Q1 2021 Tactile Systems Technology Inc Earnings Call
[music].
Please standby good evening, ladies and gentlemen, and welcome to the first quarter of 2021 and earnings conference call for tactile medical at this time, all participants have been placed in a listen only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded.
<unk> and will be available and the company's website for replay shortly before we begin I would like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated.
Including those identified and the risk factors section of our annual report on form 10-K, as well as our most recent 10-Q filing filed today with the Securities and Exchange Commission.
Such factors may be updated from time to time and our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements and the result of new information future events or otherwise.
This call will also include references to certain financial measures.
Our non calculated in accordance with generally accepted accounting principles or GAAP, we generally refer to these as non-GAAP financial measures.
Conciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP and 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 Executive Officer. Please go ahead.
Sir.
Thank you operator, and welcome everyone to our first quarter of 2021 earnings call. Joining me on this evening's call is Brent Moen, our Chief Financial Officer.
Let me provide you with a brief outline of what we intend to cover this evening.
I'll start by discussing our first quarter sales performance and business trends followed by a discussion of our recent operational highlights Brent will review our financial results in detail as well as our 2021 financial guidance, which we reaffirmed and our earnings release this afternoon.
I'll close with some additional thoughts on our assumptions outlook and key areas of focus for 'twenty. One before we open the call for questions with that let's get started.
We were pleased to deliver sales performance that modestly exceeded our expectations for the first quarter of 2021.
Specifically, we saw first quarter total revenue decreased by 2% year over year to $42.8 million compared to the mid single digit year over year decline, we had anticipated at the time of our earnings call in February.
The two per cent decrease and total revenue was driven by sales and rentals of our flexi touch systems, which decreased 3% year over year, partially offset by sales and rentals of our entre systems, which grew 5% year over year.
Turning to a more detailed discussion of the first quarter, we continued to face a series of COVID-19 related headwinds throughout the quarter. These.
These headwinds and their impact were consistent with our expectations and largely represented a continuation of the dynamics, we saw in Q4 and.
In early January we conducted a survey of our top accounts, which found that only a quarter, where operating without restrictions, which was consistent with the results of our survey in October.
A follow up survey in early April of this year found that this ratio has slightly improved to just under 30% of surveyed accounts operating without restrictions.
These health and safety protocols continued to impact our performance in two primary ways.
First the treatment capacity of many of the clinics that we serve remained constrained due to lower patient throughput as clinics continued to operate with fewer exam rooms, dedicate more time to cleaning and room turnover leading to longer gaps between patient consultations specifically.
Specifically, our surveys and January and April found that two thirds of our top accounts reported they were still operating at less than 80% of normal levels.
And second many clinics continued to restrict sales rep access to their patients, which limited our ability to conduct in person patient demos at the clinic and.
And important part of the patient engagement.
During the first half of the quarter. We also continued to see impact from the spike in COVID-19 cases around the winter holidays and its effect on facilities clinicians patients and our own field teams specifically our accounts continued to experience an uptick and COVID-19 related patient cancellations.
And employee absenteeism and the first two months of the year.
We also saw absenteeism and our own sales force due to quarantining and compliance with our corporate safety policies.
As COVID-19 cases declined from the highs of December and January we were pleased to see conditions begin to moderate and we ultimately achieved sales performance in March that showed evidence of recovery.
In terms of the trends across our customer base.
Throughout the first quarter privately owned practices based and the outpatient settings continued to demonstrate higher resiliency and faster recovery trends vascular clinics, specifically remained a key contributor to our performance.
Our focus on targeting vascular clinics has been an important contributor to the strong growth and entre systems sales.
With our expanding universe of Entre patients. We're also well positioned to serve those that may ultimately require and advanced therapeutic device like our flexi touch plus.
Meanwhile, sales to practices based within hospitals and health systems continued to lag as these practices remained more constrained by COVID-19 related restrictions.
And the VA and particular remained especially challenged by these restrictions and during the first quarter. We continued to see lymphedema patients redirected from the 170 VA hospital centers to the more than 700 community based outpatient clinics.
VA sales tend to be an important contributor to our total revenue in the first quarter of each year due to the typical seasonality we experienced related to the resetting of annual deductibles for patients covered under commercial insurance plans.
