Q2 2022 Tactile Systems Technology Inc Earnings Call
Please standby.
Welcome, ladies and gentlemen to the second quarter of fiscal year 2022 earnings conference call for tactile medical at this time, all participants have been placed in a listen only mode. At the end of the Companys prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay.
Shortly.
Before we begin I would like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties, which could cause actual results to differ materially from those indicated including those identified in the risk factors section of our annual report on form.
10-K, as well with our most recent 10-Q filing to be filed with the Securities and Exchange Commission.
Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements that they were adult of new information future events or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with Jenny.
[noise] accepted accounting principles or GAAP.
We generally refer to these non-GAAP financial measures reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.
I would now like to turn the call over to Mr. Dan reversal, tactile Medical's, President and Chief Executive Officer. Please go ahead Sir.
Thanks, operator, and welcome to our second quarter earnings call I'm joined on the line by our Chief Financial Officer, Brent Moen.
Today I'll begin with an overview of our sales performance and operational highlights during the second quarter.
Brent will then cover off on our second quarter financial results in greater detail and review our 2022 for 19 financial guidance, which we updated in our earnings release earlier today.
I'll conclude with some additional thoughts on our updated outlook and key areas of focus in 2022 before we open the line for questions.
Starting off with our second quarter sales performance. We were pleased to report total revenue growth of 17% year over year to $59 $6 million, which came in ahead of our 10% to 15% growth. We had anticipated at the time of our earnings call in May.
Our outperformance in the second quarter was largely driven by sales of our airway clearance products, which as a reminder includes aflow best airway clearance products contributed approximately 16 percentage points to our total revenue growth.
Sales and rentals of our lymphedema products in the second quarter increased 1% year over year to $51.6 million consistent with our expectation of flat to low single digit growth.
Performance is looking at the performance in our lymphedema in airway clearance product categories. More closely we were pleased to see lymphedema product sales returned to modest year over year growth as some of the more pronounced headwinds that we experienced during the first quarter began to subside.
As a reminder, throughout the first quarter of 2022 performance and our lymphedema business was paced by headwinds related to Covid case surge as well as the sales force staffing gaps we experienced in the second half of 2020 one.
But this is a backdrop during the second quarter, we saw lower rates of Covid related absenteeism at the patient provider and sales force levels sales and our lymphedema business increased 27% sequentially compared to our first quarter's revenue.
From a sales force staffing and training perspective, we made good progress in recovering from the recruiting and retention challenges discussed on our recent earnings calls.
I'm pleased to report that we achieved our hiring target for the year ending the second quarter with 241 field sales reps in our lymphedema channel an increase of 15 since the end of March.
In addition to filling the remaining gaps in our sales team we've focused on ensuring that bolus of new reps. We brought on board in recent quarters are well trained to facilitate their increasing productivity over the second half of 2020 two.
In our airway clearance business, we were pleased to deliver another quarter of exceptionally strong sales performance in the D. M E channel.
On a standalone basis, given aflow vast was a private company in the prior year period airway clearance product sales grew 96% year over year.
Feedback from our D. N E channel partners indicates that the respiratory D. M reps that we partner with have been quick to appreciate the value and complementary nature of having our aflow best within their existing portfolios, they're seeing success in finding qualified audiences across the complex respiratory patients theyre already serve.
Yeah.
These are patients who for example, maybe on oxygen nebulizer noninvasive ventilation or using one of the other complementary products that respiratory D. M reps sell and do not yet have an effective at home treatment for their airway clearance needs.
Even the success their reps are seeing our D. M partners are continuing to introduce our absolute best system to more of their branches further expanding their coverage universe.
In addition, our small team of respiratory specialists is making good progress supporting and educating reps among our existing G. M partners, while also helping to develop new partnership opportunities.
And lastly from an operational standpoint, we completed the final stage of our integration of Aflow best on May 1st by assuming oversight of product manufacturing and shipping.
We continue to work with our existing supplier to expand production capacity and remain on track to add a second supplier by the end of this year in order to support our growing demand.
