Q4 2020 Inogen Inc Earnings Call
Greetings and welcome to the Inogen fourth quarter, and ear and plenty of 'twenty earnings Conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
And you want to require operator assistance during the conference. Please press Star zero on your telephone keypad as a reminder of this conference is being recorded.
I would now like to turn the conference over to your House My Kitchen Investor Relations. Please go ahead.
Thank you for participating in today's call joining me from Inogen, our newly appointed CEO and mobile shop shop, and CFO and co founder Ali Bauerlein earlier today energy and released financial results for the fourth quarter and full year 2020, This earnings release, and the energen and corporate presentation.
<unk> are currently available and the Investor Relations section of the company's website. As a reminder, the information presented today will include forward looking statements, including without limitation statements about our growth prospects and strategy for 2021 and beyond expectations related to our operating results for 2021, including direction.
The revenue commentary for the first quarter of 'twenty, 'twenty, one and our ability to create shareholder value by driving awareness of our products expectations regarding our international and domestic sales channel expectations related to our rental channel expectations related to our physician sales force hiring expectations and expectations regarding our.
Sales and marketing roles and related investments product development expectations expectations regarding reimbursement and regulatory changes and our expectations regarding the market for our products and the impact of the COVID-19 pandemic.
And on our business and demand for our products and both the short and long term the four.
Forward looking statements and this call are based on information currently available to US as of today's date. These forward looking statements are only predictions and involve risks and uncertainties that are set forth in more detail and our most recent periodic reports filed with the Securities and Exchange Commission actual results may vary and we disclaim any obligations to update these forward looking statement.
Except as may be required by law, we have posted historical financial statements and our investor presentation, and the Investor Relations section of the company's website. Please refer to these files for more detailed information during the call. We will also present certain financial information on a non-GAAP basis management believes that non-GAAP.
Measures taken in conjunction with U S. GAAP financial measures provide useful information for both management and investors by excluding certain noncash items and other expenses that are not indicative of Inogen and core operating results management uses non-GAAP measures internally to understand manage and evaluate our business and make the operating decisions.
Reconciliations between U S GAAP and non-GAAP results are presented in tables within our earnings release for future periods. We are unable to provide a reconciliation of our non-GAAP guidance to the most.
To the most directly comparable GAAP measures without unreasonable effort as discussed in more detail and our earnings release.
With that I will now turn the call over to energy and President and CEO and OBL shop shop the Beall.
Thank you, Matt and good afternoon, and thank you for joining our fourth quarter 'twenty to 'twenty conference call before I discuss all of recent performance for the fourth quarter of 'twenty and 'twenty I would like to say that I'm really excited to have joined the image and team as I believe that this company has the real opportunity to impact the quality of patients lives by providing them increase.
Freedom and independence of the at all.
Oxygen therapy needs all.
Also I believe that Inogen is in a great position and the continued to be either and the oxygen therapy market, while driving patient access and the portable oxygen concentrators or to the Ocs and what I believe is the large and currently under penetrated market.
With that I would like to turn to the review of our fourth quarter 'twenty to 'twenty performance.
And the COVID-19 pandemic continues to have a significant effect on our business and the fourth quarter of 'twenty, and 'twenty bright and Burley and the direct to consumer and it didn't.
National business to business sales channels, we are pleased with the rebound and performance and our domestic business to business channel, which exhibited double digit growth over the comparable period of the prior year to year. Additionally, the recent focus on the rental channel produced strong operating performance with rental revenue growing significantly and.
The fourth quarter of 'twenty, and 'twenty versus the comparable period and the prior to year.
With that I will now provide details of our fourth quarter, 'twenty and 'twenty revenue by channel.
For the fourth quarter, we generated total revenue of 74 million compared to seven to $8 9 million and the fourth quarter of 2019 and decline of six three per cent from the competitor theaters and 2019.
Domestic business to business sales and the fourth quarter of 'twenty and 'twenty increased 17, 9% to $24 2 million compared to the 26 million and the fourth quarter of 'twenty and 19.
