Q1 2022 Outset Medical Inc Earnings Call
Okay.
Good day and thank you for standing by welcome to the outset medical first quarter 2022 earnings Conference call.
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After the presentation, there will be a question and answer session.
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I'd now like to hand, the conference over to your host today, Jim Mazzola head of Investor Relations.
Okay. Good afternoon, everyone and welcome to our first quarter 2022 earnings call participating from the company today are Leslie Trig Chair and Chief Executive Officer, and the BLM, Ed Chief Financial Officer.
During the call, we will discuss our first quarter operational and financial results as well as provide an update on our outlook for 2022.
After our prepared remarks, we will host a question and answer session. We issued a news release after the close of the market today and updated our investor presentation, both of which can be found on the investor relations pages about medical Dot Com. This call is being recorded and will be archived in the investors section of our web site.
I'd also like to remind you that it is our intent that all forward looking statements made during today's call will be protected under the private Securities Litigation Reform Act of $19 95.
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 on 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 outset assumes no obligation to update these statements.
List and description of the risks and uncertainties associated with our business. Please refer to the risk factors section about public filings with the Securities and Exchange Commission, including our latest annual and quarterly reports with that I will now turn the call over to Leslie.
Thanks, Jim Good afternoon, everyone and thank you for joining us to review, our first quarter 2020 to resolve.
Since our last update in February the outset team has continued to execute well across our strategic initiatives we.
We delivered our seventh consecutive quarter of strong top line growth led by continued momentum in the acute market. As we achieved continued positive performance on gross margin expansion and made substantial progress toward our home inflection objectives for 2022 with the number of home consoles shipped in the first quarter exceeding our.
Expectation.
Total revenues for the first quarter was $30 6 million, representing 33% year over year growth and eight 5% growth sequentially. We benefited from strong console demand and strength in treatment utilization as we continue to capture share across acute care customers accelerate home expansion.
And brought in our installed base.
We maintain a high level of visibility into our business supported by a robust backlog and strong pipeline grounded in broad interest in tableau and we remain confident in our near and longer term outlook.
I want to begin today by discussing our results and home, where we made very strong progress against our expansion strategy with Q1 results, putting us ahead of schedule relative to our 2022 objectives.
The metrics, we look at as a measure of home growth performance first the number of home programs, where we are ahead of plan.
Second the number of new patients, who went home with tableau, where again, we are ahead of plan.
Third how quickly patients can train on tableau, where we have a significant advantage over our competition and for US the number of patients who stay at home on tableau, where we remain meaningfully higher than competitors retention rates.
On our last call, we highlighted that home consoles accounted for a significant portion of our Q4 exit backlog and our expectation that the home business would inflect beginning this year. We are pleased to report that shipments to customers at home exceeded our internal expectations in the first quarter and represented a significant portion of total.
First quarter shipments in.
In addition, we are ahead of schedule and initiating new home programs with providers against our goal to establish 100 programs exiting 2022.
And importantly, we continued to deliver a highly differentiated patient and caregiver experience, resulting in an industry, leading retention rate, which we believe is essential to sustainably high long term growth.
This early momentum reinforces our conviction on delivering 2022 home revenue of roughly mid teens as a percentage of our total revenue.
To get there we plan to continue to expand our footprint with our two customer segments.
<unk> dialysis clinic operators focused on substantially growing their home program.
Health systems standing up new home dialysis service lines.
This past quarter, we launched a new program specifically aimed at the second customer segment health systems.
Proprietary turnkey solution is called destination home and it provides a roadmap for health systems to send patients home quickly and seamlessly.
Three destination home outset brings a team of qualified partners that accelerate each step of standing up the service line from facility requirements to accreditation and certification to ongoing patient care management and the home.
With one quarter behind Us, we're pleased with the level of traction we're seeing.
From a clinical and patient experience perspective, the data speaks for itself.
In early April three new datasets related to treatment with tableau at home were presented at the 2022 National Kidney Foundation spring clinical meeting in Boston.
These studies highlighted patient and Nephrologist views on home hemodialysis adoption and the hidden cost of peritoneal dialysis.
And the first data set presented a national survey of 200 to dialysis patients found that 72% viewed the features of tableau as a significant clinical improvement in home hemo and 77% for the tablet features would make them more likely to try home hemo.
Moreover, a second National survey of 184, Nephrologist found that 77% of the features of tableau, we're a significant improvement over existing home hemo devices and importantly, 98% that these features would make them more likely to recommend home hemo to their patients.
From prior studies and research, we found that patients identify flexibility and treatment frequency the availability of dialysis on demand automated data and remote monitoring ease of use and reduction in storage requirements as Paramount decision, making considerations when choosing our home hemodialysis device <unk>.
Tableau provides a compelling answer to these considerations.
