtually.
Working together with key opinion leaders in our field, we developed an organized a total of 34 virtual education events during the fourth quarter. These.
These events ranged in scope and focus depending on the target audience within our universe of potential prescribers and health care providers.
The fourth quarter saw event participation from nearly 1100 attendees.
And all of 'twenty 'twenty, we hosted over 6500 attendees at education events nearly three times as many as we did in all of 2019.
In addition to our account targeting efforts. These virtual education events have been an important resource for our sales force they serve as a way to augment the more limited physical access our field teams have faced as well as provide a great way for the reps to initiate new relationships with prescribers and as a result, we've continued to see our prescriber base expand.
Which helped us to partially offset the COVID-19 headwinds I previously described.
Looking ahead, we're excited to be expanding our prescriber base, creating a broader pool of clinicians recognizing flexi touch an entre and the role they can play in their treatment Arsenal.
In summary, I'm proud of the achievements of our team this quarter, which enabled us to continue along the path to recovery in spite of the incremental headwinds. We faced we were ultimately able to bring the year to a strong close returning to year over year growth for the first quarter since the onset of the pandemic and exceeding our revenue guidance.
Reflecting on our performance in 'twenty 'twenty I'm incredibly proud of our team's ability to deliver year over year growth on an operational basis, which excludes the impact of ASC 842 for the full year 'twenty 'twenty period, especially after the sobering, 20% operational decline we faced in Q2.
Now before I turn the call over to Brent I'd, just like to call out a couple of other recent operational highlights.
We received five 10-K clearance to market our solutions for both lipid Demma and Filippo lymphedema.
Filippo Lymphedema is the combination of lymphedema and chronic venous insufficiency, both indications we already had clearance for.
But this more comfortably expands the dialogue boundaries and adds clarity as we educate and interact with our customers.
Lipid demma is a chronic medical condition characterized by symmetric buildup of adipose tissue in the legs and arms lipid Nemo may cause swelling pain and easy bruising.
And we were also successful in removing the contra indications for active cancer, reducing the consideration to a caution.
This helps add clarity to suitable patient selection within the oncology community and simply better aligns with the evidence.
Also in early January we announced the addition of two new board members with the appointment of Sherry, Dod and deep D. J.
Sherri and deep day, each join our board with over 20 years of healthcare experience share is currently vice President General manager of Medtronic care management services business and deep D. Recently served as president of engine in Jennie O Rx and anthem subsidiary that manages a 20 billion dollar pharmacy business.
I'm pleased to welcome them to our board and convinced still enrich our leadership team and look forward to leveraging their expertise and strategic insights as we continue to evolve as an organization.
With that Brent will now discuss our fourth quarter and full year financial results in greater detail and review our guidance for 2021 Brent.
Brent.
Dan.
Revenue in the fourth quarter increased 4% on both a reported and operational basis to $59 $2 million compared to $57 $1 million in the fourth quarter of 2019.
Sales and rentals of our flexi touch systems accounted for 87% of our total revenue in the fourth quarter of 2020 compared to 90% in the prior year period.
Fourth quarter 2020 revenue by payer was approximately 71% commercial 18%, Medicare and 11% VA compared to 75% 12.
12% and 13% respectively in the fourth quarter of 2019.
Continuing down the P&L.
First quarter gross profit increased $753000 to $41.9 million compared to $41 $1 million last year.
Gross margin was 71% of sales in the fourth quarter of 2020 compared to 72% last year.
Yeah.
The year over year change in gross margin in the fourth quarter of 2020 was primarily driven by product mix.
There was proportionately higher fourth quarter revenue coming from our entre product line versus the prior year, which has a modestly lower gross margin compared to flexi touch.
Fourth quarter operating expenses decreased $189000 to $34 $9 million compared to $35 $1 million last year.
The decrease in operating expenses was primarily driven by lower sales and marketing expenses, which decreased $2 $6 million or 12% to $19.8 million.
The decrease was driven by lower patient training costs.
Sales commissions and travel and entertainment expenses.