We believe this increase was primarily the result of the unfulfilled orders and the fourth quarter of 'twenty, and 19, which led to an easier compare the theaters and the fourth quarter of 'twenty and 'twenty and increased demand of POC S and hospital systems and stationary oxygen concentrator supplies were strained to keep up with the rapid increase.
And COVID-19 cases.
In addition, we believe the resolution of the competitive bidding uncertainty back in October 'twenty and 'twenty also contributed to increased demand and the quarter, which was partially offset by lower reseller customer demand and the comparative period.
And international business to the business sales and the fourth quarter of 'twenty and 'twenty decreased by 24% of 23.8 per cent decrease on the constant currency basis to $13 6 million compared to $17 1 million and the fourth quarter of 2019.
We believe the decrease was primarily driven by the resurgence of the COVID-19, pandemic and the quarter, causing additional lockdowns and many European countries, along with reduced operations capacity of certain European respiratory assessments centers.
However, I would like to dimension the during the fourth quarter of 'twenty and 'twenty. The Inogen, one <unk> 50 of let's see what's clear to reimbursement in Germany, and we are excited for our German customers to begin purchasing our latest and highest output the Oc.
Direct to consumer sales decreased 25, 2% to $26 8 million and the fourth quarter of 'twenty and 'twenty from 35 to 8 million and the fourth quarter of play and 19.
We believe the decrease was primarily driven by the impact of Cook of COVID-19 to H E on consumer travel mobility, and consumer confidence as well as and approximately 6% reduction and average inside sales representative headcount.
Given the impact of COVID-19, P. H E on our direct to consumer sales. We have continued to review our hiring and retention practices and ended the year with 300 inside sales representatives down from three to 29 at the end of 'twenty and 19, we plan to continue and inside sales representative hiring at the measured pace and the first half.
Of 'twenty to 'twenty, one while we monitor to the impact of the COVID-19, Phe on all of the business.
Rental revenue and the fourth quarter of 'twenty and 'twenty increased to $9 4 million from $5 4 million and the same period and 2019 and increase of 71, 7% primarily due to increased patients. The long service hired a bit of and patients as a percent of scope and patients on service higher Medicare reimbursement.
Rates and lower rental revenue of just fine.
As of December 31, 'twenty and 'twenty, we had the approximately 32002 hundred patients on service, which was up nine 2% sequentially compared to September 30 of 'twenty and 'twenty and up 27 three per cent compared to December 31, 20 and 19.
The increase and patients on service was driven by both the greater utilization of needs for rental opportunities and initiatives to increase physician awareness and by our own sales force.
As of December 31, 'twenty and 'twenty, we had the total of 24 of physician sales that are presented to us up from 17 and as of December 31 and 2019.
Looking ahead and as I previously mentioned I believe we are leaders and the plc technology and the the markets for our technology the remaining.
And the Underpenetrated with only an estimated 18 per cent of patients using P. O C of the total long term oxygen therapy market and 2019 based on Medicare data.
Furthermore, we are committed to our vision of making all the P. O C technology, the standard of care for oxygen therapy patients to.
To do so we believe we need to increase patient access to all the technology at the onset of care, which requires and driving physician awareness of our products and services and expanding our reinsurance contract coverage.
As part of the strategic initiative, we plan to invest to expand the old physician sales force with the intent to have the national presence within the next three to five years also as part of the strategic initiatives. We plan to make further investments to build out of rental infrastructure to offer physicians and necessary solutions to better serve their patients.
And.
In addition over time, we plan to increase the investments in R&D to broaden our portfolio with and all with this product offering while gradually expanding the clinical evidence and support of those products.
We are excited about our initiatives to drive new oxygen patients rentals as we continue to see meaningful patient interest and all the products. We expect these planned investments for the strategic initiatives will impact our operating expenses and the near term. However, we believe that such investments will provide a more predictable revenue stream while and.
And having a growth and margin profile and the future.