All of its innovative features also translate into SaaS training time, which historically has been a barrier to getting patients to adopt home hemo across the spectrum of patients who have been trained on tableau. The average training time remains 10 session through less compared to two 4% to six weeks with the incumbent machine.
And the third presentation at MKS was a dataset that evaluated the confluence of clinical and economic outcomes related to TD failure.
Market data shows that PD sales, 50% of patients within two years and the data presented at <unk> showed that PD failure is associated with a nearly 100% risk of hospitalization during the six months preceding discontinuation.
The study found that over $72000 is spent per patient in the three months before adding to three months. After a patient has transitioned off PD.
Further after the transition from PD to in center Hemodialysis hospitalizations remain higher for former PD patients over time.
Today, just 3% of patients transitioning off PD will start home hemo. Despite the fact that they are already successfully managing kidney disease in the home <unk>.
Collaborating with our provider partners, we see an opportunity in the future to create programs that access this upstream patient population and transition more of them to home hemo with tableau driving both cost savings through hospitalization reduction and quality of care benefits for patients.
We continue to see rapidly growing demand for tableau as an enabling technology for home program fueled by exceptional clinical outcome overwhelmingly positive patient experiences and retention and the increasingly recognize economic benefits for patients and providers.
Most importantly, we are proud of the impact tableau and team tableau have had on patients and their families.
I recently visited several patients dialyze at home with tableau.
First and foremost what I observed was confidence control and autonomy.
Listen to them describe how much more convenient home dialysis was that it had given them their life back because they now have the freedom to decide when they wanted to dialyze. They were freed from a clinic schedule. They didn't choose they were free to pick up their kids free to take care of others free to work again as one patient put it clinic.
With a cattle call I was constantly rush stress and how to Orient my schedule around it being at home I can take my time I want to live my life.
Perhaps even most importantly, I heard pride in their voices pride that they owned their care, but they were independent and self reliant.
This autonomy translates into self worth and identity and ways to change lives families and communities over time.
I heard about tableau being easy to learn and easy to use and I watched people set it up for treatment with confidence.
Is this just also reinforce that the patient experience does not begin and end with the device what I learned was that the experience for patients is tied both to the people and the product and pathic listening patients genuine care about the person behind the patients.
Part of how we support patients is a big part of our secret sauce or now not so secret as well is something we believe creates protected competitive advantage along with our technology.
We are excited for all of you to also get a firsthand view into the patient experience through an educational webinar for investors. We have planned for June one from one to two P. M Pacific 4% to five P. M. Eastern we have two patients a caregiver and a leading neurologists scheduled to participate in a panel discussion where we will also give.
The opportunity to ask questions.
We will release additional details in the coming weeks.
As we celebrate home adoption. We also continue to see strong growth among our acute care customers.
Unlike large expensive capital equipment, the upfront investment for tableau is relatively small with a payback period typically measured in months not years as a result hospital executives have much greater visibility to and certainty of a near term ROI compared to other types of capital equipment the combination of <unk>.
<unk> low capital high return value proposition has been a key driver of our continued momentum and consistent performance. Despite inconsistent hospital hospital operating environment.
In the first quarter, we made headway with new sales agreements and expansion sales within our existing customer base as our land and expand strategy continued to progress.
A key highlight for the quarter was landing the eight.
Of the eight largest national health system.
Another area, where we continue to see commercial success with new sales agreements is within hospitals with fewer than 100 beds on.
On our last call. We highlighted how 2021 taught us that tableau solve important problems not only for the nation's largest health system, but also for smaller hospitals, which in many cases are part of larger health system, where tableau is already in use.
We also continue to learn about hospitals contending with challenges due to their outsourced dialysis providers struggling with staffing shortages.
As we discussed in February some hospitals are receiving service price increases some are receiving service level decreases and some are receiving surprise service contract termination and.
In one circumstance, we were contacted by hospital and ask the tap installed tableau and train its nurses within 72 hours or service and training team successfully met the challenge and have the hospital's own staff running tableau treatment later that same day.
In short tableau has proven to be a valuable solution as it allows hospitals to finally control their own destiny from cost to staffing to compliance.
In concert with console placements a vital part of our commercial strategy is to drive utilization across the installed base and we were pleased to see strong utilization during the quarter evidenced that our recurring revenue model is working well we are pleased to see asp's holding steady as our installed base grows and we pull through a larger volume.
Of higher margin consumable.
In addition to our commercial success our team continues to make impressive progress on gross margin expansion delivering non-GAAP gross margin of 14, 8% in Q1 were very proud of our teams across the business and how they've effectively managed through a continually challenging macro supply chain environment.
And sector volatility during the quarter Testament to the team we have not missed a single day of demand.
With no console or cartridge shortages, even as the business has continued its strong growth trajectory. We continue to have healthy inventory position, where it matters and our backlog is reflective not a supply chain or production constraints, but a strong demand that is scheduled for delivery on the customers' timeline.