The year over year decrease in sales and marketing expenses more than offset higher reimbursement general and administrative expenses and to a lesser extent higher R&D expenses, which increased 19% and 15% respectively in the fourth quarter.
Reimbursement and G&A expenses increased $2 $2 million to $13 $7 million, driven by litigation defense costs and other professional fees as well as personnel related expenses due to increased head count and our reimbursement and corporate functions.
Operating income in the fourth quarter of 2020 increased $948000 to $7 million compared to $6 million in the fourth quarter of 2019.
In the fourth quarter of 2020, we recognized $1 $2 million of other income associated with the general allocation from the cares Act to support health care related expenses or lost revenue attributable to the Covid pandemic.
Income tax benefit in the fourth quarter of 2020 was $3 $9 million compared to income tax expense of $1 $9 million in the fourth quarter of 2019.
The change in income tax expense and benefit was primarily due to changes in our effective tax rate, which was attributable to a change in taxable income, including proportionately higher tax benefits for stock based compensation as compared to the same period last year.
Net income increased $7.8 million to $12 $1 million or <unk> 61 per diluted share for the fourth quarter of 2020 compared to $4 $3 million or 22 cents per diluted share for the fourth quarter of 2019.
Weighted average shares used to compute diluted net income per share were $19 8 million and $19 7 million for the fourth quarters of 2020 and 2019, respectively.
Adjusted EBITDA for the fourth quarter was approximately $10 $8 million compared to adjusted EBITDA of $10.4 million in the fourth quarter of 2019.
As a reminder, we have provided a reconciliation of certain GAAP measures to non-GAAP measures in our earnings press release.
Turning to a brief review of our results for the full year 2020, total GAAP revenue decreased $2.4 million or 1% to $187 $1 million compared to $189 $5 million for the full year 2019.
Yes.
On an operational basis total revenue increased 1% year over year as a reminder, our operational revenue growth excludes the impact of ASC 842, accounting standard, which favorably impacted our revenue in the first three quarters of 2019.
The decrease in total GAAP revenue was driven by a decrease of approximately $7.4 million or 4% year over year in sales and rentals of the flexi touch system, and an increase of $5 million or 28% in sales and rentals of the entre system.
2020 revenue by payer was 71% commercial 16%, Medicare and 13% VA compared to 72%, 11% and 17% respectively last year.
Net loss for 2020 was $620000 or <unk> <unk> per diluted share compared to net income of $11 million or 56 cents per diluted share for the full year 2019.
Weighted average shares used to compute diluted net income per share were $19 3 million and $19 6 million for the full years 2020 and 2019, respectively.
Adjusted EBITDA for 2020 was $16 million compared to $25 $3 million for the full year 2019.
Adjusted EBITDA margin was 9% for 2020 compared to 13% for 2019.
As of December 31, 2020, we finished the year with a $2.7 million increase in cash cash equivalents and marketable securities totaling $47 9 million compared to $45 2 million at December 31, 2019.
A satisfying measure that reflects the strong cash flow generation of our business despite an unprecedented year.
We had no outstanding borrowings on our $10 million revolving credit facility at year end.
Okay.
Turning to a review of our 2021 outlook, which we provided in our earnings release this afternoon.
For 2021, we expect total revenue in the range of $215 $3 million to $224 $5 million, which represents growth of 15% to 20% year over year compared to the revenue of $187 1 million reported in.
2020.
Byproduct or 2021 total revenue guidance range assumes sales of our flexi touch systems increased approximately 13, 5% to 18%.
Sales of our Entre systems increased approximately 26% to $33 five per cent.
For the full year 2021, we also expect our gross margin to be in the low 70% range.
Our adjusted EBITDA margin to be in the range of 12% to 13%.
This adjusted EBITDA range assumes the following depreciation and amortization expense of approximately $3 million.
Stock based compensation expense of approximately $12 million.
And legal expense related to litigation defense cost of approximately $2 $5 million.