With that I will now to end the call over to our CFO Ali Bauerlein Ali.
Thanks, and good luck.
Afternoon, everyone.
Total revenue for the fourth quarter of 2020 with $74 million, representing a decline of six 3% from the comparative period and 2019.
And I need to gross margin to the fourth quarter of 'twenty and 'twenty total gross margin was 46 per cent compared to 43 per cent and the fourth quarter of 2019.
Our sales revenue gross margin increased to $44 five per cent and the fourth quarter F 'twenty and 'twenty versus 43% from the same period of 2019.
This increase was primarily due to lower manufacturing costs per unit versus certain manufacturing inefficiencies, we experienced in the comparable period of 2019 and lower warranty costs per unit.
These increases were partially offset by higher labor and overhead cost per unit and lower average selling prices.
The mix of domestic business to business sales, which have a lower gross margin versus our direct to consumer sales.
Rental revenue gross margin increased to $56 five per cent and the fourth quarter of 2000, and 'twenty versus 43, three per cent and the fourth quarter of 2019.
Primarily due to higher available patients as a percentage of total patients on service and Medicare reimbursement rates and lower rental revenue adjustments and lower depreciation expense per patient on the survey.
And for operating expense total operating expense increased to $39 6 million from the fourth quarter of 'twenty and 'twenty versus $39 2 million and the fourth quarter of 2019.
Due to an increase and the fair value of the new era earn out liability and higher personnel related expenses, partially offset by lower legal and consulting expense and a reduction in product and incentives and.
Scott.
Research and development expense increased to $3 7 million and the fourth quarter of 'twenty and 'twenty compared to $3 6 million and the fourth quarter of 2019.
Primarily associated with the increased product development related expenses.
Sales and marketing expense decreased to $25 4 million from the fourth quarter of 'twenty and 'twenty versus $25 5 million from the comparative period of 2019, primarily due to decreased product incentives and advertising expenditures, partially offset by increased personnel related expenses.
Advertising expenditures were $9 3 million and the fourth quarter of 'twenty, and 'twenty compared to $9 5 million and the fourth quarter of 2019.
General and administrative expense increased to $10 5 million and the fourth quarter of 'twenty and 'twenty versus $10 1 million and the fourth quarter of 2019, primarily due to a point $4 million increase and the fair value of the new era.
And the increased recruiting costs, partially offset by lower legal and consulting expense.
And the fourth quarter of 'twenty and 'twenty, we reported an operating loss of $5 5 million adjusted EBITDA of 3 million and net loss of $5 1 million and loss per diluted common share of 23.
Finally, we ended the year with cash cash equivalents and marketable securities of $231 2 million with no debt outstanding.
Regarding reimbursement rates. The recent stimulus bill that passed in December 2020 included to provisions related to oxygen therapy.
The bill extended the temporary elimination of the 2% Medicare sequester of reduction that went into effect from 2013.
Previously it was expected to go back into effect on January one 'twenty and 'twenty, one and the this extends the benefit until March 31st 2021.
The Bill also waived the budget neutrality provision for oxygen therapy, thereby increasing payments for certain of oxygen equipment and rural areas.
We see both of these changes is incrementally positive for our industry and POC adoption.
Now turning to guidance because of the unprecedented market uncertainties. We are still unable to provide guidance for the full year 2021.
And the uncertain and scope and duration of the COVID-19 pandemic, we are unable to estimate the impact on our financial results, including our revenue revenue mix net income or loss and adjusted EBITDA estimates for such period.
While we expect the COVID-19 pandemic and any potential for further prolonged lockdowns would have a negative impact on our sales revenue and the period as Bill mentioned, we believe it is prudent to continue to make investments to build the necessary infrastructure to support our strategy to focus on rentals at the onset of care.
Part of the strategic initiatives, we plan to invest to expand our physician sales force and to build up the infrastructure to enable us to offer physicians the necessary solutions to better serve their patients need.
In addition.