In summary, the first quarter of 2022 was marked by a strong start to home inflection revenue performance and progress towards our gross margin goal I'm. Once again very proud of the entire outset team and our ability to consistently deliver strong and predictable financial and operational performance.
We remain highly confident in our ability to deliver against the 2022 objectives that we laid out on our last call as we provide a transformative technology to reduce the dialysis burden for patients and all those who support them.
With that I'll now turn the call over to Neil to review, our financials and provide more granularity on our expectations and key drivers for the remainder of 2022.
Thanks, Leslie Hello, everyone I am pleased with our great start to 2022.
Our first quarter revenue grew 33% year over year to $40 6 million.
Driven primarily by higher consumable shipments increased console shipments to acute and home customers and increased services to support our growing installed base.
Product revenue grew 41% year over year to $27 million console revenue grew by 22% year over year to $18 1 million.
Driven by higher console placements.
PSP is also increasing year over year, given the demand for <unk>.
We continue to see better uptake of our XD upgraded than we had initially projected which highlights <unk> clinical versatility with the clinical communities recognition of <unk> ability to recruit the very statistical accumulation of patients can be ICU.
Consumable revenue was $7 6 million.
An increase of 121% versus the prior year.
Q1 cartridge utilization was strong and in line with our expectations.
Service and other revenue of $4 $9 million was higher by 4% compared to the prior year.
Service and other revenue almost doubled with the growth of our installed base.
<unk> set by the brands, excluding the HHS agreements, which we previously described.
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 first quarter gross margin was 14, 8% an improvement of approximately 13, two percentage points versus the prior year period, and a sequential improvement of 280 basis points.
This improvement compared to the prior year period was primarily the result of the transition of our console manufacturing to our Mexico production facility are ongoing console cold Stone program and our revenue mix with a higher percentage of our Q1 'twenty two revenues coming from our consumables compared to the prior year period.
Cartridge manufacturing transition is well underway and our new Mexico continues to ramp up the volumes off.
Operating expenses in the first quarter were $36 million.
Up 11 $8 million versus the prior year period and in line with our guidance.
The increase was driven primarily by head count growth, resulting from investments in commercial organization investments in R&D and G&A expenses tied to operating as a public company.
To the prior quarter non-GAAP Opex decreased $3 4 million.
Remember, we because of a fourth quarter opex included treatments into compensation premiums, including sales commissions.
Turning to our year end operating performance.
We reported first quarter GAAP net loss of $36 $9 million, resulting in a net loss of 78 cents per share compared to a net loss of $30 million.
Or <unk> 70 per share for the prior year period non.
non-GAAP net loss was 31 $9 million was.
It was <unk> 67 per share compared to a non-GAAP net loss between $2 million or <unk> 56 per share for the same period in 2021.
<unk> ended the quarter with approximately $335 $6 million of cash cash equivalents restricted cash and investments.
Moving on to our 2022 outlook.
Given our strong performance in the first quarter and the forward visibility afforded by our backlog and our pipeline we have increased conviction in our ability to execute as we plan to do in 2022 as a result, we are updating our expected 2022 revenue guidance.
Now project revenue for the full year 2022 to range from $144 million to $150 million, a $2 million increase at the lower end of our prior range of $140 million to $250 million.
This range represents approximately 40% to 46% growth over fiscal year 2020 MW.
Our performance in the home needs, we continue to be on track to whom.
Revenues of roughly mid teens as a percentage of full year 2022 revenues.
Moving to gross margin, our first quarter results give us increased conviction in the gross margin goals that we laid out for you at the beginning of this year.
While we continue to see inflationary pressures in the macro supply chain environment close to transportation and the cost of components, our call strong dealers and trends moving as expected.
All factors considered we continue to have confidence in non-GAAP gross margin expansion to the high teens for the full year 2022 in line with what we shared with you on our last call.
With that I think we're ready for Q&A operator, please open the lines.
If you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
Draw your question press the pound key.
Our first question comes from Hassan with Goldman Sachs.
Hi, This is Phil one permit thanks, so much for taking my questions as always.
But I thought maybe we'd start with guidance and try and break down the performance in the quarter. So.
Certainly heard all of the positive commentary on the home front, which is great to hear.
I'm wondering with very little commentary around Covid disruption.
You actually came in ahead of your internal expectations or is the increased confidence in guidance and the raise at the bottom end is more.
Reflection on kind of the run rate that youre seeing in the exit rates, it's kind of a question on acute and outperformance wondering whether there was disruption in that space in the quarter.
Yeah sure Hi, Phil.
Short answer no COVID-19 disruption and really a continuation of the theme over the last two years I think.
<unk> has been an example of a company and a business that has continued to perform consistently well not because of or in spite of COVID-19 and Q1 didn't represent any change to that pattern. So the strength that we saw in the quarter, leading to a strong performance on the topline.
