Q1 2021 Outset Medical Inc Earnings Call
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Ladies and gentlemen, thank you for standing by and Vulcan for the outset, the medical first quarter 2021 earnings conference call.
At this time all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session and to ask the question. During the session you will need the press star one on your telephone and if you're required for any further assistance you May press Star zero.
I would now like to hand, the conference over to your speaker of today Ms Lynn Lewis.
Good afternoon, everyone and welcome to our first quarter 2021 earnings call participating from the company today will be lastly, Drake, President and Chief Executive Officer, and Rebecca Chambers, The Chief Financial Officer. During the call. We will offer commentary on our commercial activity interview, our first quarter financial results for these after the close of market today, after which we will host of <unk>.
<unk> and answer session and press release can be found in the Investor Relations section of our website and outset medical Dot Com. This call is being recorded and will be archived and the investors section of our website before we begin I'd like to remind you. It is our intent and all forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of 1995.
Any statements that relate to expectations or predictions of future events market trends results or performance are forward looking statements. All forward looking statements are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward looking statements.
All forward looking statements are based upon current available information and outset assumes no obligation to update. These statements. Accordingly, you should not place undue reliance on these statements for a list and description of the risks and uncertainties associated with our business. Please refer to the risk factors section and for 'twenty for beef or prospectus filed with Securities and Exchange Commission.
On April 12, 2021, and connection with the company's primary and secondary public offering with that I'll now turn the call over to Leslie.
Thanks, Lynn and good afternoon, everybody and thank you for joining us to review, our first quarter 2021 resolved and.
And our last update in March the outset team and continue to execute exceptionally well across all of our key strategic initiatives. We outperformed on revenue secured new console orders across care settings, and made substantial progress operationally for the first quarter, we reported $22 9 million in total.
The revenue, representing 219% growth year over year, and 33% growth sequentially. This outperformance relative to our expectation was driven primarily by increased product volume as well as higher and P.
While new customer acquisition is important our leading indicators, we watch justice closely is whether our existing customers expand their use of tableau to other facilities within their network. This metric provides tangible validation of tablet adds value and lowering costs and increasing operating efficiencies and the.
First quarter more than 75% of the consoles ordered were for shipments and new sites within existing customer networks customers continue to cite positive experiences as well as and appreciation for tablets and economic value and ease of use and factors that are driving their decision to purchase.
Additional console and expand to new locations.
In terms of new customers, we added several health systems during the quarter and are currently projecting that we will have signed agreements with seven of the top eight national health system as well as of third of the top 100 and regional health system by the end of this year achieving these goals will be a testament to the strength.
Of our entire commercial organization market receptivity to tableau and importantly, our future the prospects.
As more prominent health systems adopt and expand with tableau, we're starting to see a greater number of independent publications and abstracts. For example, Q1 saw clinical abstracts, written and submitted to scientific conferences from U P. M C. The University of New Mexico NIH. The at these abstracts for.
Ported on tableau success treating high acuity patient and cost reduction the St. Mark The HCA Abstracts for example reported of $550 per treatment cost savings with tableau.
As we've outlined in the past we include both the huge and sub acute facilities and our definition of the acute market within the sub acute market. We're focused on penetrating the long term acute care facilities and none of adult packs as well as skilled nursing facilities for these customers the tableau of value proposition and similar supply.
And labor cost reduction along with operating efficiency and clinical versatility. Our sales team has successfully communicated these advantages to I'll talk I'll pass across the country and in fact tableau is now used by three of the four largest <unk> providers, while we still have considerable runway both in terms of expansion of cross.
Our <unk> customers and new customer acquisition, we're pleased by the adoption uptake so far.
With our installed base growing and the acute and sub acute market. We are increasingly confident that our value proposition is resonating quickly. Following console deployment. We've used this early momentum as critical and expect it to continue to build as key stakeholders experience of the unparalleled benefits of tableau and clinical versatility point of <unk>.
Care of mobility data rich simplicity and economic advantages.
As we look to expand our footprint. We have also continued to grow our home population and the first quarter, we signed master contract with for new home customers, which in part led to a 50% sequential increase and home console orders. This early traction helped fuel our anticipated home growth trajectory.
And puts us in a good position to meet our 2021 home goal.
And the majority of our new home contracts are with progressive innovative customers spanning both health systems and dialysis care providers. One of our notable new customers. For example is focused on enabling health systems to identify chronic kidney disease earlier and manage patients all the way for the home and this model.
Tableau is their preferred home dialysis technology, while the services provider and supports the patient journey from the hospital to the home for the health system in other cases, the health system itself is standing up and managing its own home dialysis program. In fact currently a third of the health systems and our pipeline.
Are interested and be getting home programs and both models tableau is an important enabling technology.