Our performance over the first half of this year, where sales of Aflow best increased a 102% year over year, along with the positive feedback received from our D. N E Channel partners continues to validate the effectiveness of our strategy to leverage this channel to reach more complex respiratory patients.
Turning to a review of our other operational highlights as I mentioned earlier, our primary focus during the second quarter was Onboarding and training our recently hired lymphedema sales reps most.
Most notably we hosted our national sales meeting in April the first time in 27 months that we've been able to assemble our entire sales team in person due to COVID-19.
Our primary goal for the event was to reinforce our new team members technical knowledge and selling skills with this goal in mind. Our event included interactive panels, which allows our reps to learn from and engage with both our top performing sales team members and with key opinion leaders in the field of vascular medicine.
We also held sessions dedicated to reviewing the latest clinical evidence as well as interactive workshops focused on enhancing selling skills.
Our national sales meeting was also a great opportunity to bring our team up to speed on our new product introductions ahead of their full market release.
On the heels of our National sales meeting, we hosted regional in person training sessions to support our newer reps as well.
Feedback on these events has been positive and along with our new products has helped to Reenergize our team as we enter the second half of 2022.
In addition to our sales training efforts, we continued to educate clinicians we hosted sixty-nine educational programs attended by nearly 1700 U S clinician participants.
As part of this programming we continued to build awareness of the recently published expert consensus on lymphedema by hosting a webinar with the lead physician authors along with contributing panel experts.
They discussed the publication, which represented important collective stance among three disparate professional societies to payers and clinicians concluding that all patients with chronic venous insufficiency should be considered lymphedema patients and that pneumatic compression devices should be recommended for the treatment of lymphedema.
Patients by.
By continuing to raise awareness in the market about the identification and effective treatment of lymphedema, we're creating new opportunities for our team to identify educate and train new clinicians and their staff.
And lastly in keeping with our renewed focus on R&D and new product development. We completed the final prelaunch stages of two new solutions for our lymphedema patients.
The first of these is the new series of lower extremity comfort east garments for our flexi touch system.
The development of these garments led by a designer who joined tactile medical with a background in athletic apparel was informed by over 18000 points of feedback obtained from patients and therapists. The goal of our new comfort. Each series is to improve the user experience for our patients making them easier to train.
<unk> and use more comfortable and better fitting.
Our new garments are lighter than our prior generations and made from materials that are cooler and more malleable.
Lymphedema is a condition, which requires daily management. So our design team was focused on making the experience of putting on and taking off our garments more comparable to getting dressed versus wearing a medical device.
During the second quarter, we conducted a limited market release of our lower extremity comfort east garments across a targeted group of accounts and I'm pleased to report that the feedback we receive from our patients and trainers was excellent.
Comparisons between comfort ease and our prior generation of garments.
<unk> emphasized it's intuitive nature and ease of use with less external assistance required.
By improving comfort.
It and ease of use we believe comfort ease garments will favor improved patient adherence and ultimately optimal treatment outcomes.
Based on the success of our limited market release, we began our full market release of comfort ease in July , which we announced via press release last week.
In addition to our comfort ease garments, we were pleased to announce the launch of our new Kylie mobile application for the iOS and Android platforms.
As we've discussed previously lymphedema is an underserved condition and patients often go undiagnosed and untreated for years base.
Based on an analysis conducted of 85000 patients with limited lymphedema over a five year period. We found that it took three years on average for a patient to obtain a definitive lymphedema diagnosis. Following the onset of their first symptoms.
We also found that patients often engage with three or more health care providers, along this multiyear journey.
The launch of our Kylie mobile App represents our first digital step in providing support for patients with information and tools to assist them on their path to diagnosis and treatment.
Our app is designed to help educate patients with chronic swelling about lymphedema and its effective treatments at.
It contains features that will enable them to track and document their disease progression with pictures and measurements ahead of their visit with their specialists, helping to arrive better informed and qualified for treatment.
Patients that are prescribed one of our devices will then be able to stay informed via the app, which will help update them on their verification of benefits and insurance approval status help them track when their flexi touch plus or entree system will arrive and assist them with their training, including product tutorial videos.
And that's a Q help.