Revenue side really came again from the core tableau value proposition in the acute around significant cost reduction both supplier cost reduction labor cost reduction and operating efficiencies for the hospital customers that are choosing to adopt it. So a lot of strength in acute from corp, tableau value proposition and similarly, a lot of <unk>.
Strength in home and in growth in the home revenue number.
For similar reasons tableau is delivering on the promises that we make to our health system and our dialysis provider customers on the home rapid training time.
And long retention time at home.
Those are the drivers of the drivers of the beat.
Okay. So it could put a finer point on it but would you say that the the raised at the bottom end is attributable to AUM being ahead of your expectations for the year, so far as you've kind of characterized all Nicole.
Yes, Phil.
Can the deal so Phil.
Confidence in our 'twenty two guidance is really predicated on a couple of things. So one as Leslie mentioned, we didn't have a strong start to the year with Q1, performing really well on revenue in the acute and the home setting number one and then number two we continue to have.
Really good backlog and pipeline as we sit here today as.
As we've talked about we're running this business and the backlog positions, we really have good backlog in pipeline as we sit here today and all of that gives us a lot of coincidence.
The team to achieve the guidance range that we talked about sort of and that's what that's what drove us to tighten our range to $144 million to $150 million.
<unk>.
Got it that's great. Thanks for the additional color if I could sneak just one more in on the capital environment, we've heard from others.
Kind of a mixed message depending on the company in terms of the ability to install and the impact from.
Labor shortages and absenteeism on installations it sounds like the unique value proposition for tableau is kind of positioned uniquely to kind of supersede that are super event that.
Can you just talk broadly about any changes that you might have seen from hospitals willingness to take any capital on their ability.
So kind of to start new programs or to take installation.
Yeah sure I'm happy to comment on that well I think there's maybe two parts to that question are two dynamics that are worth commenting on one is hospitals willingness to acquire new capital. So let me comment on that and I think the second dynamic is around staffing in short no we really have not experienced.
Any change in our business.
Hospital interest in acquiring tableau and.
And I think it's probably worth pointing out and I mentioned this in my prepared remarks, just a minute ago the capital investment even for a hospital is buying a fleet of tableau.
It really is a different ballgame, if not a couple of million dollars of capital and so this is a dollar amount that's comparatively small number one and number two.
An investment where CFO have very rapid payback period.
As I said, just a few minutes ago typically measured in months and sometimes as soon as three to six months Eric breakeven.
And that's because they start utilizing tableau the cost reduction on the disposables is very very significant and so I think that when our sales team goes in and Theyre talking to the C suite, whether it be the CFO cielo CEO youre talking about a relatively small amount of investment again compared to other forms of capital.
A very very high certainty of a near term payback. So I think that that continues to serve us well that those dynamics. So no changes in the capital acquisition environment as we sit here today as far as tableau got the second dynamic around staffing I would say on balance staffing shortages.
Continue to probably be while they are not probably they are a tailwind for tableau adoption more than they are a headwind on the margin in Q1 did we see a hospital or two.
Change its timing of installation a bit I mean navy, but this was very had a very very marginal effect if any what.
<unk> really had a more meaningful positive effect.
Was this dynamic again that I mentioned in my prepared remarks around hospitals that had previously been outsourcing dialysis to a third party service provider and noticed third party service providers and they've been fairly public with this are really struggling with staffing. So that's resulting in a number of hospitals getting surprised and realizing that they want more control.
Over cost over compliance and over labor and so we were kind of called that to answer the balance. If you will in a number of circumstances in Q1, I just talked about one of them.
In the prepared remarks, but there were many examples of that where it really motivated kind of lit a fire under the health system to in source dialysis, I'm, using tableau and using their own stuff.
That's fantastic. Thanks, so much for all the color book, Thank you sure.
Our next question comes from Rick Wise with Stifel.
Hi, good afternoon Leslie Neville.
I hate to start with the generic.
Talk to us about the supply chain challenges.
I just feel like I have to ask.
Leslie.
Yep.
Any concerns at all on electronic component availability or chips or anything that is causing you any anxiety as you reflect on the outlook for the rest of the year.
Hi, Rick.
So Rick supply chain continues to be a dynamic environment for us as it has been over the last couple of quarters.
Leslie talks about sort of our supply chain team and let me just say that those guys are working hard and we have not.
And we see so far that we have not been able to overcome.
In Q1, we delivered 14, 8% gross margin.
<unk> expansion of 280 bps up 13, two percentage points year on year in the face of new supply chain challenges and as we look through the rest of this year with momentum we have in the first quarter rig combined with sort of the visibility we have into.
Into the remainder of the year, we have we still have confidence in our guidance of getting to high teens gross margin, so long way of saying it but nothing that we haven't been able to really come look we've talked about leveraging our balance sheet tissue to make sure that.