From a provider's perspective, we believe that as the collect and present real world evidence tableau and value proposition at home will become increasingly tangible to date patient data from those at home remains exceptional we continue to see highly differentiate and patient training times on tableau consistently two weeks or less compared to the for.
And the six weeks it typically take patients to learn the incumbent device.
Additionally, we have seen much lower patient attrition for example, published data on the incumbent Dubai documents of training dropout rate that is 60% higher than seen on tableau. Today. Moreover, while still very early and on a small number of patients we have not had of patients choose to come off tableau.
Once they started at home.
As our patient population growth, we certainly expect the dropout rate to increase but it's a good start and one that we're very proud of attaining.
We continue to believe that these two metrics training time and dropout rates are the most vital because they represent the biggest historical problems that of preventive ADHD growth and the past onerous training and high attrition.
On a qualitative level, we get to see the impact tableau is having on patients lives every day. We recently had a patient go back to work and another report that he is now able the cycle 10 to 15 miles per day, even on the day you know all of it.
Each of the stories that really motivate us the most and represent the impact we intend to have on the lives of patients. We look forward to continuing to deliver on our vision to transform dialysis for patients and.
For a tech enabled journey with seamless activation of training and retention all driven by digital marketing and support features.
And the orders for tableau build our supply chain and manufacturing team has continued to lift production capacity, while maintaining an exceptional level of quality and focus on our cost reduction activity both of which are vital to our long term success.
Our new facility in Tijuana, and Mexico, which incorporates a state of the art cloud based manufacturing and documentation and system produced 165 comp sales in Q1 ahead of plan.
This outperformance was the primary driver of slightly better than forecasted gross profit leading to our second quarter of positive gross margin. The factory continues to ramp and in April alone. The team manufactured over 100 console.
With production, increasing we remained well positioned to satisfy our forecast of ships scheduled fully from the new manufacturing facility and the second half of this year and.
Additionally, we submitted our fights and applications USDA as expected and March to enable our new contract manufacturing partner to produce tableau cartridges.
The submission put this on track just shift the majority of production from Asia to Mexico later, this year and to see the anticipated benefit from the related cost reduction and the second half of 'twenty, one assuming FDA clearance within the expected timeframe.
Looking ahead, we remain focused on achieving three critical objectives through 2021 first driving growth and the acute market by expanding more deeply within our current customer base and signing new agreements with regional and National Health systems.
And accelerating home patient adoption to capture incremental user data bolster customer relationships and provide a foundation for significant growth in 2022, while working to ensure and exceptional tableau of home experience for patients and their families and.
And third continuing to focus on increasing manufacturing output and cost reduction activities to drive gross margin expansion.
With the benefit of our recent follow on offering we are more confident than ever in our ability to drive the adoption of tableau across the multiple care settings. The proceeds will help us fund revenue growth, which is tracking above our internal estimates for less than a year ago. Additionally, we are moving forward with various home R&D.
International and data analytics initiatives designed to drive durable long term growth and profitability in summary, our first quarter was marked by strong revenue performance and continued operational execution and substantial progress across our strategic initiatives.
And we see demand for tableau accelerating across the acute and sub acute care setting with a growing number of providers uptake and tableau per home as well at the same time, we remain on track with manufacturing and cost reduction initiatives.
With interest and tableau and clear visibility on the timing of console placements, we are confident and our positioning for consistent strong performance in 2021 and beyond.
And so with that I'll now turn the call over to Rebecca to review, our financial and provide more granularity on our expectations and key drivers for the remainder of 2021.
Thanks, Leslie and love.
We mentioned first quarter revenue grew 219% year over year to 22.9 million driven predominantly by increased console shipments to acute customers, our HHS lease agreement and continued growth and consumables.
Product revenue grew 207% year over year to $18 2 million.
Console revenue equaled $14 $8 million for 194% year over year growth driven by higher placements to our acute customers as well as the recognition of XT upgrade revenue.
Rising volume associated with our growing installed base increased utilization and higher asps.
Drove consumable growth of 283% versus the prior year, resulting in quarterly revenue of $3 4 million.
Service and other revenue grew by 273% to $4 $7 million compared to $1 3 million and the prior year period.
Services for our larger installed base as well as the impact of HHS, We service revenue contributed to the growth.
Moving to gross margin and operating expenses I will highlight our non-GAAP results I encourage you to review the reconciliation of GAAP to non-GAAP measures, which can be found in today's earnings release.
Our non-GAAP gross margin was one 6% and improvement of 51 percentage points versus the prior year period the.
This expansion was primarily the result of significantly lower console and treatment costs and higher service margin as well as the impact of ex P deferred revenue release.