Armed with our Kylie mobile application and easier to use comfort ease garments patients should be better positioned for easy and effective training either through our self training option or by working with one of our in house trainers.
Let me now turn it over to Brent to discuss our financial results in more detail along with our updated guidance for 2022 Brent.
Thanks, Dan.
Revenue in the second quarter increased 17% year over year to $59 $6 million compared to $51 $1 million in the second quarter of 2021.
Looking at our total revenue by product line sales of our airway clearance products, which includes the outflow best product line. We acquired in September of 2021 contributed $8 million for the quarter.
Sales and rentals of our lymphedema products, which includes our flexi touch plus an entre systems increased 1% year over year to $51.6 million.
Total revenue by source was 59% commercial 17% Medicare, 13% durable medical equipment distributors and 11% V E.
As a reminder, durable medical equipment distributors is a new source comprised of revenue from our acquisition of the airway clearance therapy business, which closed on September eight 2021.
These figures compare to our total revenue by source in the second quarter of 2021, and which commercial Medicare N V. A represented approximately 70%, 16% and 14% of total revenue respectively.
Continuing down the P&L unless noted all references to the second quarter or on a year over year basis.
Gross margin was 72.5% of sales compared to 79% last year.
non-GAAP gross margin increased 210 basis points year over year to 73% of sales compared to 79% in the prior year.
non-GAAP gross margin excludes noncash intangible amortization in both periods.
The increase in gross margin was attributable attributable to both product and payer mix.
As a reminder, we have provided reconciliations of certain GAAP to non-GAAP measures in our earnings press release.
Yeah.
Second quarter operating expenses were $47 $3 million, an increase of $11 million or 30%.
The increase in operating expenses year over year was primarily driven by a $7 9 million dollar increase in sales and marketing expenses largely due to the addition of our Aflow best sales team and new hires added to our lymphedema sales team along with increased travel related expenses as we were.
Turn to normalized business activities.
Expenses related to our in person National sales meeting held in April and costs associated with new product introductions.
The year over year increase in operating expenses was also driven by a $1.7 million increase in non cash earn out expense related to the acquisition of the airway clearance therapy business.
And noncash intangible asset amortization.
Our GAAP operating expenses were not impacted by these noncash items.
And $800000 increase in reimbursement general and administrative expenses and a $643000 increase in research and development expenses.
Moving the aforementioned noncash expenses and litigation defense costs in both periods, our non-GAAP operating expenses increased 28% year over year in the second quarter.
Operating loss was $4 $1 million compared to an operating loss of $76000 last year.
non-GAAP operating loss was $1.8 million compared to income of $915000 last year.
Income tax benefit was $20000 compared to a benefit of $1 $4 million last year. The difference relates to a full valuation allowance being recorded against all deferred tax assets in the current period and a tax benefit related to a research and development credit recognized in the second quarter of 2021.
John .
Net loss was $4 $6 million or 23 cents per diluted share compared to net income of $1 $3 million or seven cents per diluted share last year.
non-GAAP net loss was $2 $9 million compared to net income of $2 million last year.
Weighted average shares used to compute GAAP diluted net loss per share or $20 million and $19 7 million in the second quarters of 2022 and 2021, respectively.
Adjusted EBITDA was $1 $7 million compared to $4 $1 million last year.
Yeah.
As of June 32022, we had $23 4 million in cash and cash equivalents and $50 5 million in outstanding borrowings. This compares to $21 2 million in cash and cash equivalents and $51 million of outstanding borrowings as of March 31 2022.
And $28 2 million of cash and $54 8 million at December 31, 2021.
Turning to a review of our 2022 outlook, which we updated in our earnings press release today, we are raising the full year guidance range to account for our stronger than expected performance. During the first six months of 2022 as well as our updated growth expectations for the balance of the year.
For 2022, we now expect total revenue in the range of $238 million to $242 million, which represents growth of approximately 14% to 16% year over year. This revised outlook compares to our prior revenue guidance range of $2 35.
To $240 million, representing growth of approximately 13% to 15% year over year.
Our updated 2022 total revenue guidance range assumes sales of our lymphedema products increased approximately 3% year over year, which reflects growth in the range of 6% to 8% year over year in the second half of 2022.