At the time, we plan to increase investments to broaden our portfolio with innovative products and to support those products by gradually expanding clinical evidence.
Given such investment initiatives, we expect increased operating expenses for 'twenty and 'twenty, one that we believe will support future revenue growth and margin expansion, while also increasing the predictability of our revenue.
Also while we incurred minimal expenses related to bonus and performance based stock compensation and 2020, we expect such and such costs to increase in 'twenty and 'twenty, one along with certain expenses related to the recent CEO transition.
As we saw in the fourth quarter of 'twenty and 'twenty demand has increased so far and the first quarter of 'twenty and 'twenty, one compared to the first quarter of 'twenty and 'twenty from our domestic HMA partners, primarily due to increased demand for P. O sees of hospital systems and stationary oxygen concentrator of supply has been strained to keep up with the rapid increase in COVID-19.
And in case of it.
While we do not know how long this increased demand for Poc's will continue we expect our domestic business to business sales to increase and the first quarter of 'twenty and 'twenty, one versus the comparative period from the prior year.
Furthermore, we expect rental revenue to grow and the first quarter of 'twenty, 'twenty, one and compared to the same period and the prior year.
Due to increased patients on service higher billable patients as a percent of total patients on service and higher average reimbursement rates.
However, we expect our international business to business and direct to consumer sales channels and the first quarter of 2021 to be down compared to the same period and the prior year as a result of the continued COVID-19 impact on these channel.
With that we'll be happy to take your questions.
We will now be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is from the question queue.
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One moment, please follow me to call for questions.
The first question is from Robbie Marcus from Jpmorgan. Please go ahead.
Oh, great and nice quarter and thanks for taking the question and the Bill and I thought I'd start off at two questions. One maybe a higher level of one may be a more focus on the the business here, but for a lot of US. This is the first time, we get to hear from you and and.
It'd be great. If you just gave us your thoughts are and what attracted you to the role.
And you know what you think you can achieve and the next six.
Six to 12 months here within the Jan and what you think you might be doing differently.
Versus the prior CEO.
Yeah.
Hi, Robbie Thank you for the question. So let me go to the first part of the question the to address what attracted me to Allergan and the old. So if you think stand out in my mind, specifically, how underpenetrated the appeal with the oxygen therapy market remain not the only in the U S, but around the world and the opportunity for the company like in the gym that has truly.
And the best in class portfolio of.
Products to meet the needs of patients that require of such therapy.
Also what attracted me is the fact that Allergan has the company with the purpose of basically focused on really improving desperate after the therapy around the world, but that's the coupled with as I mentioned the portfolio strength of the commitment of the team that I saw during the discussions we were having provided for the unique opportunity to serve patients and.
Need and deliver on their expectations as well as the expectations of share holders, so but with that said there's a lot of work ahead of us and division Israel and the capabilities of our strong in the portfolio and this is good and I look forward and working with the team on improving that now to the second part of your question Ravi in terms of what can we do and the show.
And then the medium to like any incoming CEO into the organization I'm spending a lot of time doing deep dives with the team specifically around two things the strength of the portfolio of both existing as well and what's in the innovation pipeline and.
In terms of what's coming next and.
One as the strength of the go to market more of them and it's good ability and how we can continue to build on debt and leverage.
And the strength that we have there so the market it sounds as to as I said and not penetrated that much and leave the lot of room for us to grow as well as all of partners and the channel.
So we'll be looking as part of that into what the area scan, we doubled down and strengthening some of the investments or what we're placing our bets Inc.
Clothing, and some of the capabilities, we have some of the underlying technology systems that we need to look at looking at the business model as well as revisiting the strategic imperatives, and tweaking them and for us to get to that that's part of the growth rate.
Thanks, and and maybe just as a follow up you talked about under penetrated market. You know how are you thinking about the business strategically because on the one hand DTC is the most profitable on a net income dollar basis for the company Yeah, a lot of patients.
And like to get it through there.
The H M, the suppliers and you've done well and that bucket over the past several years and.