Non-GAAP operating expenses from the first quarter were $24 2 million up $8 1 million versus the prior year, driven primarily by investments and our commercial organization as well as G&A expenses tied to operating as a public company, including head count growth.
Compared to the prior quarter non-GAAP Opex declined $1 6 million as Q4 saw higher commissions tied to year and bookings outperformance.
As detailed in the GAAP to non-GAAP reconciliation and our earnings release first quarter of stock based compensation was $5 $9 million and we recorded expenses tied to satisfying the performance vesting condition for certain stock options. Upon the closing of the IPO as well as the quarterly expense tied to time based grants.
We reported first quarter GAAP net loss of $30 million, resulting in the net loss of <unk> 70 per share compared to net income of $4 2 million or <unk> 74 per share for the prior year period.
This included the net benefit of certain adjustments related to our private company financing.
Non-GAAP net loss was $24 2 million or <unk> 56 cents per share compared to non-GAAP net income of $4 7 million or <unk> 84 per share for the same period and 2020.
We ended the quarter with approximately $311 million of cash cash equivalents restricted cash and short term investments. This does not include the approximately of $150 million of net proceeds from our recent follow on offering in April.
With this raise wear and now more confident than ever and our ability to fund growth.
Moving now to our 2021 outlook.
We project revenue for full year 2021 to range from 92 million to $97 million, which represents approximately 84% to 94% growth over fiscal year 2020 of revenue.
This compares to prior revenue guidance of $89 million to $94 million and contemplates our modestly updated expectation for console placements.
Moving to gross margin we are projecting.
The lower console costs, given our cost down activities and improved manufacturing productivity as well as the benefit of shifting towards our lower cost cartridge manufacturer of assuming FDA clearance.
These factors are expected to drive further gross margin expansion with sequential improvements throughout the rest of the year and.
Additionally, we are forecasting of meaningful increase sequentially and operating expense given investments to continue to drive revenue growth.
And all we remain confident and our position both financially and operationally and and our ability to continue to execute according to plan as we build on our success through 2021 and beyond thank.
Thank you for your time, we look forward to providing an update on our Q2 progress during our next earnings call. We will now move to the Q&A session. Operator, Please open the lines.
Operator.
Yes.
Hello.
Yeah.
Okay.
Operator are you there.
Okay, we will hold on the line until until the operator reconnect.
Okay.
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For those on the line, we're doing our best to get in touch with the operator, and we'll do Q&A as soon as we can successfully do so please hold on the line.
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The first question comes from Amit <unk> from Goldman Sachs.
Thank you and me.
Gary.
It's like the Jamie per tonne from the Goldman team.
Thanks for taking the question.
The you mentioned the three strategic priority. So I've got one question on each.
First you mentioned the existing customers. It sounds like that was really really strong this quarter.
What are you seeing from these customers in terms of the triggers to expand their use of tableau across other hospitals and as part of that I mean, given the color in the past on the opportunities for tableau and different size hospitals, and and things like that I was wondering if you could tease out sort of the the Tam if you will.
With the existing customers, it's just the opportunity to continue penetrating existing customers.
Sure well, let me let me start with your first question and then Rebecca and they want to chime in on the second part C of the first of all of your question was what's really motivating and these customers to expand and the the the triggering event. It is really the the quantification of the cost reduction first and foremost I'm most of our.
Hospitals, and health systems, and adopt tableau understandably will seek to quantify how much they are saving on a per treatment basis.
And we assist them and in doing that and what will often do of what we'll call sort of quantify the impact meetings as early as three days after their start with tableau and on the basis of really seeing the results first hand.
And that's that's the the real number one motivator for health systems too.
Have a desire to expand that to other hospitals and there and the network is really seeing the results and and also not only on cost reduction of about on patient quality. You know the tableau really gives these hospitals and opportunity to to better control of patient care for.
And that back and their own hands, and and I'm looking at things like reducing length of stay where do you think patient wait times for dialysis or are often other reasons why hospitals choose to expand their utilization of tableau to other facilities.
Yeah. Thanks, Thanks, Jamie for the question with regards to the Tam of existing customers. If you think about where we are today, we have six of the eight top national.
Health systems with several of the top 100 health systems and three of the for top L tax and so that.
And that is that as a significant portion not not ready to quantify it today, but I would say more than the majority of the $2 $2 billion of acute Tim that we have you know.
The contracts for and and and have the ability to go further penetrate.
And and so I think I think when it comes down to it we're very well positioned to continue to penetrate and grow the acute revenue base.
And I think the the success, we've seen today speak to that and.
Okay. Thanks for that and then just turning some of the home opportunity for a second.
Two of the largest dialysis provided and the country and Davita and Fresenius had an agreement.
And so in the quarter related to one of the competitor technologies, just wondering how that impacts you from the competitive positioning standpoint and the.