Sales of our airway clearance products in the range of approximately $30 million to $32 million.
For modeling purposes for the full year 2022, we expect gross margins in the range of 71% to 72%.
Our GAAP operating expenses increased 23% to 24% driven primarily by incremental operating expense from our acquisition of Aflow best for the 12 month period in fiscal year 2022, as compared to the partial period in fiscal year 2021.
We also expect legal expenses of approximately $3 million.
And interest expense of approximately $2 million and a fully diluted weighted average share count of approximately $19 8 million shares.
In 2022, we continue to expect to generate adjusted EBITDA of approximately $14 million to $16 million.
And our adjusted EBITDA expectation continues to include certain noncash items, including stock compensation expense of $12 million intangible amortization and estimated changes in contingent consideration of $11 $5 million and depreciation expense of approximately $2 four.
Yeah.
Lastly in the interest of transparency, we would like to provide some additional color on our expectations for the third quarter.
Specifically, we expect total revenue growth of approximately 13% to 17% year over year, driven by 1% to 3% growth in sales of our lymphedema products and 7 million to $8 million of sales in our airway clearance products.
With that I'll turn the call back to Dan for some closing remarks Dan.
Thanks, Brent we're raising our guidance today based on the impressive airway clearance product sales performance, we've seen so far this year and our expectations for continued strength from this business in the second half of 2022, we're pleased to see the steady increase in demand for Aflow vest consistent with the significant underpenetrated market.
And expect additional capacity to help support demand as we move towards 2023.
With respect to our lymphedema business, our updated guidance assumptions contemplate a slower ramp to recovery than our prior guidance had assumed let me just take a minute to discuss why.
While we've been pleased with the progress made in hiring and training new sales reps, we've not yet seen evidence of the salesforce productivity ramp assumed under our prior guidance.
Broadly speaking patient volumes at clinics, we serve have been a little slower to recover than we expected and we continue to receive reports that productivity at some clinics remained challenged by issues with staffing.
We're also seeing two other dynamics that have prompted us to revise our second half assumptions related to productivity we.
We saw some leakage at unrepresented accounts impacted by our sales vacancies in late 'twenty. One in early 'twenty, two and are now looking to recoup them with restored coverage and an improved product lineup.
We've also seen little commercial payers favoring the use of a pneumatic a basic pneumatic compression device as a precondition to becoming eligible for an advanced device with these considerations in mind and in view of our progress to date, our updated guidance assumptions for our lymphedema business reflect a more cautious stance on the.
<unk> productivity ramp of our sales force in the second half of 2022.
Importantly, despite the slower ramp to recovery, we expect sequential improvement in the third quarter and further improvement sequentially again in the fourth quarter.
Taken together in the second half of 2022, we continue to expect year over year total revenue growth in the mid to high teens and organic growth above 10% coupled with improvements in our profitability.
In the second half of 2022 we're focused on continued execution with respect to the following four objectives.
First improving the productivity of our new sales force hires.
Second facilitating the introduction of our new comfort ease garments, and Kylie mobile app to improve patient engagement experience and outcomes.
Third, helping our current and future respiratory DNV channel partners to successfully integrate and feature Aflow vas to prescribing clinicians and patients and expanding capacity to meet demand.
And finally, demonstrating improving profitability in the second half of the year.
Having navigated recent challenges related to the Covid surges in sales force staffing, we remain well positioned for long term success with clinically proven therapies and a well developed distribution network now targeting underserved patient segments in lymphedema and bronchiectasis that collectively represent two.
Very large underserved markets.
Looking beyond 2022, our execution against our four stated objectives for this year will enable tactile medical to deliver strong organic sales growth and EBITDA margin expansion in the back half of the year as well as position us for a solid entry point into 2023.
Before we open the call for questions I'd like to conclude my prepared remarks by thanking our employees for their commitment to the customers that we serve and to our success as an organization.
Operator, we'll now open the call for questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up.
I would like to ask additional questions. We invite you to add yourself to the queue again by pressing star one.