Large quantities of some of these longer lead time or <unk>. So the strategies. We've employed are the same ones and they have served us well in the past.
We expect him to serve as well which included.
Got you. Thank you.
And hopefully maybe turning to your comments about home shipments exceeding expectations.
Yes.
Maybe give us a little more color there.
Yes.
Was it a specific.
Setting or because of a contract or just maybe help us understand.
Performance came from.
And.
I was hoping you could break down a little more I would be curious.
To reflect more on your.
Your comments about.
Two main opportunities.
Clinic.
Operators and health systems.
Just curious.
Are they.
How can I say this as you think about this year is it sort of.
Youre focused on half the revenues are going to come from the clinics and half from our home health systems.
Is there are there any unique challenges or opportunities of getting both going.
Where are you where are the <unk>.
Headwinds you're facing.
As one heart of the other just curious to learn more about.
This opportunity.
Sure Yeah, I'm happy to say well, let me talk a little bit about your first part of your question which was.
Whether our sort of our over performance in leads to our internal plan on home with concentrated.
And in one part one segment or another I mean short answer no actually I'm really glad you asked that question because it it may be realized that it was really evenly distributed growth across the home customer base. So.
I like seeing that you know that that really means I like saying even growth in general because it means that the device and.
And the value is resonating broadly and evenly so that's kind of 0.1.
0.2, you asked about are there any unique challenges or opportunities between kind of well call. It the progressive clinic operators versus the health system.
Any headwinds in one segment or another again, I'd say not really not that are visible to me today.
I think that we talked about this program destination home and that is targeted more toward health system, which makes sense right because the progressive group of clinic operators by and large already have home programs.
It got accreditation certification for home program. They have the <unk> in place at sort of the facility already set up for a transitional care program, that's where it is new for health systems for sure Theyre going to Stephanie chronic chronic service line.
It's kind of a question of we want to we're excited how to how to and so we did see an opportunity to you. When you were correct. Yes. There was an opportunity on the health system side to provide kind of a turnkey solution for lack of a better word where we could guide help guide the hospital through the process.
More quickly and seamlessly so the destination home program is really a <unk> roadmap for getting a chronic dialysis program up and running guidance led by not only outside but a small team of kind of subject matter experts, who can just put kind of shorten the learning curve and an accelerated execution. So we do see that as an opportunity.
Within the health system segment, but broadly speaking we are equally excited about both segments of our home business.
Okay, and just one last if I could.
Just in terms of the ramp.
Where are you sorry, the cartridge manufacturing, maybe where are you in that process.
When are you likely to be.
Sort of fully ramped how should we think about that thank you.
Yes of course, so with respect to the cartridge we got the approval in Q4 and when we last spoke to we said that we would be ramping over the first half of this year and by kind of Q3, two for the bulk of our core produce would be coming from our Mexico vendors that continues to be the case.
That continues to be our expectation is sort of ticking along to plan and Thats one of the things that as we've talked previously about gives us the gross margin benefits that allows us to get to our high teen margin guidance for the year.
We're on track. Thank you so much.
Thanks, Rick.
Our next question comes from Travis Steed with Bank of America.
Alright, thanks for taking the questions.
I just wanted to touch on the home program again, I guess kind of more bigger picture.
Not quite clear what you mean by inflection, but just wanted to kind of see what you can do on the ground kind of beyond the 100 programs in 2022, and the things that we put in place to really get the.
A big business and kind of your vision over the next two to three years.
Sure. Thanks for the question Travis.
That one key that is underappreciated, two really really significant growth overtime is retention.
<unk>.
No.
I know that it is important to be growing the top line. If you will number of patients at home, but for example, if youre, losing 50% off the bottom.
100% to grow 50%, so I've always been a really sort of prevent like perhaps your religious doctrine level of the importance of retention and building a strong foundation from which to grow we will make the growth over time much much easier.
So that's kind of first part of the answer Travis is like what can we do on the ground. We can make sure every patient and every patient family fall in love with tableau and Thats going to happen when when our team is easy when tableau is easy.
They feel that they can fully appreciate and enjoy the benefits of choosing when where and how they wanted to highlight so that's the number one thing that we can do day. After day after day to ensure a very very high growth rates for a long time to come.
Alright, that's fair and then I appreciate the answer.
On gross margins, maybe just higher level as well just kind of thinking about the path beyond the high teams that youre talking to in some of the things you can put in place that maybe you haven't thought about before with pricing.
Increases at some point, along the future as well.
All sorts of the inflationary pressures any any color that'd be great.
Yes, So let me just say a couple of things there so first of all.
We continue to have conviction in our ability to get to roughly 60% gross margins in 2025, that's kind of the next milestone. If you will that we're looking forward to now the drivers of that are well known and sort of these are drivers of the year actually one that we've talked about our console.