Are you going to.
Have access to Davita and Fresenius customers. There should we think about your and your path to penetrating the home opportunity of through other channels.
Well I think the most important thing to continue to keep in mind is just the the enormity of the market I was and it's a ginormous and but I don't think that's the word.
Although the enormity of the of the market and the opportunity and there is scarcely a bigger piece of the health care market available today, and and again and you know for the last kind of 15, and 20 years Theres really only been one device available too.
The survey and so first and foremost and we view this to be kind of a wide open driving range has the second product to market.
I can't speak specifically to the Davita and Fresenius the agreement other than what I read about it. It's just as you did what I can say is that there are a growing number of providers and that I talked about a few minutes ago being health systems and some of these kind of new newer entrants.
And of the market that are specifically focused on I'm.
Sending patients home. So we don't view this as an either or proposition, we really view, it as and and proposition where you'll just see the universe of of home dialysis providers of expanding.
Okay, All very fair and then just one last one just from the path the profitability, obviously gross margins and then really strong and the last two quarters and above expectations can you just update us on what you're thinking in terms of.
Potentially pulling forward from your your timelines to profitability and.
Longer term peak gross margins.
Yeah happy to take that Jamie I think we're becoming more confident and the path. We've always had a significant amount of confidence, but each quarter under our belt. Obviously provides provides more proof points to that and again, we're still only a couple of quarters into the so thinking about 2025.
Margin structure, it's probably too early to get there.
But were remained very confident and the 50% gross margin target as well as of the 20% operating margin target for 2025, given the variety of assumptions around segment mix and and the other various contributing factors.
With regard to the timelines of profitability. If you recall back and last summer we had expected the fourth quarter of of 'twenty, one to be the first quarter of profitability of the gross margin line. Obviously, we have pulled out for now a couple of quarters and and given incremental sequential gains on the gross margin line for.
And the rest of the you're.
Assuming we deliver those as we expect and I think we can successfully say we're at least of couple of quarters out of of schedule there.
Okay. Thanks for all of that and congrats on the good quarter.
Thank you Frank.
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Our next question comes from the line of the.
Drew Ranieri from Morgan Stanley for your line is open.
Oh, Hi, Leslie and Rebecca.
My first question and kind of piggyback from some of the comments that you've already made but just on the relationship and the acute setting and the home I'd just like to get more of your view and I understand that the acute setting momentum is building here and it remains still early days for the home but could.
Could you talk about how the acute channel really lays the potential for for home demand going forward. How are you thinking about that funnel of evolving and any.
The signs that you're seeing still and these early days of acceleration.
<unk> got some sense that youre still being methodical and the acute rollout, but what do you really need to see to.
The stuff on the GAAP total to take advantage of the enormity of the opportunity here.
And I appreciate your adoption of this new word and expect that it'll be entered and western shortly.
Yeah. So let me, maybe I'll start and end and ask Rebecca to comment. Additionally.
So how do we see the the acute channel helping to kind of build the funnel for home the and maybe maybe take a quick step back the way that we design and tableau and our design goal from a technology standpoint, and from the beginning really was of the notion of and enterprise solution that health systems would no longer need to buy in Maine.
Hain to three for different types of machines, each of which did only one type of dialysis and and so the design vision went hey could we build a single hardware platform that really could perform the functionality of all of these machines for all types of of acuity patient and so in deliver.
And on that that promise that designed promise.
We're able to approach a health system again of health system and talk to them about down selecting now to tableau for us anywhere from you know the ICU to home. So that's that's kind of part one and and the idea of behind the enterprise solution I think the part two and with leading.
Health systems to pick up on the concept of managing the home patient is incremental revenue.
Home dialysis for a health system is associated with the contribution margin that and I won't say all cases, but in many cases is a higher contribution margin and the inpatient procedures that they're that they're managing and their current environment and so we've seen health systems and sort of light up at the opportunity on the one hand to stay.
The money with tableau and let's say in the ICU on that side of the floor and then and then make more money by managing that patient on of chronic basis.
Both in terms of the higher topline revenue growth rate as a result, and also and incrementally differentiated contribution margin and managing that patient and the homes. So that that's really what seems to be resonating most with withheld for sun.
Got it. Thank you and just the second question on new products, you touched a little bit on the set the.
The at the end of your script, but can you talk about and <unk>.
For details about some of the R&D development initiatives, you highlighted maybe around the analytics and I think I heard the word international and there. So just love to get some more color on those opportunities. Thank you.
Yeah, sure well the and.
And maybe I'll start and reverse chronological order with with international and and our approach to even contemplating selling tableau that they have and I'd say it will be very very similar to kind of the measure twice cut once the approach that we first spoke with acute and we're now taking with home and it.
And it's worked well for us to be thoughtful and prospective and deliberate.