Our first question will come from Ryan Zimmerman with <unk>. Please proceed with your question.
Thank you.
Afternoon, Thanks for taking the questions, Dan and brand I wanted to start with <unk>.
Appreciate the commentary you gave on guidance I guess as I think about your guidance for the back half of the year.
What is contemplated in terms of new product contributions.
Given the lower guidance in lymphedema myself.
So.
Relatively modest as you can imagine Ryan based on our updated guidance I think maybe just to add a little bit of color on the lymphedema side. So you know in the second quarter. A couple of things that we saw were patient volumes is in the vascular clinics, particularly not necessarily showing what I'd call. The <unk>.
<unk> <unk> of improvement that we've been looking for I think we've been consistent in saying that we expect progressive improvement not back to pre COVID-19 levels, but certainly improving each quarter and didn't see so much of that in Q2 and even into into July so that probably created a little bit more caution and then the second one was.
We did see some leakage in as a result of some of the vacant territories. We had territories that were open here in the first part of the year and one of the things I think we've noticed is.
There's two key roles are among others. Besides education that our reps play one is.
Educating the patient when they are in the clinic and also hosting demos. So the patient can understand what that therapy is going to be like in the absence of the rep presence there.
It had a consequence on some of our business so making sure that we're focusing in the back half on those accounts, we think that with the new products.
And now with some new salespeople back with better coverage. That's really the focus is to make sure that that we pick those back up if those if those weren't a leak on the back half.
You know the the rest of the business I think would continue to have grown consistent with our original expectations right.
And just to follow this line of questioning and then I had one follow up but are you going to do you expect to get any type of ASP lift.
On some of the new the new garments or.
Of that the Kylie App.
Yeah. So I think the we don't expect to see as much a S. P lift but on the garments theres a modest a good guy on the gross margin side.
And the Kylie App, a less a function of ASP.
As it.
It's a courtesy application, but more about trying to unearth patients earlier in their journey and and ensuring that they can arrive at their specialist visit perhaps better qualified and not having to be sent home only to try and.
Some of the basic interventions first we're trying to educate those patients earlier. So they know what they can do on their own with the goal of arriving at a specialists.
Visit with better qualified conditions, including even being able to chronicle some photos of their swelling overtime.
Okay and then just the last one for me I'll hop back in queue, but this this idea that commercial payers are.
Putting patients through Rigamarole with basic nomadic compression is this a newer phenomenon as you know has this increased material enough.
Just more color there around why this has become a challenge because I think you know.
This has always been one of these topics that has circulated in the lymphedema space before moving to advanced device compression. So you know why now is this.
Kind of popping up thank you.
Yeah, I think we've seen a little bit of the commercial programs that administer Medicare advantage.
Some of them have aligned more with medicare's policies.
Which we know is a tried and failed approach so theres a certain sequence that the patient has to follow and we saw some of the advantage programs.
Following that posture a bit more.
Keep in mind, our guidance originally our expectation was flat to up.
Low single digits. So we were up plus one it wasn't a huge contributor.
But we did see some a few pockets of it.
Thank you.
Thank you. Our next question is from Adam Maeder with Piper Sandler. Please proceed with your question.
Hi, Good afternoon, guys. This is Ryan on for Adam.
First congrats on the corner.
I would just love some extra color or commentary around Q2, and kind of what the progression looks like from month to month.
As well as the exit momentum that you had into Q3 and what you saw over the course of.
On July both on the lymphedema and alpha that side.
Sure.
Hi, I'm wrong here.
I'll give you a little color on the progressive nature. So as you know and as we comment in it we grew 27% sequentially over our first quarter. So we started to see a return to what I'll consider to be normal relative to access and certainly amp absenteeism spin.
Typically as it pertains to our rep activity.
Didn't get back to a 100% normal but certainly.
Much improved from our our <unk>, our Q1 experiences.
Second thing as it relates to Apolo best certainly saw really strong momentum associated with that as our <unk> partners continued to one gain experience with the with the product truly understand how they can leverage it and included in their portfolio and then ultimately start to take advantage of it those are some of the things that we.