With this with these challenges as a backdrop, our VA revenue declined 17% year over year to $5 $8 million, adding a particular drag on the quarter, yielding just 14% of our total revenue compared to 16% in the first quarter of last year.
Given this performance and the VA and the continued challenges related to COVID-19. The fact that we only saw a 2% year over year decrease and our total revenue for the quarter speaks to the dedicated efforts of our team and the tailwind from our expanded base of prescribers, which helped to offset some of the most notable impacts of the pandemic.
In terms of our patient focused activities, our sales reps continue to conduct a portion of patient demos virtually where appropriate due to clinic restrictions.
We also continued to enhance our virtual out of the box alternatives to in person patient training.
These expanded options are earning high patient satisfaction scores with patients equally likely to recommend our system, regardless of which training option they utilized.
Approximately 40% of our new patients were trained in person during the first quarter and while it remains to be seen where the mix of in person trainings will shake out longer term, we're poised to provide a menu of well structured options.
In terms of our medical education efforts, our teams continue to organize events virtually which were developed to engage and inform a variety of target audiences.
And we hosted 31 events during the first quarter and collaboration with many kols and the treatment of lymphedema and related conditions and these events were attended by approximately 1200 clinicians and staff.
Most notably we co sponsored and presented at the power Lymphatic Symposium, which was held virtually and attended by over 650 therapists.
We also participated in the virtually hosted American venous Forum's annual Congress.
In addition to their primary purpose of helping us raise awareness and educate the market on the diagnosis and treatment of lymphedema. These events continued to serve as a valuable resource for our sales reps to build relationships with potential new prescribers.
As a result, given the strong interest that we've seen and our virtual events over the last 12 months, we continued to see success and our efforts to expand our prescriber base during the quarter.
In summary, while the COVID-19 related headwinds remained largely consistent with our expectations. We were pleased by the resourcefulness of our team and their efforts to lay the foundation for our future growth by expanding our prescriber base.
As Brent will discuss further I'm also pleased we were able to maintain our 70 plus percent gross margins along with the modest year over year improvements and our operating income and adjusted EBITDA, Despite experiencing a slight decline and total revenue.
And lastly, we complemented our financial performance with some important operational highlights, which I'd like to briefly recap.
First we continued to invest.
To expand the productivity of our commercial team consistent with our stated strategy, we expanded sales territories by promoting a portion of our existing associate product specialists and we also grew our commercial field team of both sales and support personnel to over 295 members including fee.
<unk> support specialist to help our product specialists and dedicate more of their time to engaging new physicians.
And second we continued to strengthen our leadership.
By adding top talent to help lead our continued market development efforts as we scale into the future.
In addition to expanding our board of directors with the appointment of Sherry, Dod and deep D. Jane whom we discussed on our fourth quarter call. We added three important new members to our senior leadership team.
In January we appointed Mickey Brown, as our new Vice President of payer relations and market access and following the retirement of Maggie Thompson and.
In March we appointed Christy Burns as our new senior Vice President of marketing and clinical affairs, following the promotion of Dara and women.
And earlier this month, we appointed Eric Pauls as our new senior Vice President of sales following the retirement of Brian reach.
Mickey Christie and Eric each bring over 20 years of experience and the health care industry.
Mickey was previously the vice President of reimbursement at Wright Medical and his career highlights include five years at cochlear, where he served as vice President of Health Economics nine years at Medtronic, where he was the director of health policy and reimbursement for their spinal and biologics business and experienced from the payer side.
And including Blue Cross Blue Shield.
Christy and Eric's backgrounds. Both includes significant experience commercializing wearable medical technologies for the treatment of chronic conditions at home.
Christy joins us from a prior career at Calla health, where she led the U S. Commercial introduction of its lead product a wearable neuromodulation device for the treatment of essential tremor.
She also spent 13 years at resume where she helped develop the market within the obstructive sleep apnea space.
And Eric spent the past 19 years at Philips.
Where he most recently led a 500 person commercial team within their sleep and respiratory segment.
While there Eric also manage the integration and operations of respiratory and <unk>.
Phillips acquisition with a similar business model to our own that market's a wearable garment to treat chronic respiratory conditions in the home.