We expect our fully diluted weighted average share count in 2021 to be approximately 26 million shares.
Lastly, given the continued COVID-19 related headwinds, we expect throughout the first quarter of 2021.
We expect our total revenue to be down mid single digits year over year in the first quarter of 2021.
With that I'll turn the call back to Dan for some closing remarks Dan.
Thanks Brent.
Before we open the call for questions I wanted to provide some added color on key assumptions for the investment community to bear in mind as they evaluate our 'twenty one revenue guidance.
First while we expect first quarter revenue to be down mid single digits year over year as Brent outlined earlier, our full year 'twenty one guidance still assumes revenue growth in the mid to high teens over the first half of 'twenty one.
And high teens and approaching 20% over the second half of 2021.
Second while we continue to invest in an expanded commercial team, we're adding to our service and support team as well, which we believe will enhance the productivity of our direct sales reps, particularly our product specialists, while also driving leverage in our sales and marketing line going forward.
Let me take a minute to provide you with some additional color on these important changes to our commercial organization.
By way of background. We ended 2020 with a team of direct sales reps that consisted of approximately 200 and twenty-five product specialists and associate product specialist with roughly an even split between the two roles.
This team of direct sales reps is led by approximately 30 sales managers, including regional and district managers and VA specialists, which in total brings us to the 255 feet on the street that we reported in our 10-K filing today.
As we exited 2019, we began trialing a new position in our organization called field support specialists.
These individuals' assist our direct sales reps by conducting patient demos and collecting necessary medical records and documentation in order to free up more of our direct sales reps time. So they can focus on engaging with clinicians and growing their prescriber base.
We expanded this pilot field support specialist team during 2020.
And we've been pleased with the success of the initiative overall.
We ended 2020 with a team of approximately 30 field support specialists, bringing our collective field commercial team to 285 employees at year end.
In 'twenty and 'twenty, one we expect the total number of our team of direct reps and field support specialists to increase in the high teens year over year.
We also expect the composition or mix of the team to change over the course of the year as a result of two components.
First we expect to promote approximately 30 of our existing associate product specialists to product specialists and expand our number of sales territories.
We also expect the size of our team of product specialists and associate product specialists to meet to remain relatively flat from the approximately 225 at year end of 'twenty. 'twenty. However, we expect the mix of this team to shift from 50 50 to more like 60 40 in favor of product specialists by the end of 'twenty one.
Second we expect to invest in the expansion of our field support specialist team by adding approximately 45 support specialist this year.
Importantly, this investment will significantly enhance our direct rep productivity at the equivalent cost of approximately 20 new specialists.
We view the investment in the expansion of this team represents a P&L friendly approach to improving the productivity of our existing reps, while continuing to deliver high quality service to our customers and achieving our growth goals.
Stepping back despite the continuation of Covid related headwinds as we enter 'twenty one are.
Our organization and the clinicians and customers, we serve have become increasingly more resilient and resourceful after navigating an unprecedented year.
For tactile specifically, we believe many of the changes we made in 2020 will ultimately improve our business and process going forward.
With an enhanced sales and field support team in place to improve our coverage and rep productivity.
An expanded pool of prescribers and an updated approach for educating clinicians and training patients. We're excited about our prospects in 'twenty, one and beyond.
We also continue to believe our market is vastly underpenetrated and the AR that we have ample opportunity to drive strong sustained growth over the long term as we continue our market development efforts, especially as vaccines give way to some return to normalcy.
December of 2020, we conducted another analysis of U S. Medical claims data, which showed that there were 1.4 million patients diagnosed with lymphedema in the 12 month period, ending December 31 2020.
While the number of patients diagnosed in 2020 was undoubtedly muted by Covid. The data still reflects growth in the number of patients diagnosed during the year. Despite the significant challenges related to COVID-19.
The 1.4 million diagnosed in 2020 also shows the number of patients diagnosed has increased at a compound annual rate of more than 10% since 2013. The first year, we evaluated claims data.
With approximately 60000 patients served over the course of 2020, we remained severely underpenetrated in a large and growing market.