<unk> from the overall performance in Q2, coupled with the fact that we had good success in finding new talent to augment our sales force. So we are a net plus 15 Q2 to Q1 on sales reps so that should be a helpful contributor as we move.
Into the second half the one thing that we're starting to see and experience just given the addition.
That productivity is one of those things that will take a little bit longer to to ramp and perfect over the course of the second half of 2022. So those are some of the things that we saw in the second quarter.
Okay perfect.
And just with the latter part of my question any early learnings in July that started out of guiding your expectations.
For both once edema and off of that.
Yeah.
Guidance outlook.
Yeah I think.
Relative to the guidance outlook. So we provided an updated range I think.
Some of the underpinnings on that are on the low side, if we didn't see any any incremental improvement in some of the vascular patient volumes that sort of baked into that one and.
And also caution on the productivity ramp as we as I said go out and try and recover a couple of those accounts are some of those that had leaked a bit.
The Aflow assumption, we certainly feel confident that we can meet the low end there on the higher end some of the things that.
I think it could influence that range, if we see some improved patient volumes through the clinics, but just as much.
A slightly faster impact from some of the new products, we're actively out promoting in talking about the new garments and as you can imagine with a.
July full market release, we really spent the first half of July just making sure that we got all of our sales reps and trainers equipped with the garment. So I think it's a little early to try and come to a conclusion on what impact that's going to make based on July .
Hi, slow vest.
Right now the range that we provided continues to be based on the backdrop that we have a single source supplier through the balance of the year.
We think that we.
We had mentioned on our last call that there was some capacity constraints.
Constraints that are did that supplier has less about sourcing components and just.
There's other businesses that they support and this is kind of they're punching a bit above their weight already to get us up into the $30 million range.
So we're continuing to pursue.
An alternative supplier as a as an additional stores, we have not built that into our 2022 numbers, but the goal is to get some additional supplier up by the end of the year.
Got it perfect and then if I could just ask one quick one on the sales force, but it does sound like you hit your full year target a couple of quarters in advance.
So maybe talk.
Talk about when you can expect this group to be running at full productivity and maybe what that productivity rate looks like exiting this year, if they're not right.
Full strength yet.
Yeah.
Yeah. So I think we've always said, it's a it's at least a six month term before they can get up and two to peak productivity.
So the fact that we were ahead of our hiring we were certainly encouraged with I wouldn't say it was so much ahead of the end of the year I think our goal is to try and get pretty close to this by the end of Q3, we typically don't do a ton of hiring in Q4.
So we're probably a quarter ahead of where we wanted to be it.
It remains to be seen how much impact will be able to drive from that in the back half. It certainly would position us better in 'twenty three as we enter the new year with a with a group that's going to have an extra quarter under their belt.
Also think it's a good indication that the stability of the sales force is starting to take shape.
Frankly, we were probably.
It was less about more gross hiring and more about net retention.
That allowed us to get up to that number. So I think that was a good sign that having assembled the group at a national sales meeting spending more time with them and.
And I think the enthusiasm from the new products certainly is bearing fruit on bringing some stability to the sales force.
Thank you. Our next question is from Margaret Kaczor with William Blair. Please proceed with your question.
Hey, everyone. Good afternoon, I wanted to start maybe with going back to that discussion around payers and their requirements for towards basic pumps first and I know you referenced it was that MA plan, primarily but I guess.
Couple of questions within this one you know what percentage of your plans at this point have something like this included.
Two are you assuming that's at all spread further.
And three you know are these trends accelerating.
So they may be a multi year headwind or are they relatively stable as fast as you can tell.
Yeah, I would say, it's a it's certainly not been a rampant trend Margaret.
And it's one of the reasons also that we continue to talk about engaging with CMS and we've had a fairly active dialog with CMS and the administrators.
Over the last few months I think there's an opportunity for us to continue to improve the.
Medicare policy, which has an impact not only on Medicare, but also as we know on other payers that sometimes look to them as a barometer or a guide so we.
What we saw primarily was.
Within the Medicare advantage some of those plans.
So I think it's still relatively modest but we're.
<unk> to try and work to improve the efficiency with which we're able to deliver both products.