And you know it's the company at one point was.
Moving away from rental and now coming back to rental so where do you think the market is in terms of penetration in terms of you know available units for patients and.
And where do you think the key focus for Inogen will be and are.
And the next 12 to 24 months is it the.
Returning to DTC is it building of big aggressive B to B presence is the is getting more aggressive and rental how do you think about balancing the three cars.
You know they they don't always works perfectly well together.
Yeah, So I'm I'm going to take the first pass and the since I've only been here three weeks or two and the athletes I'll, let Ali chime and after I give you my thoughts so I think in terms of of the balance between the three channel was and let me let me start with the penetration of the market and based on the CMS to later that we have and it's difficult to put all of the datasets together.
But we believe that the penetration is around 18%. So there's still a lot of room left and the market in terms of how do you think of that upside based on the channel and the and the field of play that you that you go into so on the let me start with the smaller side the business to business. So of course it remains the full.
But we need to balance it with the direct to patient or direct to consumer as well as the rental market. The rental market that we have started focusing on and again recently has shown some positive signs in terms of how it responded to our efforts and us increasing the exposure and the and the attention of the patients within that space, We will continue to.
Double down on that because we've seen good growth rates, there as well as continue to refine and automobiles and towards the direct to consumer and see how we can leverage some of our strength and optimize all of our performance and spend and that space. So the answer is we're not going to take our eye off any of them, but where the.
And then to be placing bets and little bit differently. After I have a little bit more time with the team to look at the return and tons of the investment and one of the three channel as well as whats what tweaks are required and each one of them.
And Ali you want out of way and listen but.
Yeah sure. So yeah. Robbie is as you know our our vision of the future is really to make P. O sees the standard of care for ambulatory oxygen therapy patients and certainly it's been difficult. The last couple of years to really see improvements significant improvements.
<unk> and the penetration there.
And you know, we're really about trying to drive that patient access to the product and we think the combination and efforts of creating patient awareness that we've done through our D to C efforts, creating physician awareness that we do with our rental assets as well as our.
Physician facing sales team and then also to our partners who are also creating that awareness. We believe that's the best way to get to a POC to becoming the standard of care. So we're about trying to drive that access certainly we're proud of what we've been able to accomplish in the rental business and it.
It shows the true patient interest and P O sees and the high demand. That's there if they can get access using their insurance benefits and as you rightly said.
And a large portion of patients can't afford to buy of POC out of pocket. So the more we can give patients access to using their rental benefits as a way to get P. O sees.
And that the higher conversion rates that we would expect and our business and the pathway to achieving our vision to the company.
So maybe I'll just to add something that the Ali mentioned, which is getting to those prescriptions at the onset of care. So the efforts, we're putting behind all of our direct to physician sales force. It's part of the strategy that the Ami and I covered in terms of making sure that we give them the patients of the options we give the physicians.
And what is required and we are capable of either side of it and get through the insurance and the worst of all cash sales.
Great. Thanks for all of the insight I appreciate it.
The next question is from Matthew of emission from Keybanc. Please go ahead.
And good afternoon, and and the Bill congratulations on all of the new role.
And get it before I ask a longer term question and I just wanted to the.
Asked around and if so what are some of the early signals of activity you're seeing from your your DTC customers at this point and now that the vaccines.
Our rolling through have you seen call volumes or inquiries and start.
To start to improve.
Yeah I'd say.
And it's a little early to say that still.
We're just now getting into what would be our typical higher seasonality period, usually that starts in March or April for us, where we would see.
Consumers, increasing both seeing our cost per lead declined as well as our our conversion rates increase.
But we certainly have spent a significant amount of optimism from the patient population that they do plan to get vaccinated and they plan to resume traveling.
Once they do and.
Received those vaccinations so.
I think that we've seen some hopeful signs there.
But still it's a little too early to say that we've seen a trend and our business debt would immediately drive and impact to our results.
And then all of the international side of it it would seem as if there are several potential catalysts for us for some improvement into 'twenty.