And so we're gonna rinse and repeat that pattern on international and so what we're committed to is discovery. What we're committed to is the valuation and I know it is not lost for you or anybody on this call that you don't just sort of leap into a bunch of different countries, what Willy Nilly and so we're going to we're going to do our homework, we them ourselves of the homework assignment.
And we're gonna use and investment dollars to go do that homework well.
Which countries why.
Of course, the the Tam of those opportunities both acute and home what problems have left tableau really saw if any and which of those markets and why.
What the margin profile might look like and through various distribution mechanism and the.
And the sequencing of these opportunities I mean, there's no secret and in the U S opportunity here is so so big and we do want to be thoughtful and stay focused at the same time, but the U S market and 30% of the global dialysis market and.
We're very well aware of that too so and so I would call it and investment in and discovery and and smart thinking around it through for for the time being one thing that'd be for listings onto new product is international it is not currently baked into any of our revenue projections for the rest of through the forecasting for it.
And really you know as we've shared historically those have primarily been driven by the acute market and in the near term and and in future years augmented by the whole market. So just wanted to add that and before you have to lessen the city of products. That's the that's a good point and I will try to not wax poetic on and the new product and the answer because.
And it could be of long one.
But yeah, I think I'll start by saying that a big part of our what we're excited about is cementing our position as the innovation leader in this space I think the space is lack of an innovation leader and we intend to fill out of the way our ambitions and delivering on the hat go far beyond the tableau device.
There are so many ways that we already are inventing inside of out debt from supply chain to distribution and logistics to manufacturing and that the.
We see many many opportunities due to invent broadly.
You mentioned kind of data analytics and yes that is one area that we are really keen to further exploit both for the benefit of patients you could think about all sorts of digital and virtual.
And based on sort of support mechanisms for the paint the consumer at home that might build virtual community that might get patients access to virtual support on a real time basis.
And that's again all of the name of of benefiting retention and the home and you might think about sort of digital and digital are more hybrid virtual strategies around training.
All things kind of a surround sound digital approach to consumer support might be one and.
And another is just building more value for their provider of tableau already integrates into the EMR provide the tremendous amount of data to the provider about their patients and their treatment outcome, but and a value based care environment. There is so so so much more information and value that we believe we could deliver to <unk>.
The systems, both regional and national over time. So those are the general vectors of growth through and without getting without getting too specific at this time.
Thanks for taking the questions.
Thank you for our next question comes from the newest unhealthy from S. VB learning and your line is open.
Hi, good afternoon, ladies thank so much for taking the question or back I think the question is probably for you and I apologize if I.
And if I missed it but just.
On the the backlog that you guys had talked about on the Q4 call and is there a way to quantify how much of that contributed to Q1 is the totally worked through or is there still more to go and where you are from a backlog perspective, if youre still giving that number I apologize I can't remember, if you're and you're going to keep getting that [laughter] yeah.
I think of claims for the question Danielle to hit the last part first and we plan on disclosing that number of annually.
That's right that's driving the no not at all and not at all but I'll answer the rest of your question for you.
As you mentioned, we ended and the 2020 with meaningful backlog of approximately 550 counsels and backlog and those are primarily expected to ship in the first half and so we do we do still have a portion of those obviously and backlog here as we enter the second quarter.
And the first quarter, we continued to see strong demand for of tableau and we're very pleased with our backlog position exiting the first quarter.
And that position as well as our pipeline and what effectively allowed us to modestly raise our revenue expectations for the year, just with one quarter underneath our belt.
And going forward, our focus is less on the magnitude of the backlog, but really making sure that we use it as a tool for hiring planning and ensuring a good customer experience, which is our real real you know the real benefit we get from from that backlog position.
The question if you will.
Yeah that makes a ton of sense and Rebecca I'm going to keep you are talking sorry, Luckily for us.
And this question is on the on the gross margin. So you have another pretty.
The strong quarter relative to you know we had the looking at.
For a decline in and gross margins are a negative gross margin I should say you beat our number of it looks like you came basically in line with consensus, but still a positive number and feels like youre continuing to track sort of faster. I know you were committed are you you said last quarter that you were able to say, yes, we're tracking faster, but not ready to sort of.
To put a new number out there for long term margins I mean, what can you say about how sustainable this trajectory of and of margin improvement is.
Because it does feel like maybe now you have got two quarters of positive gross margins just wondering.
How that you know what.
What you can say about the long term trajectory now thanks, so much yeah, my pleasure I would say that.
We are increasingly confident and the trajectory and that you shouldn't expect to see incremental sequential improvement throughout the remainder of this year really as you think about the rest of the year and the second quarter, even a higher percentage of our Hong Kong being ships will come from our new facility and.