This year, we're focused on expanding our leadership position in the 5 billion dollar U S. Lymphedema market through a combination of continued execution and strategic investment in our business, including driving improved productivity in our sales organization, while continuing to expand our commercial teams.
Targeting and educating new clinicians to grow our prescriber base, while increasing our penetration of existing accounts.
And continuing to leverage important tailwind, including our broad in network coverage with commercial payers.
Longer term, we also continue to develop and expand the size of our addressable market opportunity by investing in our central areas, including clinical evidence generation clinic.
Clinical education and.
In research and development to raise awareness of lymphedema and enhance our product offering to expand our patient focused solutions and market leadership position.
By focusing on these areas, we aim to return to strong sustained growth and improved profitability as quickly as possible and continue our long term track record of performance for the benefit of our patients customers and shareholders.
I'd like to conclude my remarks today by commending the entire tactile medical team for the exceptional effort and dedication they've shown during a challenging year.
Their commitment to serving our customers and improving the lives of patients is one of the most distinguishing features of our company and the central component of our success.
And lastly, and most importantly, I'm proud of the initiatives we've implemented over the last year to mitigate the potential risks created by Covid and continue to ensure the safety of our employees as well as the clinicians and patients that we serve.
Operator, we'll now open the call for questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
I ask that you limit yourself to one question and one follow up.
He would like to ask additional questions. We invite you to add yourself.
Darwin.
It will come from.
Ryan of Piper Sandler.
Hi, guys. This is net.
Hi, guys. This is drew on for Matt. Thanks for taking the questions and congrats on a good quarter considering the circumstances.
I do want to start off on guidance, maybe you guys could help us understand a few things.
Berkeley, tactile talked about yourselves as a 20% plus grower.
On the guidance you've thrown out there today is a little bit light of that and I think we all understand that COVID-19 is going to have some impact from the first part of the year.
So I guess first what are you seeing on the street as far as Q1 that kind of led you to guidance the slowdown here in Q1.
And then second is there anything else meaningful authentic COVID-19, that's contemplated into that that 15 to 20 per cent that we need to be mindful of.
And when do you see growth returning to that normalized 20 per cent base.
Yeah. Thanks for the questions drew.
So I think first of all as it relates to the first quarter.
Yeah, well, we're not going to give monthly breakdowns I can certainly indicate that we continue to see the the headwinds of COVID-19.
We've historically depended more on the VA business is a bigger contributor in the first quarter and given kind of where the V. A softness has been I.
I think ultimately that's a contributor on overall kind of the holiday Covid wins that we entered the quarter with.
I think will all contribute a little bit too to how we see the first quarter playing out I think that while we certainly are looking forward and fully expect.
A return to that 20% sustainable topline growth keep in mind, given the guidance on Q1.
You know <unk>.
Much of the growth that we're talking about is going to have to be condensed and three quarters. So the 15 to 20 reflects the full year most of that will have to be produced in the three quarters. Following and we see a lot of the the assumptions that we've kind of built into this.
Is that there's really not going to be a material change in the operating environment in.
In the first quarter.
And probably even moderated certainly in the first half.
On the throughput issues, we've talked about patient access et cetera, I think until we see vaccine traction take hold.
I think some of those same headwinds will probably persist non.
Not knowing.
Some of the some of the variants et cetera, I think that we certainly expect that we're going to be.
In a much more normalized environment in the back half, but that's.
That's kind of what we're looking forward to as far as.
How we think we can finish up and enroll into the new year.
Okay. That's helpful. I do on a follow up a little bit on on your comments on EBITDA there.
You know you know recently.
You guys had suggested it likely becomes a smaller portion of the business going forward.
But maybe you could kind of give us an idea of how it trends over the intermediate term I mean does it stabilize a bit in and later 'twenty one as you begin to comp against some of those COVID-19 related issues.
And then just wondering if you've received any indication from VA in one day intend to bring some of those patients back into it.
To more concentrated centers in a post COVID-19 world. Thank you.