Mickey Christie and Eric possessed the leadership skills and vision to help us develop the lymphedema market scale, our business and ultimately deliver healthy long term growth and I'm excited to have them on our team.
With that let me turn it over to Brent to discuss our quarterly financial results in greater detail and review our guidance for 2021 Brent.
Thanks, Dan.
Total revenue and the first quarter decreased 2% year over year to $42 $8 million compared to $43 $7 million and the first quarter of 2020.
Sales and rentals of our flexi touch systems accounted for 88% of our total revenue and the first quarter of 2021 consistent with the prior year period.
First quarter 2021 revenue by payer was approximately 66% commercial 20%, Medicare and 14% VA compared to approximately 69% commercial 15%, Medicare and 16% VA, respectively, and the first quarter.
And 2020.
Continuing down the P&L first quarter gross profit decreased $843000 or 3% to $32 million.
Gross margin was 71% of sales and the first quarter of 2021 consistent with the same period last year.
First quarter operating expenses decreased $1 $2 million or 3% to $34 3 million the.
The reduction in operating expenses was driven by lower sales and marketing expenses, which decreased $4 2 million or 18% to $18 8 million and to a lesser extent by lower research and development expense, which decreased $400000 to $1 3 million.
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The decrease in sales and marketing expenses was driven by virtual sales meetings, along with lower patient training costs and reduced <unk>.
The year over year decrease and sales and marketing and R&D expenses more than offset higher reimbursement general and administrative expenses, which increased $3 4 million or 31% to $14 $3 million driven primarily by increased occupancy costs.
And depreciation.
Legal fees and personnel related expenses.
Operating loss and the first quarter of 2021 decreased $367000 or 8% to $4 1 million compared.
Compared to a loss of $4 $5 million and the first quarter of 2020.
Income tax benefit and the first quarter of 2021 was $1 8 million compared to $2 $9 million and the first quarter of 2020.
The year over year decrease and income tax benefit was primarily due to the net operating loss carry back claim recognized in the first quarter of last year, which did not impact the tax benefit and the first quarter of 2021.
Net loss was $2 3 million or <unk> 12 per diluted share for the first quarter of 2021 compared to a net loss of $1 $3 million or <unk> <unk> per diluted share for the first quarter of 2020 weighted average shares used to compute diluted net income per share were <unk> <unk>.
$17 5 million and $19 2 million for the first quarters of 2021 and 2020, respectively.
Adjusted EBITDA loss for the first quarter.
Okay.
Compared to the loss of $470000 and the first quarter of 2020.
As a reminder, we have provided a reconciliation of certain GAAP measures to non-GAAP measures and our earnings press release.
As of March 31, 2021, we had cash and cash equivalents of $46 9 million <unk>.
Compared to $47 9 million at December 31, 2020.
We had no outstanding borrowings on our $10 million revolving credit facility at quarter end.
On April 30th we'd entered into a restated credit agreement with Wells Fargo Bank to expand the size of our revolving credit facility, providing us with increased financial flexibility to pursue our growth strategies.
The restated credit agreement provides for a $25 million revolving credit facility and a three year maturity that includes a $30 million accordion feature which could allow the company to expand the total aggregate principal up to $55 million.
Turning to a review of our 2021 outlook, which we have reaffirmed and our earnings released this afternoon.
For 2021, we expect total revenue and a range of $215 3 million to $224 $5 million, which represents growth of 15% to 20% year over year compared to revenue of $187 $1 million and 2020.
Byproduct or 2021 total revenue guidance range assumes sales of our flexi touch systems increased approximately 13, 5% to 18% year over year and sales of our entre systems increased approximately 26% to 30.
Three 5% year over year.
And for the full year 2021, we also expect our gross margin to be and the low 70% range or.
Our adjusted EBITDA margin to be and the range of 12% to 13%.
Please note that this adjusted EBITDA range assumes depreciation and amortization expense of approximately $3 million.
Stock based compensation expense of approximately $12 million and legal expenses related to litigation defense costs of approximately $2 5 million.
We expect our fully diluted weighted average share count and 2021 to be approximately 20 million shares.
Lastly, we continue to expect total revenue growth in the mid to high teens over the first half of 2021, which for the avoidance of doubt implies year over year growth and the second quarter of approximately 40% to 43%.