And therefore, obviously that will lower the labor costs associated with each council as well as as well as increase the absorption from incremental productivity.
And and then and the third quarter will be fully will be fully felt both sort of thing if you will.
So we will be we will be fully.
Building, the the cultural and needed to hit our ships schedule and that will continue on from there.
And we'll see the incremental benefit again, and the third quarter and then timing of of the cartridge move is obviously slightly out of our hands given we have the application into the FDA, but that also should be of back half of tailwind.
The gross margin and so we're pleased with how margin and shaking out and where.
Obviously still.
And we're incrementally confident but we're not ready to change the 2025 target margins by any stretch of imagination at this point in time, but our confidence is increasing.
Thank you so much my.
My pleasure.
Thank you. Our next question comes from Rick Wise from Stifel. Your line is open.
Hi, good afternoon for you both.
Maybe you could add some more color on your comments around.
Yes.
Okay.
The expanded tableau.
You sort of orders.
And from existing customers into other facilities.
Which I think you said 75% of the.
The orders.
And the quarter, if I understood you correctly, correct me, if I'm wrong, but.
Help us think about that kind of number going forward and it's true it's fantastic and real.
Vote of confidence and the technology and new.
And is that do you should we expect that to make up.
The significant portion of orders going forward.
Or is opening new accounts or how do we think about that mix.
And this quarter and going forward.
Yeah, sure I'm happy to take that and the and yes, you're absolutely right about the 75% debt that was the correct figure.
Well.
We don't break and I'm not sure. If this is gonna be totally helpful. For you you know, we don't really think about forecasting our business that way.
We have to be good at though we have to be great actually at new customer acquisition, and we have to be great at the experience that that customer and are now our consumers have after they've adopted the technology and so our whole commercial strategy.
Really is kind of a we talked I think we've talked about this before we kind of the mantra of land and expand right and and we talked about that since last summer.
And we have to be great at both and so we just today mentioned the expansion data really to give you all some evidence for the first time that the expand part of land and expand is.
Is materializing in a way that you know that we're really proud of and I and I use. The we're proud of because this is certainly not easy and and I would love to take the opportunity just to kind of dilute our clinical and capital field team. The this is not it's never an easy one to work with and with customers with and a new technology and oftentimes it and.
New kind of care delivery model and I think the team has done a fantastic job and introducing and also executing change management and in a way that and it is resulting in the both customer expansion and new customer acquisition I don't know if that's that's helpful color, Rick, but we just view the view and effectively as a reflection.
Of of our land and expand commercial strategy and it just hadn't talked as much about the expand the part thought it was a good time to do so.
Alright, that's great.
Rebecca.
Turning to the guidance, obviously you raised the.
Both the low end of.
Hi, Ann.
Roughly $3 million.
The from at least.
And the consensus by.
And the half or so and the first quarter, how do we think about.
Factoring that's what the hard guidance and to the quarterly cadence.
And how do we think about the sequential.
Pattern of quarters now for the rest of the year.
For that.
The lease slightly sequentially higher or do you think that for some of the factors that you've mentioned, we might see it might be now of shade more back and loaded.
The extra.
Bob.
The guide above the outperformance.
Yeah happy happy to take that one Rick.
Your your former for your for the fixed the form of statement and and that is the correct conclusion, given our performance and the first quarter, we are forecasting sequential growth across the balance of the year.
And with roughly equivalent growth of expecting them and the second and third quarter, and then slightly lower growth and in the fourth quarter. Given if you recall, we had the headwind with the first HHS lease coming off and in that quarter. So there's some puts and takes there as you think about some some chunky revenue for lack of a better way to say it.
But we are expecting you know pretty pretty steady sequential growth for the rest of the year.
Right.
For two more questions from me for back to the home the.
50%.
The sequential increase and and home orders.
Appreciate that the base and small.
But.
Maybe help us understand.
And what's involved there.
If you could give us a little more color and and.
And that kind of order increase how quickly it.
You know you can deliberate and.
Our person.
And frankly I'd be curious about the master agreements what's involved there.
And what's the.
One of the implications for sort of go forward most of what you do.
Good.
Understand.
A little more about how to think from master of insurance.
Let's let me give.
And give you a little bit of of editorial here and then you can redirect me if we're not quite getting to what you want to learn more about.
And in terms of when you say kind of the how quickly and and so forth on these home contract I would say generally speaking what what we found is that the home contracts are generally following a pretty typical sales cycle and the acute side, we're not we're not seeing them necessarily and.
And he faster longer than our typical acute sales cycle, which we share in the past is is about nine months some are faster and some are longer and.
But that's kind of what we're seeing and if I had the characterized our sales cycle and the home side nothing really special the call out there.