Yeah.
Yeah, So we've not.
Gotten any evidence that the VA is poised to return to the to their pre COVID-19 posture. So we're continuing with the assumption that the current landscape will continue to persist for.
For some period of time.
Okay.
I think book.
Brent on or if you had anything you wanted to share on the mix I mean other than I guess the other one I would just add to drew is that keep in mind. The V. A ultimately represents less than 10% of the total health care spend so anything above kind of low double digits, probably represents an over waiting so we were at 11%.
Sent in Q4.
I think that on a if you take out kind of the lumpiness of the quarters within the V. A you know being in the low double digits is probably a sustainable target for us.
Got it thank you.
Our next question will come from Margaret.
Blair.
Please state your question.
Hey, guys good afternoon.
I wanted to follow up on from the sales Rep updates that you gave and maybe just to start could you walk us through what led to those changes in sales rep structures.
How we should think about sales rep productivity maybe ramping.
Going through this year and into 'twenty two.
And then ultimately all of this leads into this question and I'll just say it upfront. If he has a high teens increase in reps. This year that implies at least high teens growth for 22 on less productivity declines.
But as you're leaning more on today's senior specialists with arguably higher quotas that should lead 22 growth to 20% plus so that.
Net net is that the right way of thinking about it.
Yeah, Let me, let me take a shot at it and then Brent may have something he wants to add Margaret but.
When we.
I actually inherited this a pilot program with field support reps when I got here and you know it was an interesting one because when you think about the amount of tasks associated in the field that have to occur many of them are not or are there outside the boundaries of market development and engaging with with physicians.
You've heard us talk a bit about the importance of access to patients to do demos. So the patient can get engaged many times that occurs in a doctor's clinic.
And often it requires the rep to occupy a clinic a room for the better part of an afternoon and they may get three patients. They may get one they may get five but.
The point is it's a it's certainly isn't something that warrants of highly trained professional market development rep. So the idea was that instead of the time that these professional reps were spending doing patient demos and perhaps even.
More to the point collecting medical records when they were necessary to make sure that we could submit on the patient's behalf. Those are big distractions from the opportunity to go engage with new prescribers, So where we had deployed on this pilot program. Some of these field support reps, we were able to demonstrate that the productivity of those were.
Reps that had field support reps in there in their geography.
Higher productivity and make good sense to us so we started to contemplate.
Should we continue to just add reps knowing that a portion of their day will continue to be consumed with what I would call non selling tasks or should we continue to equip those higher productivity markets with support reps. So we can liberate the sales force and allow them to expand their productivity.
And that's kind of what we're talking about for 'twenty 'twenty. One so we're still looking at an increase of 14 or 15% in total head count in the field. The mix as we said, we'll look a little bit different but making sure that we can liberate some of our best sales people to spend more of their time hunting is and liberated from the <unk>.
<unk> test is really what the model is about.
And Margaret I would just add this is brent by the way, although I would just add that you know what I mean as we look through this we are and we pressure test it relative to our 2021.
As Dan had mentioned in his comments I'm wrapping up the call certainly we believe this to be a P&L friendly approach to improving that that productivity. So you think about that lower cost resource being able to offset the continual add of a product specialist or on a P. S. Over the course of time, so I'm definitely expect that.
You'll see productivity bump as well as a bit of a friendly behavior on the P&L.
Okay, and useful and and as a follow up on that hit on both retail as well as potential risks I guess.
Yeah on these changes in sales Rep model I don't really see one but I've always got asked that question because I think management team, sometimes get surprised when you when you do change.
You know sometimes that net sales structure at what have you guys thought about men and yeah, how does that look like.
What's the risk profile and then the second question is going back to the 22 comment I know you're not ready to provide guidance on net plus you anyway, it's on it.
Yeah is that year end net growth number that you guys are planning to finish this year at which I think you guys said kind of high teens, maybe approaching 20 per cent is that the right rate that we should start to focus on as we go into.
<unk> to 'twenty two.