With that I'll turn the call back to Dan for some closing remarks and <unk>.
Thanks Brent.
Given our performance and the first quarter and the trends we've seen to date this year, our assumptions and expectations for 2021 remain unchanged, we remain confident and our ability to deliver strong performance in 2021 as the recovery continues to progress.
We expect that the primary COVID-19 related headwinds to persist through the first half of 2021, followed by progressive improvements in the second half of the year as vaccine inoculation becomes more widespread and its effects on the overall health care landscape continue to gain traction.
We continue to anticipate growth and the high teens approaching 20% and the second half of the year as we focus on expanding our position and the U S lymphedema market.
By increasing the size of our commercial field team and driving improved productivity.
Primarily through strategic investment and our field support specialist initiative.
Expanding our base of prescribing clinicians through targeting and education.
And continuing to leverage our unique position and the market with products that are clinically proven to improve outcomes and reduce costs.
Longer term, we look forward to returning to our multi year track record of 20 plus percent annual revenue growth by continuing to develop the greater than $5 billion market for lymphedema and related chronic conditions.
I'd like to close by thanking our team for the commitment they have demonstrated to our success in the first quarter, despite a challenging environment as well as their continued dedication to serving the needs of our customers, while ensuring their own safety as well as that of our patients.
And I'd also like to thank our investors and those on today's call for their interest and support and tactile medical and our mission.
Operator, we will 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 and if youre using a speaker phone. Please make sure and your mute function is turned off to allow your signal to retail or equivalents.
Do ask that you limit yourself to one question and one follow up.
If you would like to ask additional questions. We invite you to add yourself to the queue again by pressing star one.
Our first question will come from Matt O'brien with Piper Sandler. Please proceed with your question.
Hi, guys. Good afternoon. This is <unk>.
Drew on for Matt and thank you for taking the questions.
I do want to start off on the guidance obviously good to hear that you guys are comfortable with the previous range set out there, but I did want to see if maybe you could speak to some of the factors that are kind of giving you that confidence.
Obviously with a pretty big second half ramp implied.
So maybe if you could comment and what type of growth rate did you see in March and then into April.
And then and your press release, you mentioned that you expect to return to growth approaching 20% and the second half.
You've historically talked about yourselves at 20% plus growers.
So maybe you could kind of help us understand what you're assuming from a COVID-19 perspective, and the back after the year.
Sure thing Hey, drew it's it's Brent Thanks for the question I'll, just give you a little bit of color relative to guidance and then I'll turn it over to Dan for a couple of closing remarks, but just in terms of what we saw during the course of the first quarter.
We were certainly pleased with March results.
They were actually modestly better than what we had expected following a very challenging first half of the of Q1, we reaffirmed guidance today, certainly at at 15% to 20% growth year over year.
And which equates to about $215 million to $225 million and we continue to expect mid teens mid to high teens over the first half of 2021, which implies growth of 40% to 43% year over year for Q2.
And then certainly yet I was starting to rebound nicely and the second half of 2020 and in the high teens and approaching 20%.
Yes, I think just to add drew.
We were pleased to see some of the momentum we were able to start to develop and March <unk>.
Certainly a different view than we saw in January and February and we saw some of that same progress continuing into April. So that's certainly felt good I think the fact that we hosted again, so many clinicians and some of our physician education events continues to help us bring more new <unk>.
Scriber onboard, which I think is going to be and important part of our ongoing recipe.
And the sales support roles that we've been sponsoring we're seeing early indications that that also can help some of our productivity. So.
In spite of the fact that clinics are still not at the pre COVID-19 levels as far as the number of patients that they are seeing we feel like a number of the other things that we're doing around that is both offsetting it and then as we continue to see some of the what I would call emergence from the COVID-19 environment continue to progress over there.
Course of the year, we think that will move in tandem with that.
Okay.
Very helpful.
And then second question.
People are obviously, taking a look at some of the claims data for 2020, which I believe you referenced that in your previous call and then comparing the growth of tactile to the growth of overall lymphedema diagnosis and so.
Just wondering if you could comment on net and then any changes from a competitive perspective that youre seeing out there right now.
And that's from simple pumps and some of the more advanced competitors you have out there. Thank you.