Stone program. So that's kind of that's in place now it's given us benefit since we've had gone so and we will give us benefit in the future Secondly, we talked about our cartridge so as that transition to Mexico complete skewed this year that'll give us benefit that'll continue into the future. When you talked about sort of our service margin expansion.
Each will come as we have more consoles deployed and as we get leverage from that human and finally, as we get larger installed base and more consumables.
That will drive margin expansion rates those are.
Margin expansion.
Roughly 60% target in terms of the second part of your question on pricing.
Have customers, where we have committed pricing the majority of our customers.
I believe today's prices.
We're not going to comment on specific pricing programs or actions we may take.
All of kind of what I described.
What I described here.
Our path to get to roughly.
In 2025.
Great. Thanks for taking the questions.
Okay.
Yes.
Our next question comes from Suraj Kalia with Oppenheimer.
Good afternoon, let's face it the Bill can you hear me all right.
Yes, hi.
Perfect hope everyone to say hey.
So.
Let's see thanks for providing the latest.
Information on unlocking over reading this.
Forgive me if I am.
It seems to be a distinct shift in your commentary about targeting PD patients.
And the reason I say it.
Got my attention has peaked patients.
Its a hit or miss of having a partner on site right because thats it.
Just curious if.
Just give.
So I think for our finger more shifted focus.
And also if I could piggyback on that question.
The 100 point programs ULA targeting by end of FY 'twenty two.
The criteria used to identify and target these PD really the driving factor here.
Yeah.
Yeah.
Yes, suraj thanks for the question.
Short answer is no TD is not at all a driving factor so let me back up.
And maybe give a little bit more color.
No shift in the types of patients we're targeting I mean as you know unfortunately.
Entire dialysis patient population in the United States, only 1.5% to 2% of patients are on <unk> to begin with so.
There is just a massive opportunity ahead of us amongst patients who are currently just sitting in dialysis clinics. So that's maybe kind of where we start.
The second thing, though is I do think PD patients over many many years has been underserved I think these are individuals I've met many of them who are already really successful at home, they're already independent they already manage their chronic disease, very well independently or with a third partner and I do think that.
On a human level it is.
<unk>, an unnecessary to see the vast majority of them when they M. P. D go straight back into the clinic I just think that's wrong.
And so we do see an opportunity in the future is it a targeted program or something new or our shift not at all but I thought it was worth starting to talk about it and and have it be a part of the conversation because I think that that PD patients deserve much better.
And greater channel through which to stay at home. So, it's perhaps more of a clinical and humanitarian comment more than anything else suraj.
But over time, yes, we probably do anticipate.
Net participating in upstream patient communication over the next couple of years, just to make sure that more and more PD patients who are coming off that therapy are aware of and offered opportunities to stay at home on HD.
Got it.
Okay.
Let's see the math the math suggests approximately 600 tableau consoles was shipped in the quarter.
And forgive.
Forgive me I must have missed it did you provide a backlog number exiting one queue because I remember 12, 50, or so exiting <unk> 'twenty one I'm just trying to connect the dots you just make some assumptions in terms of pizza and unit chips potentially it could be home and just kind of connect the dots here any help will be.
Right.
Yes, sure so with respect to backlog disclosure, our practice has been and will continue.
To provide that number annually. So we printed it exiting Q4. The next time, we will plan to will be exiting Q4 of 'twenty two sort of bets.
With respect to your console shipped pounds I don't want US again, we're not in the practice of providing installed base numbers in any given period with like that feels a bit high to me I'll sort of legal costs.
Fair enough, Hey, Leslie I'll, just throw in one more and I'll hop back in queue I promise.
Political scenario, let's say you guys have done very well with <unk>.
On demand dialysate production right.
Kansas approach be more.
To a real time on demand PD.
Approach and take it through the <unk>.
To the NDA.
Trial, and everything is that something thats.
Potentially it could be on the.
On the radar for Okay. Thank you for taking my questions.
Sure of course.
Yes.
The question around PV and generally what we're what are we thinking about Max and what might be on the future either and it is a very fair one in an understandable one.
First and foremost.
One 5% of the population.
On <unk>, and maybe just to near 12% on home period.
Our primary focus is it remains on the U S market number one and then giving patients more access in general to two ADHD.
I will say this is an organization of I think imaginary and adventures, who are probably going to continue to desire to imagine an event.
The directions in which we take.
That DNA inside of out that I think are still be reveal but what we are going to remain a very ambitious group of people in ways that continue to drive.
Differentiated growth.
And really meaningful quality of life and clinical improvements for patients and providers that I can assure you.
Our next question comes from Josh Jennings with Cowen.
Hi, good afternoon, thanks for taking my questions.
The strong start to the year.
You were talking about.
Hospitals kind of calling in Calgary.
So to help them with their staffing challenges and we take control over there.