Or is it just kind of an easier comp off from this past Q4, and so maybe not apples to apples. Thanks guys.
Okay.
So two things first of all relative to the question about.
Risk is.
And some of the model pivots, we're talking about.
I think that if we did this in Patras Lee certainly, we'd probably be confronted with more risk. The fact that we've actually let this pilot run its course over the last 12 months or so has given us a lot more confidence that it makes good sense and interestingly.
The sales force, which is usually the most important one to make sure that you have on board are the ones that are actually raising their hands, saying, hey, we really want to have an FSS they've talked to their peers and they've recognized that their peers that have the support of our field support rep has allowed their peers to to actually spend.
More time, selling and they've seen evidence in their results. So this seems to be a pretty popular choice with the sales force and I think that as a result, we feel like there's a better chance that it'll be warmly embraced <unk>.
Certainly from a P&L standpoint, it seems to make sense and I think any of us think about division of labor.
It's the same reason I have an assistant in the office, because she's probably better suited to do some of the things I'm not as well equipped for and Oh. Those are some of the same I think analogies from 'twenty one to 'twenty two standpoint, we felt like we were being good and bolt by giving good clarity on 'twenty one.
That said, we continue to believe and and expect of ourselves to be 20, plus percent growth growth profile over the long term.
We're certainly not prepared to give 'twenty two guidance today, but but I think that getting back to 20%.
Over the course of 'twenty one.
Is something that's going to position us to be the kind of 20% plus long term growth profile company that we still aspire to be.
Great. Thank you guys.
Mhm.
Okay.
Our next question comes from Ryan Zimmerman of <unk>.
Please state your question.
Hi, This is actually Caroline on Brian and Thanks for taking my question and I'm wondering if we may just turn your expectations for your international initiatives. So I know that you had prior to the pandemic expected renewed CE Mark for that's like the touch product add before the year end of 2020, and so just appreciating that net that again why is that pre.
The pandemic could you provide an update on your expectations for those international niches in 'twenty 'twenty, one and going forward. Thank you.
Sure and thanks for the question Caroline.
From an international standpoint, since I joined we've sort of relax the pace.
It's a little might be a little surprising having the fact that I came from an international background for a period of time, but when you think about the growth profile that we still have ahead of us in the U S.
One of the things I've tried to be very focused on is keeping our attention very very focused on the development within this U S market given the size of the underserved community and the job ahead of us in market development.
My concern would be that we spread ourselves too thin I think the other one is as we think about the international markets.
Probably going to be at a lower ASP for us and probably.
A a different channel than we've been able to build out here in the U S. So I still believe that it's time will come but we've slowed some of our our investment I think the CE marks probably pushed back a year and a largely by design because we've tried to reorient most of our R. R.
Initiatives to continuing to develop the U S market.
Yeah.
Thank you, yes, absolutely an expense and then just thinking about maybe turning to some of your comments about new prescribers. So again you had mentioned that you had added maybe three times as many attendees at the meadows educational events in 2020 versus 2019 and sell especially on some of the three X attendees potentially settle into.
More irregular prescription <unk> yeah, how are you thinking about the contribution from some of those new prescribers in 2021. Thank you.
Yeah. Thanks for the question and new prescribers and expanding the prescriber base is an important part of our growth story.
And I think that when you consider that we've seen from the surveys of our customers that are many with the throughput constraints that we've spoken about quite a bit have seen some of their throughput down by double digits clearly to grow 4%, we're filling the gap somewhere and new prescribers of <unk>.
<unk> to play an important role we've talked previously about new prescribers typically start out slow so often new prescribers that.
Ah recognizes the potential merit of one of our products will prescribed for a patient or two and in spite of the body of evidence many still want to see how their patient responds. So they may put one or two patients on fall on for a couple of months in.
In fact, if they've got a patient that they want to put it on they may have to do a tried and failed on a compression garment first or they may not even be eligible until they've gone through that but as they start to get experience typically that's when we see them recognizing the success and us being able to share the feedback and ER and then ultimately.