And in terms of the the Master agreement, we don't we don't have a one size fits all there is each one is a little bit different and unique unique depending on the goals of the other provider again, whether that's the health system or one of these kind of innovative new entrants or a conventional dialysis care provider, but jen.
<unk> speaking of the the Master agreement and is a commitment on both sides.
Lee of speaks to a pretty significant commitment from the provider to put more.
More patients on home than they have today and and to do so.
With principally with tableau, so I'm not sure if I'm getting to what Youre curious about Reg bi and.
Desert those are a few comments that come to mind.
Great No that's helpful and.
Uh huh.
And I keep asking about it.
The macro environment and the.
You know evolving clearly positive macro tailwind from.
And again maybe.
I'd be interested in hearing how.
Now the UPC model impact.
And you know.
The country expanded reimbursement.
How's the factoring into the discussions with providers is that a factor at all or just the.
And for a whole change and shrimp and that's how do we think about it. Thank you yeah, you're absolutely right.
I would say that it has absolutely had an impact in terms of mindset and planning on the part of those providers and our predict bidding and it and and to cover just a few of the fact the.
And the T C and mandatory for approximately 30% of the clinics is the geographically based and so but think about kind of third and third roughly 30% being required to participate and over time, the ETP well either involve up to and 8% increase in the treatment base rate or.
For a penalty of up to negative 10% off the treatment base rate dependent on how successful that individual clinic has been and growing its home population, so but getting back to your question wreck well, yeah, well, we continue to experience pretty consistently.
Is that because of the E. T C. I do think it is shifting.
Mindset towards more home I think it is increasing our motivation both with providers and also with physicians because the T. SEC also paid nephrologist more or less depending on their patient census at home and it.
Yeah, I think it's accelerated some planning I think it's activated a lot more thought and and certainly increased interest in.
Conversations around Hey, how do we drive ex percent of our patients home and what I've noticed is that and my personal conversations with providers their ambitions and aspirations around the percent going to home.
For more elevated today than they would have been maybe and conversations I would've had a year or two ago.
So that the that those of the impacts for noticing that far.
Very interesting thanks, so much.
Our pleasure.
Thank you for your next question comes from Suraj Kalia from Hilton humor and company. Your line is open.
Hi, Leslie Rebecca can you hear me all right.
Yes, the address.
Perfect.
And congrats for the quarter, so less of a bunch of questions from my side and and forgive me if I if I didn't get this right the.
Attrition rates and.
Joel we're implying vs next stage and he's a 50% lower I thought the 50% number.
And Mike can you just provide some additional context for what period. Most of this measure both of these existing customers home hemo customers.
And as the quarter was.
Sure sure happy to so the cause for the number that we talked about in the script was 60% and so that's that's kind of part one.
The period of time that the attrition day to pertains to his training there are a number of of cut that attrition data over time on the income of device just because they know they've been around for 15 years and so there's been more opportunity to study of that device.
And but so the way that some researchers have studied attrition rates on the incumbent device or at the time of training and then at the time of one year or some of the studies that we've read and so so to try to compare apples to apples and since we just received FDA clearance and.
And the spring of last year, we just haven't had enough time on task to measure and adequate population of course, and a year and longer but we do feel that we have an adequate sample size of our patient dropout rate on ton tableau training and so we just suraj and and in the script compared the the dropout rate during the.
Tableau training versus the dropout rate that's been reported during training patient training on the other incumbent device and and that's when we noted that the attrition rate on tableau during training is approximately 60% lower.
Additionally, suraj, we did cite that once we have gotten patients home, we haven't seen anyone drop off now that as you know is as Leslie mentioned and the script of very small number at this point of measured over.
I would say a handful of months a little bit more than a handful of months, but that is notable as well and obviously, there's only one place to go from here. So we don't want to get too excited about it but it is a positive.
Positive indicator in the county.
<unk> of tableau, and and you know and it and there it does near so far of our experience and the field and our retention.
Very high and retention rate and the home doesn't mirror.
Our data from the I D.
And the <unk>, we did not have any patients dropped who started the home arm drop out and that was not the case and the incumbent device trial for FDA. So we had a little bit of a helpful indicators of the trial and thus far that has been the commercial experience and the real world, but I do stress again, so far and in <unk>.
Small numbers.
Got it and.
Let's see you Rebecca just true and my two additional questions and I'll hop back in queue, Let's see one is just by Oh.
Had topic and this and this whole space look you guys have done so well against the tough backdrop right just the structural backdrop.
And you mentioned.
Do you think yourself of the innovation leader, let's say why not go all true on on demand and real time P. D.
That is one question is if you care to answer the second thing and maybe I missed it any updated comments on any type of just getting to the extra of payments I know, we talked about the quality of the 8% upside of the 10%.
Downside I'd be curious more so in terms of the ladies.