This service line.
Hoping to ask about.
Actually outsourced service providers third party like Davita has got some actual checks suggested that they've bought some tableau system score.
Sir.
Servicing of some hospitals dialysis units or surface clients are you seeing that channel pick up from third party providers.
<unk> total consoles for one and then just the follow up is just on the beta specifically with all the staffing shortages not just for the in hospital dialysis business, but also.
The home.
Is there a channel in 2022, where davita could be start purchasing more temporal assistance. Thanks for taking my questions.
Sure.
Just jotting down the order of your questions here.
So the activity that we've seen year to date.
To address the acute first Josh I think the activity that we've seen year to date on the acute side is is almost entirely health systems and Thats, our focus right. Let's go back to the commercial strategy.
All of our team clinical and capital is pointed at selling servicing and supporting the health system.
To control their own destiny, when it comes to the cost and complexity of dialysis, whether it's in the ICU are bedside out with on the floor. So thats what were trying to our sites on and that's where we think we deliver the greatest value right to the end customer.
So that that kind of addresses the first part of your question and the second part.
The last thing I would ever do is try to seek for another another provider or another entity.
We are again similarly focused on the home.
And in two segments and seeing a lot of benefit and reward for that I think as humans. We tend to continue to do things that are working and where we're seeing success and we are seeing a lot of success with.
With a number of.
More conventional dialysis providers again kind of in the mid tier segment of the market that are really progressive and nimble and agile and moving very fast and in many patients home as they can possibly support as quickly as they can do so well that's where we want to be you know those are the friends that we want our circle. So that's that's one.
We're obviously very very focused on partnership with our existing health system customer base.
Helping them initiate their own home program service line so.
That remains our commercial focus and like I said it.
It's easy and fun to continue to do things that are working and benefiting all parties involved.
Great. Thanks, so much.
Sure. Our next question comes from Danielle <unk> with Seb Securities.
Hey, good afternoon, guys. Thanks, so much for taking the question.
Likely it just you know I always like to ask you a question on home. So I mean, it keep the home conversation going.
And just curious as you are opening up these these new home centers sort of what the process is like so one of the things I remember my days covering next stage when it was a standalone company as it was really important to get the right patients on et cetera, et cetera to make sure to your point the retention was.
Hi.
It feels as though like tableau is in such an advanced from a technology perspective that patient collection matter and sort of what.
What youre working with these centers on to ensure that they are starting off on the right foot and building a successful home program and that's it for me. Thanks.
Okay sure.
Hi.
Well I think that the notion of the right patients.
Is very 2000 by thinking.
And and perhaps patient selection in the quote unquote right patients was needed when.
The technology options that were available were less accessible perhaps took longer to train on were more difficult to successfully maintaining the home our goal. Our design goal on the very beginning with tableau was to ensure that we designed a technology that all patients almost all patients could be.
If successful on whether they had a third grade education or a graduate degree and so when I look at our patient population and we've had the ability now we're running a registry where we can we can look at patient demographics.
It is extremely diverse it is diverse in terms of age gender.
Right.
<unk> economic characteristics and I'm really proud of that because I think as part of the that the moral mission of out that a big part of that is E racing in equities and access to home to home health and one way we're doing that is through a simpler technology that doesn't require a ph.
Seating is another way that we're going to do that is by continuing to influence the physician mindset.
This will happen over time as they they do spend more and more patients home, but influencing the physician mindset that perhaps once was more selective and convincing physicians that theres no need to be selective anymore and that showed up even in our home trial R E 70% of our ITE with non white, we published on that the results were exactly the same.
And we have seen again, a very similar data in terms of diversity of our patient population here in the quote unquote real world.
With equivalent retention rates and equivalent training time upfront.
So that's kind of 0.1, so no we do not anticipate that this very narrow overly narrow constricted patient selection process will matter at all in the future moving forward, which I think again it is a great thing on many level how do we build a successful program part two of your question, yes, it's not it's not really about patient selection.
It is about though making sure that we can support the home program in as many ways as we can so we do and we continue to grow our customer experience team.
They effectively serve as sort of the tableau concierge, if you will not only for each and every patient but also for the home team staff.
We are always and all about.
What are your obstacles what are your challenges, let us take that off your hands and let us make this work for you. So I think a lot of the program's success points Daniel are in a good news way things that are well within our control and pretty tactical actually there's nothing structural there is nothing strategic.
It's probably just doing more of a of a full.
Full service approach.
We found gives these these teams the confidence to grow home programs as quickly as they need to be brown.
Thank you.
Yeah.
Our next question comes from drew Ranieri with Morgan Stanley .
Hi, Leslie and thanks for taking my questions.
Sorry to break the home trend, but to go to acute for for a moment.
You highlighted you got it.