Sure Joe I'll give you a little perspective on overall size of the market.
Certainly.
COVID-19 has.
And as.
Challenged everything in terms of comparability out there, but certainly over the course of 2020, even in a COVID-19 year. We saw the total number of diagnosed patients grow.
Up to one 4 million patients and in 2000.
2000, and so I think thats, certainly indicative of the growing awareness and market development that we've had that.
And that we've been able to influence both.
In terms of the educational events that we hosted on top of the fact that we've continued to invest and our commercial organization. Both of those things are starting to pay dividends.
We expect that as we progressed through 2021, we'll be able to take advantage of that growing diagnosed population and certainly convert that back into our overall expectation of long term, 20% growth in terms of the revenue line.
And then maybe just a comment on the competition drew.
I don't know that we've seen anything dramatically new and the last couple of months certainly there is.
We were aware of a few that are expressing interest in our space I think on the surface it sort of validates the Tam, suggesting that this is a market that's drawing some additional interest as we said in the past I think the body of evidence that we've built up that so heavily reeds.
And our devices.
Our direct distribution as opposed to <unk> and then all of the payer contracts that have to be put in place we feel like we've got a pretty good.
Protected position for the time being but we certainly don't look to take that for granted it's one of the things I've said several times that we want to continue to <unk>.
Invest and make sure that we've got a good vibrant portfolio going forward and we certainly intend to do that as well.
Thank you.
Okay.
Thank you. Our next question comes from Margaret <unk> with William Blair. Please proceed with your question.
Hey, guys. Thanks for taking my question and.
And wanted to follow up on guidance, a little bit and.
So just on that 40% to 43% number that you gave.
And I know you didn't really give a ton and detailed between flexi and entrees and maybe that's part of it but.
So sequentially as you look back between Q1, and Q2 and flexi touch should probably be up 20% plus.
And that yes.
Slight what seemed like a pretty good Q1 kind of kept guidance unchanged. So.
And as things get better sequentially I know things are still shut down but things are getting better sequentially why not assume that and guidance at least have something similar to what we've seen in the past and then if you can give us some input to what gets you to the high and low and mid range.
Sure, Yes, Margaret and ice Brent Thanks for the question.
<unk>.
I think as we progressed through the first quarter certainly we are encouraged by momentum that we're starting to see coming out of March.
Obviously early though in terms of being able to kind of really forecast full recovery certainly within our guidance range. We have a few a few things in terms of recovery built and specifically in the second half we're starting.
Starting to return to normal vaccination and traction is has taken place and were and we're focused on being able to kind of get back to business in terms of normal.
On your question relative to flexi touch and.
Entre certainly both of those will be contributors to our overall growth.
Right now Youre seeing entree, just on a lower base deliver a slightly higher.
And number, but certainly and flexi touches is expected to continue to provide its fair share of growth as we as we move forward too so.
And then just in terms of.
Our expectations, and what's giving us a little bit of confidence as we head into the back half.
Provided there's no resurgence or <unk>.
Change and variance expectations in terms of the Vaxstation vaccination we.
We expect that with our expanding sales force.
Ever large Tam that we've got in front of us that we should be able to certainly hit our guidance expectations for 2021.
Okay, So, let's kind of maybe walk through the tailwind.
More specifically because it sounds like you've got reps, you've got a new strategy, you've got a new team and all of which is getting at and.
And you've got and <unk>.
And that you guys are adding.
Very very quickly and so.
How do we think about that and and maybe the question is better for 'twenty. Two I mean, this seems like it's really developing together to be a really nice business.
What are the key inputs to those three or four things and why shouldn't they have and faster I guess.
Yes, I think there is.
The one thing that we all have caution for I think is just this still transient kind of COVID-19 year. So we're coming off a quarter, where we were below prior year and we see Q2 is kind of the transition quarter and then we get into the back half of the year. We think we'll start to see the kind of growth that we've been more indicative of and kind of will put.
US on good footing as we enter 'twenty two.
A little early for us to give 'twenty two guidance at this point, but to your question about <unk>. There are a host of them and we're going to depend on those to move from kind of a cold start after February and still deliver that 15% to 20% for the year.