Ladies thank you for taking the charges.
Yeah, no and I'm happy to and maybe I'll I'll I'll just take those in reverse order. So the so the and tap program, which for renal is called mm kit and always loved tying the two ponies, that's spelled P P and I E pest.
And stands for something that I would probably butcher and trying to bring to pronounce it but it is pronounced the pony.
So that program no no new updates there.
Rogers the the short story long.
And we put in our application in the winter and we would expect.
And that that we would get some indication of CNS and thinking about our application when the proposed rule comes out mid year.
On the but I'll, maybe repeat of I'll comment that Rebecca made earlier, that's probably important to share about about the ponies is that.
None of our forward looking revenue projections assume that tableau ever received a positive to pony approval from CMS. So we're not dependent on it and what it provides them the knife useful upside if it were to occur in 2021 of 2022, absolutely back, but it's not something that we.
Count on happening.
And on peak here I think your other question was with P. D. I guess I'd say I mean look I think we'd be foolish not to be looking at interesting technologies and and adjacent even adjacent areas within this market.
More broadly and and we intend to do so and where we're always engaged in doing so and so.
Nothing specific to share at this time, but I think we're going to be a company that takes a very broad look at where we can have impact.
Utilizing both I think the people advantages that we have and.
And the and the technology platform advantages that we have.
Thank you.
Thank you. Our next question comes from Sugar and seen from.
Wells Fargo and your line is open.
Thank you so much for taking the question. So I guess the first one is just on the average cost savings of.
And that you're seeing and the acute setting can you can you share that with US I think previously you indicated about 300 of 500, but it looks like it may be tracking at the upper and just based on some of the checks we've done and I think and one of the cases, you've been called out by 50.
So if you can help us there and then with respect to the guidance.
Full year revenue guidance of given what you did the Q1 it implies a deceleration on a call and on a <unk>.
Sequential basis.
Looking at the corner quarter over quarter growth versus.
Of course as what you did in Q1, so how should we think about that most of the backlog or is there some conservatism baked and.
And then and if you could just give us of.
And the cadence of Opex for the year I think you mentioned that.
And that would be a step up from Q1. Thank you.
The only go for it for sure and I think having two of them.
Taking those taking revenue revenues and Opex you're.
You're correct, so and so if you think about 2021 of there's really two major factors, which are impacting the sequential growth the first being the HHS agreement and and how that rolls through the remainder of the year. If you think about the the pacing from the first quarter to the second quarter and then the second quarter for the third quarter. There is theres a.
The $500000 so headwind each quarter that we have to take into account and then from the third quarter of the fourth quarter of.
The $1 million of ore or slightly more so when we think about that plus the timing of the backlog.
But we had entering in the quarter and one of our customers have asked us to ship. The backlog those are the primary drivers of of the the pacing of sequential growth through.
And through the remainder of the year with them with the topic or on the topic of operating expenses and.
We expect to see a decent pick up as I mentioned in the script sequentially for the second quarter, and then again for the third quarter before and more flattening out for the fourth quarter as compared to the third.
So the two big two decent sized pickups, as we invest and the commercial organization to support the significant consoles.
Counsels that replacing as well as as well as the other initiatives that that Leslie and I have referred to and the scripted comments.
Okay, maybe I'll I'll I'll address the the first question and you mentioned around the the little bit more color around the cost reduction results.
So what what I would say is yes. It is certainly the case that some of them.
Customers, some hospitals and health systems are seeing more than more than a three to $500 per treatment savings.
Look I mean, we try to be very conservative and and and and err on the side of conservatism when we talk about the.
And the type of impact that the tableau is having on the marketplace. So what would what would account for kind of of 300 versus a 500 or even higher than 500 is really the difference between the components of cost reduction so probably on the lower end of that estimate would be a hospital that is.
And just enjoying lower supply costs through the use of tableau in contrast to a hospital on the higher end of the maybe the 500 550 et cetera would be of hospital that is not only benefiting from lower supply costs, but also benefiting from lower labor costs and that's our hope hopefully the.
It is helpful that explains the range and and yes. There are certainly are hospitals that are on the pi and or maybe even the higher and as we note and this one abstract that was published in Q1 by one by one of our national customers.
Alright, Thank you for taking the questions.
Absolutely.
Ladies and gentlemen, and I'm not showing any further question at this time I would now like to turn the call over back to your speakers for any further remarks.
Thank you so much of your reminder, a replay of this call will be available of the webcast and the investors section of our website as well as COVID-19 Island instructions contained in today's earnings release. Thank you for joining US today. This concludes our call and we look forward to our next update following the close of the second fiscal quarter of 2021. Thank you.
Ladies and gentlemen, this concludes today's call. Thank you for participating you may now disconnect.
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