2021 can you talk about what what the UK tender timing and some of the launches and in France, and and and reimbursement in Germany, and and what that could mean.
Yeah.
Sure Yeah, I'm happy to take that question and you know the tenders have been resolved and the U K there has been a little bit of delay and the implementation of those given the pandemic.
<unk> and the impact that that has but the contracts have been awarded we have visibility on the winners and.
And we believe that that should be a tailwind to growth as those markets start returning to normalcy.
<unk> seen in the past debt when we launch new products and.
And get reimbursement approval and markets like Germany, and France that does lead to a heightened interest in the product and conversions of that product. So we are excited about those two markets of course.
And if it still has an overall impact on the business and.
In the short term, but we know, giving our partners access to the best product and.
On the market with the G. Five certainly will help enable them to provide poc's and.
Provide that patient preferred product. So we do expect to those customers and those markets to convert to the G. Five since it is better than the G. Three and anyway and that's that's the standard product that has been used across most of Europe.
And we have already seen that in other accounts, where where that product was available. So we would expect that and we do think that that will continue to strengthen our competitive position and market position and in those markets.
And and maybe Matthew of the other thing and hopefully with the assessment centers starting to reopen again as people get to vaccinate the debt will definitely be and that's a bit of the health and terms of the demand the tweaks we expect.
Okay excellent and then last question is just the Bill can you just to give us a sense of what youre going to be trying to prove out with with clinical evidence and what you think youre going to be able to show.
Yeah, I think and this is the to be determined but I'll frame it at the high level of.
The people actually get to better clinical outcomes and lower the hospital admissions hopefully if we can get to that level of them. If they are on oxygen therapy, especially if they don't if youll see that allows them to get to a higher level of compliance and adherence to the required therapy versus using it the intermittently because they're tied to a U N at the ore.
Think tank and we'd like to be able to do some other clinical studies to prove the value of the overseas and the superiority over the other modalities of therapy is to establish the oxygen therapy is definitely very helpful and beneficial and we believe that there is and added cluster of adherence and compliance, which I think of it.
The core of the offerings that we have so we're having a discussion as the team in terms of how do we go about getting to that the evidence because it will definitely be and some of the of the help that we were to quite and tons of steel ones.
Yeah, and just thank you very much at all of that and it's certainly true and and we also want to do more clinical work with the combination product that we've talked about of the POC with the T E beam technology, and really showing the differences between that product and of traditional P.
Oh C and so that will be.
Another leg to the side.
Clinical evidence approach.
Thank you all.
Yeah.
The next question is from Mike Matson from Needham. Please go ahead.
Hi, This is Joseph on for Mike.
The first question maybe.
And it around Covid.
Just curious about why it took so long to get a benefit from COVID-19 related to demand and you know like what changed and why wasn't the seen earlier and maybe going back to the P O sees as well.
Any information on the on how long these COVID-19 patients who need to use the P O sees and and specifically what happens to the units after the <unk> and no longer needed. Thank you.
Yes, sure Great question, and we did actually see the early in the pandemic as well.
Back in March and April there was the heightened interest and P. O sees and of course, there was just a lot of unknowns at that moment about what's the best treatment was for Covid patients.
But we have seen oxygen therapy and emerge as.
A common treatment for patients who need them, who have a COVID-19, and particularly as we saw a hospital systems trying to increase discharges.
Ah patients because they have limited capacity, we saw more patients going home with the oxygen therapy versus staying in the hospitals.
And we've seen a shortage of what would traditionally these patients.
And would be treated with stationary concentrator is.
Because if they're still recovering from Covid and ambulation is not there the biggest priority of typically would be a higher flow unit and.
Unit that doesn't have that ambulation, but as that supply got more constrained and the fourth quarter. We did see a pull through into P. O see demand for that to us since they couldn't get access to more traditional oxygen therapy, and so that is that.
The main driver of why we didn't see this earlier and kind of what we're currently seeing is a little different than historical trends.