Cultivating deeper into their patient population and recognizing more patients that can benefit.
As we've kind of laid out the year certainly we expect more growth to continue to ramp over the course of the year and I think new prescribers and and their continued.
Expansion in utility with our products will play an important part of that.
Perfect. Thank you.
As a reminder, if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if youre using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow that.
Our next question is from Suraj Kalia of Oppenheimer. Please state your question.
Good afternoon, Dan Good afternoon, Brent can you hear me all right.
Yes.
Cash.
Perfect Hey, Dan forgive me I have so many calls going on at the same time, so I hopped on a few minutes late.
What was the extent of independent contractor usage in Q4.
Suraj I would be happy to give you a little bit of color. It's Brent by the way. So we did a we did actually reactivate a small number of independent contractors to to help us meet the demand in the fourth quarter.
The number that we actually are used.
Independent contractors for training was was a pretty small portion of our overall training are the only reason we brought them back is to make sure that we could we could satisfy the Ah patient interest in wanting to get trained the fourth quarter.
Got it.
It then Brent either one to 60000 patients you mentioned treated in FY 'twenty.
How should I think about the utilization metrics.
On a per center basis, and with this introduction of field support specialist.
Hi.
Just give us some goalposts of how to think about kudos way utilization was shooters, how we are adding FSS and this is what we could potentially look for overtime.
Yeah, I mean I I.
I think suraj, we don't we don't provide a ton of metrics relative to our facility breakdown.
In terms of where the where the prescribers are prescriptions are coming from but I think one of the one of the interesting things to note is as Dan pointed out in his prepared remarks and a follow up question is that are we are seeing a nice step up in the number of prescribers and the interest level from folks that we have.
Educated.
On virtually so we're excited about what that opportunity presents for 2021 and as Dan pointed out will be a are a significant contributor to our overall revenue growth.
Yeah.
I would just add suraj that.
We've got some product specialists that have associated product specialists in the geography, we have some product specialists, where theres a field support rep is doing a lot of the administrative burden and then in some markets. We have a product specialist with the supportive neither which would typically have to match.
Manage all of the tasks, including some of the non selling things that we've talked about so it's a little hard sometimes force I think to use a single number that's meaningful that says here's the productivity for example per rep. Because each rep may be supported in a different way, but I do think that sales expense.
As a percentage of revenue was a reasonable.
The metric that that I think we can all kind of anchor on to demonstrate that we're making progress.
Got it and finally, maybe Brent.
Brent.
Let you have this question I'll hop back in queue, maybe you'll referenced this already the commercial segment.
You know it did seem a little soft in the quarter what are your expectations for Q1 in your embedded in your guidance and is there any subliminal differential impact because of COVID-19 on the on the on the commercial segment. Thank you for taking my questions.
No absolutely I'm happy to provide a little bit of color on that so.
On the commercial business in itself, yes. It was it was essentially for the fourth quarter on flat.
And represented over 71% of our total revenue and that compared to 75 per cent of our total revenue in the prior year.
You know as you might expect with flexi touch being down and limited access to.
On the VA and some of the hospital centers a lot of the focus ended up being in the vascular space and drove a lower extremity usage of which a higher percentage of that ended up being Medicare. So.
I think what you're what you're referencing here suraj as is continuation of the Covid impact that we've experienced and patients just apprehension to.
To return in terms of ER visits and also the patient throughput relative to the facilities that are that we've experienced as it relates to the impact in Q1.
We are we are we do face from seasonality in our business. So commercial is certainly one of those areas, where it's impacted because patients get their their co pays reset at the beginning of the year. So.
Certainly look to to continue to execute on our model in the first quarter, but.
That will be a challenge and that's part of the reason that we're.
We're guiding to a mid single digit down in Q1, one of the contributors.
We are currently showing no remaining questions in the queue that does conclude our conference for today. Thank you for your part.
Dissipation.
Alright. Thank you thanks operator.
I appreciate everyone.
Okay.
Okay.