It's you alluded to and it's certainly new prescribers, we've continued to spend a good amount of energy educating our sales force as well we've got a number of them that have achieved vascular certification, which is an internal program.
And that we've developed and it takes number of hours of study and they basically have to pass a series of tests.
And and other barriers to make sure that day they achieve that so we're really trying to continue to raise the competency level of the team I think as they continue to engage with new customers being able to have good solid clinical discussions is bearing fruit and as we continue to see some.
Of the recovery and the throughput that's been the biggest barrier I think for us to recover and.
And we certainly expect we will continue to see improvements on that as vaccine traction continues to take root and then on the oncology side. That's also an area of focus we've we've deployed a small handful of key account managers. These are historically previous clinicians that really understand how to navigate.
And the oncology market and because theres. So many different stakeholders treating patients with cancer. It's important to help navigate that process and I think the key account managers are certainly helping to raise the competency level of our sales force when they are calling on that audience as well so lots of good thing.
And going on.
And then a number of things on the evidence generation side still on the horizon. So I think a number of good reasons for us to have the confidence that we're going to be able to deliver the year that we've got in mind, but.
Just to remind again.
And the growth is going to have to come and nine months not 12.
Okay and then just last question from me I wanted to talk a little bit about these privately and practices that are and cash recovering faster and then the hospital based practices and because there seems to be a little bit of a disconnect there.
And it makes sense, but can you give us a little bit of color in terms of what those two categories grew at and then does your guidance as you get towards the end of the year do you assume that hospital comes back to normal or do you think it will take a little longer than that thanks guys.
And just in terms of the breakout between the private owned practices and the.
Hospital systems, and which I think also would be also indicative of where the VA was although they are the most conservative those price.
Moving on practices.
And are primarily the vascular businesses that we call line and.
And certainly.
There is a parallel going on between growth and the vascular and then also growth and our Medicare business. So youre starting to see Medicare business grow pretty dramatically, which as you might expect a lot of the patients that and depth and the vascular space.
Come in with lower extremity.
Kind of moves directly into our product offering our entre product offerings, so a little bit of growth there and so it just happens to be those private owned practices are a little more progressive and how they they are willing to move patients through their system versus the or and.
Institutionalized hospital systems out there that have a more.
Higher standard.
Kind of protocol that they need to follow getting patients through their systems to so it goes to expect as youre dealing with a larger institution that some of those administrative requirements to gain access to clinicians gain access to patients fall a little bit slower than what the private.
And we owned practices are.
Yeah, and I would just agree and I would just add Margaret that we do expect and ongoing normalization to.
To occur in the back half even in the institutional side. The VA is a little less certain we are a little more cautious on what our expectations are there, but I think as we think about bigger health systems University based systems, we do expect more normalizing of that environment as we progressed through the second half.
Thanks, guys.
Thanks Margaret.
Thank you. Our next question comes from Ryan Zimmerman with BTG. Please proceed with your question.
Alright, good afternoon, and thanks for taking the questions maybe.
Maybe I could follow up on a couple of questions Margaret is asking the Medicare business was up about 35%.
This quarter and and I just wanted to get your impression of.
With patients coming back into the clinics.
Whether that's a bolus whether there was some backlog dynamics there and then the second part of that question is just with the VA.
Patients kind of being kept out of the hospitals.
And your expectation is for win.
VA dynamics improve.
If you have a line of sight on that and I have.
A follow up.
Yeah, I'll take a shot at it and see if Brent wants to add anything I think on the.
On the Medicare side, one of the things that we do see and I think.
Is that a lot of the patients coming through the vascular path tend to have a higher Medicare mix.
We also see as a result of higher entre mix and we think that as we continue to expand our prescriber base, even those patients that come through the gate as an entre patient if thats their entry level.
It allows us to kind of get our arms around a bigger pool of patients and <unk>.
While some will certainly be treated effectively with the entry level pump. Some may have more advanced disease progression and ultimately may lead to.
A flexi touch which is I think we've covered is kind of the more advanced treatment option. That's available from us. So one it's an increase and the basic and the total number of patients that we're seeing that have Medicare and then Theres also an opportunity where some of those patients will continue to progress towards the universe.
Andre patients gets bigger inevitably we will continue to see growth and flexi touch we expect as well.