And we don't have good data on how long these patients do stay on oxygen therapy. If they are prescribed oxygen therapy, obviously, a large percentage of COVID-19 patients do not need oxygen therapy, they recover on their own but for those who do have severe cases, there is a portion.
Who need oxygen therapy.
It does appear to be short term in nature and thus far.
But it's really hard to tell any long term impacts at this point.
Okay. Thank you that's very helpful and then and maybe one more of.
I know you guys aren't giving guidance, but if you could give maybe a sense of the magnitude of the increase of of operating expenses and in 'twenty and 'twenty, one that would be very helpful.
Yeah.
Yeah, Thanks, and and you know, we arent, giving guidance today, so we're not going to quantify the exact level of investments, but it is a step up from the operating expenses that we saw in 'twenty and 'twenty and we do hope at some point during the year, we will be able to give more detail as to give more guidance.
But this is something that will grow over time as we continue to make those investments on both the R&D side as well as the physician sales force is you'll see incremental costs growing as we make those investments.
Okay, great. Thank you.
Okay.
The next question is from Margaret Kaczor from William Blair. Please go ahead.
Hi, This is Brandon on for Margaret Thanks for taking the questions.
The first is in the fourth quarter can you just talk a little bit about what lead generation looks like and maybe even going into so far into the first quarter and.
And part of what I'm trying to think about is are you able to even as we move through Covid are you able to kind of keep a solid pipeline of patients. Maybe this is more applicable to the D. T C.
And so as we move past COVID-19 or are the sales team kind of hitting the floor running with the strong pipeline do they have good leads or do we kind of need to rebuild that wants to move past COVID-19.
Yeah. So the lead flow was still strong and the fourth quarter and going into 'twenty and 'twenty one.
Of course with the election that occurred in the fourth quarter and during those periods, we tend to see higher cost per lead, particularly with TV campaigns.
But outside of that anomaly.
Media was performing as expected in the period.
Again as I said earlier, there is seasonality to cost per lead and and you know kind of conversion rates of those sales and we're a little early in that cycle, we usually see that pick up in the March April timeframe, but.
But we do still see strong patient interest and the product Ah hi, can conversions and and high interest in the product from our direct to consumer side.
And of course as you would expect the rental conversion rate for those who qualify to use the rental benefits is significantly higher than our cash sales conversion rate, where somebody needs to pay out of pocket. So.
And so that is certainly a factor in looking at and.
The lead pool as well.
Got it thanks.
And we.
And we spent a little bit of time today talking about kind of reducing the friction points.
For market access for patients and I was just curious if you could kind of go over what what specifically are some of the friction points that you'll be focused on that you hope to lower the barriers over the next few years like what do you what are you going to be focusing those you roxanne and or your reimbursement teams.
And in order to to help patients get this and their hands easier.
Yeah.
Yeah. So at a high level of what we're looking to do is really make physicians aware of the POC and <unk> are available for their patients.
Right now in our rental business, we are heavily Medicare focused so our ability to expand contracting coverage is another way to expand access to the products.
And expanding the clinical evidence to also show those things that physicians care about and there are patients outcomes that will also be important as we look to interact more with the physician community around the benefits of P O sees versus.
The standard oxygen and really help them see also of the quality of life improvements that the patients experience and and really enjoy about POC and so all of those things are things that we will be.
The focused on it and interaction with the physicians and.
This is one thing that we think that physician awareness should help both us and our partners just like when we drove patient awareness for our products that also helped our partners to create more awareness for P. O sees and drive that interest and the product and create that retail sales.
And we think driving more physician awareness of POC and.
And the options that patients have and why the technology really does work for the the mass majority of the ambulatory and long term oxygen therapy patients.
And that's something that we think will help to supplement the work that the provider community is already doing on physician education.
So it's all Brendan let me just wait and and bring it to life with an example, so today I'd like to refer to the friction of or the experience of the patients go through and today instead of me going to the physician and I have to advocate for to what units, though I want to I want to be able to see or to what modality. The the hypothesis and the investment thesis behind.