The eighth largest national health care systems, and also highlighted that you continue to capture share in the acute setting I was just wondering if you might be able to give us an update there on kind of where tableau is in terms of penetration at the larger healthcare systems.
And are you seeing still kind of full conversions are.
Or.
Some of the accounts kind of sticking with southern comfort technologies, but also augmenting with tableau.
Yeah sure I'm happy to talk about that.
So first part of your question.
What's the sort of what's the runway and what are the next steps I mean.
I think look so we are we sort of landed on the shores of.
The eight national Health systems, and obviously you know let landing on the shore was just not the same as conquering so I think we saw a lot of the continent to explore not to overdo My Columbus analogy, but.
So I think the next the next aspiration is to kind of make our way across the collective continent and to grow penetration. There is a very significant console Tam just within the largest eight that we now have access to an end we intend to go after we're still relatively underpenetrated.
And in most all of those those national customers.
End of high single low double digits.
Across been working towards this two and a half billion dollar Tam or broadly in the Q. So I think a tremendous runway in the largest eight still ahead of us which I'm excited about and then of course all of that.
The eight we've got.
Hundreds of.
Hospitals across the country and and parts of Big Regional Health systems still ahead of us. So I think youre going to at the at the risk of astounding boring and repetitive the land and expand is really working in this past quarter. We did land new customers. We also saw a kind of expansion within existing customers and that's frankly.
What I care about the most having participated in the ramps of many other medical device products over time is.
If your current customers are having a great experience they will buy more and.
So I always kind of effectively keep my eye on expansion within our current customer base that is my personal leading indicator and its greatness. It's absolutely fine to go and hire excuse me land, new customers and we're doing that but where I take.
I think the greatest pride is that the device is delivering on its promise is leading to a lot of our same store sales not only within specific hospitals, but across the health networks regionally and nationally.
Second part of your question was are we still seeing full conversion as an AD hoc and I would say I didn't notice any new trends to be honest in Q1, I think we do have many customers when they in source that typically is a full conversion we have many many many customers are using tableau to enforce.
We also do have some customers that maybe already owns their own dialysis service line and patient.
And are using tableau in concert with other devices has maybe earlier in their experience and we expect them to grow into full conversion over time. So it's still it's still a bit of a mix.
Got it thanks, and then maybe just for an appeal, but it looks like Opex declined or maybe it was about flat sequentially versus the fourth quarter.
But maybe how are you kind of thinking about opex throughout the year.
Maybe this is more for Leslie, but can you remind us of anything on the new product side coming in 2022, whether it's hardware or more on the software side any updates on international Thank you.
Yeah, so with respect to Opex through.
You might remember when we last spoke in February we talked about Opex declining sequentially Q4 to Q1, that's just because we have commissions and those sorts of incentive comp payments that go out in Q4 that don't recur in Q1, so thats kind of Thats. The decline Opex itself is trending right in line with what we do.
Sure.
From a guidance perspective on our last call. We said Opex would roughly be Q4, 21 times for and we continue to.
To track for essentially that for the full year.
Yes.
Great I'll, maybe cover it all.
That's a good deal I'll cover new products at an international so drew on that on the new product side.
And maybe we don't talk about this enough I don't know I mean, we every year at least the last two years and this year will be no different.
We have kind of a continuous updating and upgrading on.
The software and data analytics side.
And again, yes, I do forecast that for 2022.
Cool thing about where we are now is that.
New features and enhancements principally are done on tableau through remote software update.
This is not and no longer sort of a hardware upgrade story as maybe it was four or five years ago, and I love that because it allows us to deliver new and better and differentiated customers much more rapidly in a much lower expense compared to hardware. So yes, I do see that in our future for 2022, we're super excited about it.
And we will never ever ever continue or discontinue trying to improve the the provider and the patient experience and offering them things that that have new functionality, and then maybe new surprise and delight moment alongside that.
International we remain focused obviously in the near term on the U S market, which is still massive and barely penetrated for tableau and our.
March towards World domination, I'm kidding, but we do recognize that the U S is about 30% of the worldwide market for dialysis.
A lot of opportunity there.
But we don't want to.
And I don't think we ever have sort of.
Do anything other than measure five times and cut once and same thing with our U S. Because we do take our commitments on the margin side seriously in the end the cash spend side seriously and so our calculus around where in the world and when and why and how.
<unk> is a pretty detailed thought exercise for us and one that we want to do with careful deliberation. So I would still say that excuse me, while I don't have anything to report near term a lot a lot of work going on behind the scenes.
Internally and I would still forecast that that yes, I think he will find tableau outside the United States, you know more and more details to be revealed and we're very very confident.
The where when why and how.
Thank you.
Yes.
That concludes today's question and answer session I would like to turn the call back to Ashley trick for closing remarks.
Great. Thank you well I just wanted to thank everybody on the call for joining US This afternoon and I Hope you all have a really great evening. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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