On the VA side.
We're a little more cautious there as I mentioned, a moment ago, but.
If we can see.
The VA vaccination efforts, which they've put their energies behind for both their clinicians as well as patients continue to advance we're hopeful that they'll start to invite those patients back more regularly to the VA centers.
They're much easier for us to access.
But we've been a little bit cautious just because without any certainty of that.
We haven't been able to pinpoint when that might occur in 2021.
Okay.
Maybe just a follow up from me I mean, you did make a number of changes to the field sales force in terms of <unk>.
And the roles and has over the last quarter.
And from your perspective, what have you seen from a productivity standpoint from your more quota carrying reps if you want to call them that.
And if not now and the first quarter when do you expect the impact of those changes.
To be seen and the productivity metrics for the field force. Thank you.
Yes, I think it's a good question.
So just to remind folks we.
We said we were going to look to add.
Somewhere in the neighborhood of 15% more heads in the field and calendar 2021, or roughly 45 plus more people.
What we've been doing is promoting some of our associated product specialists into full product specialists territories and things like vascular certification of the kinds of things that continue to equip them to be a full fledged rep.
We see that shift continuing to mix and mix continued to shift so we're seeing an increase and product specialists.
As they mature from the associates. So we have actually added some territories, but I think to your other point our field support specialist that we've been continuing to expand our intended to backfill the associate product specialists and continue to give new product specialists.
Support that they need for some of the administrative effort what we've seen so far Ryan is that where we have deployed FSS is it's certainly liberated the reps.
From a number of the administrative tasks that they were otherwise having to put energy into and some of those territories. We are starting to see some productivity gains. We continue to believe is the FSS is get fully oriented.
Introduced have developed relationships with some of the high prescribing clinics that will continue to expand so we feel good about the progress that we're seeing there we're up about 10 heads so far at the end of the first quarter. So this plus 45 or so for the year were pretty well on track about a quarter of the way in.
But ultimately I think we're seeing encouraging signs that this can bear fruit, we certainly will continue to look at the productivity and.
And make sure that.
It's a good return on investment, but right now we feel good about that.
Alright, Thank you for taking the questions.
Sure.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next.
<unk> comes from Chris Pasquale with Guggenheim. Please proceed with your question.
Thanks, I had one on <unk>.
Path back to normal and then one on the VA on the recovery question, what do you see as the most important trigger for normalization as it relates to your business is it primarily a patient demand issue and so vaccines are the key or our state restrictions really keeping these clinics below capacity and those need to be lift.
And just trying to get a better sense for what needs to happen to get from here to there.
Yes. Good question, Chris I think the primary one is.
There is a component of behavior that will start to emerge as People's vaccinations continue to.
Gained.
Good.
Numbers across.
The broader population as we said the key point that continues I think to be a governor for our growth has been this sub 100% throughput clinics and hospitals that are saying they are seeing 80% or less of the same amount of patients. They would see in a given day or week clearly.
With with growth goals that we've declared even in Q2, we've got to continue to find ways to grow faster simply because the existing accounts that we were calling on are running at lower volumes, we think that.
The handful of things that have impacted those reduced throughput.
Social distancing may not change as rapidly throughout the year, but certainly.
Patient cancellations as they get their vaccines I think those things go down clinic throughput just because of.
And having people not calling out sick, because they've either been exposed or they're sick et cetera, a lot of the different variable headwinds associated with COVID-19 should continue to lift as of as we start to see ourselves and merge over the back half of the year frankly, if we had clinics backup and 100%.
Along with the ongoing expansion and prescriber base.
And feel really bullish about what the future looks like and Thats, probably the biggest governor for us, but we've seen that just the comparison of March and April to January and February is kind of given us the indication that.
Change is coming.
So we've got Q2 expectations that this is kind of the pivot point, we start to see growth emerge again and with this continued momentum we certainly expect that we.
And it will be more closer to hitting stride in the back half.
Thanks, and then on the VA.
It sounds like you're sort of waiting for these patients to come back to the hospitals, but what happens if they decide that shifting these patients two and outpatient setting is actually the way that things should be even post COVID-19, we certainly see a push to alternative sites of care and other areas of healthcare so.
Do you and have a plan in place to address that population.