And ultimately each patient that we get I think is an opportunity for us to engage with.
With them and be available to help them on their journey, which whichever path that goes.
Okay.
Yeah.
And can you guys provide any.
Detail around productivity and all kind of chime answer what my colleague from hybrid said earlier, but at.
You know if I use the 241 sales reps and used some of the historic you know annualized sales per rep, which I think was around $1 million.
Yeah, that's roughly gets me to somewhere between a 240 and $260 million went to being a revenue number and so.
So I guess any reason to think that those historic metrics would not be the right measures going forward.
The specialist versus associates, but just kind of curious how you're thinking about that and why that wouldn't be the right number, especially if you look at 'twenty three.
Yeah, Hi.
Hi, Margaret it's Brian Thanks for the question I would tell you that you know that.
Certainly as a.
Methodology for which we actually continue to think about what forward opportunity might exist as well. So you know that the mix has been in the past 50 50 between product specialists and Aps is slanting more towards product specialists, which will certainly increase that rep productivity.
<unk> as those product specialists start to gain access into territories and such we.
We also certainly believed that nothing's changed systemically in the Olympic team of business. So ultimately this is really about getting our new bolus of reps up and productive such that.
They move closer to the overall averages.
I would just add Margaret I think the.
One of the good news right now for US is we really feel like we've got solid national coverage with the number of reps that we have in the field. So I think we've got good thorough coverage in virtually all markets.
As it relates to productivity, we've got some pilot programs underway, we're continuing to work with our inside teams to identify ways. We can continue to become more efficient in processing referrals and claims as well as more resourceful and how we collect.
The necessary medical records and the other things we need to submit on behalf of the patient and I think as we can continue to make advances with some of the internal support.
That has a direct impact on sales rep productivity payer policy will ultimately also have a direct impact on rep productivity. So there's a handful of variables and I don't know that it's.
We take a static number as much as we look at those variables and I think we'll have a better idea of where.
Where we think we can get with this group, but we do feel good about the coverage that we've got with this number.
Okay, and just to add and moving to outflows asked briefly obviously a huge success there so far and I know you're sort of capacity constrained, but can you give us a sense of how many DNA. The EMEA accounts, maybe youre selling into the growth that you've seen there versus kind of growth in existing DMA Dandy accounts.
And how should we look at that through three years. Thanks.
Sure Yeah, the the Aflow vest is really.
Been something we've been very pleased with the affirmation of the channel I think is something we continue to see.
We have a lot of the D. M is the majority frankly that were working with had purchased Aflow vest before we acquired the business so they're not necessarily new accounts, but it's much deeper penetration.
Most of the the bigger Dms, we're still in what I would call pilot phase when we did our diligence and completed the acquisition.
They had deployed it in small pockets with only a few branches. They wanted to demonstrate that this really fit and what they're learning is.
The organic and I think this is an important one this is not just taking share from an existing competitor, but it's mostly about organic growth.
They're realizing and it did and their pilots that these.
Airway clearance candidates are already prequalified patients that they're serving so when you think about the patients that they tend to serve they've either been discharge from hospitalization they need oxygen and nebulizer.
Or they've either.
Had a lung infection, they needed antibiotic or nebulizer therapies or they just had an exacerbation all of those qualify them for airway clearance therapy. So when these D. <unk> are receiving these patients with all of these.
Overlapping comorbidities and needs.
They are introducing the fact that airway clearance therapy would probably serve the patient well given the condition that they've come to them in and prescribers are.
Think embracing that.
So I think all of those are really good signs for us on this one.
And as.
As we look forward, we're thinking that we will continue to see some of the expansion that we've seen even the larger <unk> that we inherited a relationship with have expanded the number of branches as they have seen their success and we still don't see all branches participating so we're still working hard to try and do.
Get the rest of the branches up and running trained and familiar with how they can market and and solve the airway clearance issues with the Aflow best So we've done less about adding new dms and more about continuing to support them in their expansion and I think over time.
<unk> Ah.
There's probably an opportunity for us to do one of three things continued deeper penetration and theres still plenty of runway with the existing DNV partners. There are still some <unk> partners. We are not yet working with that I think there's an opportunity for channel expansion.