And the direct to physician like Alex said is to increase the awareness of the benefits of this modality and of the image and product and brand to be able to remove that friction. So of the patients don't have to advocate for themselves and of course, it will still happen and then we refer to as debt friction is removed from the from the process come out of it.
Really get it covered either if I'm on the private insurance or I'm on Medicare and that's an example, but we're focused on both in terms of contracting as well that wasn't the upstream at.
And at the point of prescription.
Got it thank you.
Yeah.
The next question is from Daniele and Chelsea from SVP Leerink. Please go ahead.
Hi, this is because I agree with.
That's how I don't there Danielle I wanted to touch base and you'll Arab per that were kind of way actually it expands and the Ohio to become a revenue country and do their and what other barriers to adoption of this technology. If we if you wanted to think about the next to a few years when you thought of.
To wrap the adoption. Thank you.
Yeah, Rebecca and thanks for the question and and.
Certainly, we're still and the early stages of the benefits of the new era of technology. The T. A day product today that we sell them either b to b or three of our D.
D to C channel Oh, only works with tanks and certain stationary concentrator. So it doesn't provide the full freedom and independence. The P. O sees provides so we really see the benefit of the Ta the technology to be when we can integrate that into the P O.
The product and that still is ongoing in development.
It will require an additional FDA clearance and so we haven't given specific timing there both given the uncertainty there as well as for competitive reasons, but.
But that is something that debt. We are focused on in terms of really utilizing that technology to its fullest is the integrated product not the standalone product.
Alright. Thank you. The next question and I I know you guys don't want gave guidance for the country to kind of get what a bad outcome for both.
<unk> will become a very I E.
E. The next yeah. This year. So what are the key headwinds and Callaway is we need to see there and way to think about to hit kind of one and it may be interesting to pay to.
If you think the yeah.
Great question, Rebecca and certainly the comps get significantly easier when you get into the second quarter and and and onward throughout 'twenty.
2021, so we would expect that to be a tailwind once you kind of lap the COVID-19 impacts and the business.
Of course on the rental side of the business, we've been able to continue to grow that business in spite of the the COVID-19 pandemic and the impacts of that.
Because we've really been able to continue to grow our patients on service. So we would expect that business to continue to grow there is some reimbursement uncertainty of what the rates will be after the public health emergency is over but given the growth and patients and that's an area that we see as and Ah.
It's a true opportunity and our business going forward.
And looking at the other channels D to C will be watching the leading indicators there of how patients returned to travel the vaccine rollouts broadly across the U S and just the consumer confidence there and but as you said comps get easier and the second quarter and typically we see.
Ah seasonality that was very different than last year, and so we would normally see second quarter being the high followed by the third and the fourth and the first being the low which is of course, not what we saw in 'twenty and 'twenty. So that can create some tailwind to growth and the D to C side and of course of.
Assuming patients do return to travel, which is the big assumption and uncertainty at the moment.
On the beta beside you know, we certainly have looked at.
Our partners and we see great partner opportunities to continue to convert their.
Business is from the traditional delivery based models to non delivery models and both here in the U S and internationally and.
And being able to go back into patients home and homes and feel comfortable converting out of equipment is a critical part of that so vaccinations of their staff and their ability to and want to proactively go into homes is is a critical component of return.
And to to growth in those channel.
Great Super helpful. Thank you.
Ladies and gentlemen, this concludes the question and answer session and I would like to turn the call back to and the deal shop shop for closing remarks.
Thank you.
So why does the COVID-19 pandemic has and will continue to have a significant effect on other business. We as a company are excited about the future and believe that and the ocs and the focus we are placing to drive rental and expand patient access to our oxygen solutions. We believe the strategic initiatives will help us ensure.
But we continue to be a leader and the cooling freedom and independence of patients with respiratory disorders.
Thank you for the time today, and I look forward to them and engage in conversations with all the investors about the image of the future.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
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Okay.
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