In six 912 months those are still the sites, where you have to go to access them.
Well to some extent, we've kind of been running that play we've been swimming upstream we've started to have virtual education events for primary care physicians.
We've tried to enroll or enlist docks from some of the community based outpatient centers to participate raising the awareness and education about lymphedema among the primary care doctors.
As a result, clearly our VA business Hasnt gone to zero, we're at 14% of our total revenue this quarter versus 16, a year ago, So admittedly not where we want to be and not where we've been but I think that we can continue to incrementally get better even if the environment and.
And the.
Point of care doesn't change because we're already moving in that direction.
We think it gets easier and these patients become much more concentrated when we when we're able to see them with a vascular specialists at the VA center than when we're trying to to sift through all of the different patients seen in a primary care environment.
Thanks Mhm.
Uh-huh.
Thank you our last question will come from Suraj Kalia with Oppenheimer. Please proceed with your question.
Hi, Dan Brent can you hear me all right.
Coming through great.
Perfect.
So.
And then give us an update and the structural dynamics and the commercial side commercial side, and I'm, especially interested and the the new contracts signed I believe and late 2018 that United and.
Any update to be shared on that front.
Yeah.
Suraj Hi, it's Brian I can give you a little bit of context on that.
And that name that large payer, we refer to and with a large payer contract.
And at that large payer.
I think and.
If you recollect one of the things that they did is we traded some asps for.
Broader expansion to their their prescriber base and it continues to perform very well for us so.
Continues to grow as we expect it would.
Yes.
Okay.
And the <unk> I know a lot has been asked about the.
80% capacity.
Pre COVID-19 levels, maybe I can ask it.
A little differently, then would you mind, providing any specific utilization metrics and I'm.
And was more curious in terms of number of accounts.
Average prescriptions per account per quarter, just trying to get a sense of.
For example of how things are moving and the VA side versus commercial more so in terms of the specifics.
Yes, I don't know that we've broken it down to that level suraj, but.
And one of the things that we've alluded to here is that new prescribers of certainly filled some of the GAAP among the existing top prescribers, whose volumes are simply down. So we continue to maintain relationships with.
And what have been our high prescribers, but the majority of them have just not met the same volumes that we were accustomed to with them is.
And as recent as 18 months ago. So we continue to focus on those but the one thing that we've determined is we can control our destiny more.
By continuing to expand the prescriber base and that's one of the reasons. We've been so focused on a number of these medical education events, they've been really effective ways for us to reach out develop relationships with new clinicians and continue the education process. So I think that's that's basically what we've seen and when we say.
Yes, and 80%.
The spread is surprisingly large.
<unk>.
Less than 80% is the number we use but we've had some that have told us that there is still is at 60% of their capacity. So.
<unk>.
It's still a little surprising even to me that the throughput has not recovered faster in and some of these practices, but the other thing that we continue to ask us what do you expect and our confidence in there what I would call continued improvements in throughput comes from their expectation.
And as well.
Got it.
And last question Dan from my site and forgive me if I got these numbers wrong I thought I heard you guys say, 40% of your patients with trained virtually.
Please correct me.
Sure.
Yeah. It was just under just under 40% that were trained in person and Q2 in person.
Correct. So how should I think about the independent contractor use for the quarter again, Thank you for taking my questions.
Yeah. So it's still a small portion that were trained via independent contractors and we still frankly had even some of our sales reps doing training and some markets.
And the first quarter. The addition of FSS us and also hiring some.
Employee trainers, we think will not only continue to make sure that we've got the right kind of patient experience and consistency, but also make sure that.
We don't draw our sales people into any of the trainings either so that mix of it was just under 40% that were done in person.
I think we're going to continue to monitor that we want to make sure that wherever it lands. It leads to good patient experience. Fortunately so far for all those that have been virtually trained and we survey those patients equally we're getting the same kinds of satisfaction scores among those that have been trained in the home.
<unk>.
But there's a number of variables that I think continue to dictate whether a virtual or home training and suitable and we try to match it up with each patient.
Thank you.
Okay.
This concludes our conference for today. Thank you for your participation and have a wonderful evening.
Thank you everyone. Thank you we will look forward to speaking with everyone again once we have the conclusion of our second quarter.
Yes.