And then we do very little in the VA right now as well so yes.
As we said and we got into this when we weren't going to do it as a hobbyist and we're we're pretty enthusiastic about what we've seen so far.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Thank you. Our next question is from Suraj Kalia with Oppenheimer <unk> Company. Please proceed with your question.
Yes, Brent can you hear me all right.
Yes, Raj, giving suraj.
Gentlemen, hope everyone is safe and healthy.
So again hopping in between.
Multiple calls so just bear with me here in case, you'll have already referenced this.
Dan I remembers.
Quite some time back you know the number 5000 was constantly brought up in terms of high volume prescribing physicians. There was a proprietary database of docs that tactile had identified.
In terms of prescribing lymphedema product and I'm curious where are we with that penetration.
What has changed specifically, but in this in this cohort and the reason I ask because just looking at growth rates in the different buckets. Maybe if you can just kind of contextualize it didn't give us a perspective.
Hi, Suraj, it's Brian So yeah, we are formerly used to.
Referred to prescribing.
<unk> and the top.
Three desks aisles.
And we've actually taken a step back from talking about that publicly but and partially because of the the onset of COVID-19.
And so now just given the fact that we're continuing to train and invest in education with our are.
New clinicians out there so as we referenced we trained 1700 clinicians during the course of the second quarter through our our Webinars and interactions on educating about lymphedema. So it continues to expand in terms of the knowledge base, but as we go forward, we're not going to talk about the the number.
Of high prescribing.
Clinics out there.
Got it gentlemen, one other question and I'll hop back in queue.
So Dan.
Your comments about comfort ease into new garments, helping patients improve patient adherence.
Again, when we look at the growth rates in the different buckets and commercial and Medicare is it more in your view in terms of demand problem or do you envision this more in terms of comply.
Compliance and a patient adherence problem that would help.
To mitigate at least some of that some of the issues you are seeing in the field gentlemen, Thank you for taking my questions.
Yes, I think it's less about compliance suraj, but even though compliance has been good I would say among users of our products. We want to continue to make sure that the experience is the best it can be and I think that the introduction of the company's garments are going to make it easier for patients to use.
We obviously listened closely to.
To the feedback of our customers and want to make sure that we continue to lead with.
A winning portfolio and we think this is a nice advance for that.
I think that from a growth standpoint issue. This turnover piece clearly had implications to us that I think we fully realize now as we see some of the gaps where we had open territories. So I think that's probably.
One of the more lingering hangover components that are we recognize we have to resolve I think the fact that we have re staffed the territories that we've got good coverage in place now focusing on getting these folks trained it up and running and then the addition of equipping <unk>.
Even our experienced sales force with something new it's a better experience for the patient, but sales reps that have been selling in the same solutions for a handful of years star for a new store in a new reason to go back in and see customers. So I think that that's what we're optimistic that.
Can help reenergize, our tenured folks as well as a <unk>.
Giving some of the newer reps an opportunity to go back into accounts.
Those are a couple of variables that are worth noting.
Thank you. Our next question is from Ryan Zimmerman with BTG. Please proceed with your question.
Hey, Thanks for the follow up I, just wanted to get one more in.
The gross margin brand.
And the guidance for this year I think it's coming in at around 70, 172% you guys did 73 this quarter on <unk>.
Some product mix benefit why does it step back essentially in the back half of the year, because I would think with the incremental aflow vast sales some of the new products.
The gross margin benefit.
Just curious kind of your thoughts on and on the gross margins on the back half of the year.
Yeah, Hi, Ryan.
It's a good question what I would tell you is that.
We're no different from any other manufacturer kind of Med Tech company out there we're experiencing some of those same kind of inflationary pressures.
Primarily in the wage inflation and then also freight so as we kind of project out for the back half of the year.
Certainly we're focused on managing those affected as effectively as we possibly can but.
Taking into account some of that same kind of inflationary pressure that we're but other med tech companies are starting to experience.
Very helpful.
Okay.
Thank you.
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Thanks, operator, and thanks for joining us.
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