Q1 2023 Tactile Systems Technology Inc Earnings Call
Okay.
Please standby welcome ladies and gentlemen to the first quarter of fiscal year 2023 earnings conference call for tactical medical.
At this time, all participants have been placed in a listen only mode.
At the end of the company's prepared remarks, we will conduct a question and answer session.
Please note that this conference call is being recorded 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 as 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 S. E C, which are available on our website.
We undertake no obligation to publicly update or revise our forward looking statement as a result of new information future events or otherwise.
This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles or GAAP.
We generally refer to these.
non-GAAP financial measures reconciliations of those non-GAAP financial measures to this 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 Rivers Tactical Medical's, President and Chief Executive Officer. Please go ahead Sir.
Thanks, Operator, and welcome everyone to our first quarter of 2023 earnings call I'm joined on the line today by Lane Birchmeier, our Chief Financial Officer.
To provide you with a quick agenda for today's call I'll begin with a high level overview of our quarterly financial performance in the first quarter, followed by a discussion of the key drivers of our sales performance.
I'll cover our first quarter operational progress highlighting some of the most notable accomplishments made by our team.
I'll walk through our quarterly financial results in greater detail as well as our financial guidance for 2023, which we updated in today's press release.
And I'll conclude by discussing our outlook and strategic priorities for the rest of 2023 before opening the call for questions.
With that let's get started with a review of our financial performance.
In the first quarter, we grew our total revenue by 23% year over year to $58 $8 million exceeding our expectations.
We were especially pleased to demonstrate that such strong performance in both of our key product lines.
We posted another strong performance within our lymphedema product growing 22% year over year to $48 $9 million.
We also saw strong contributions from sales of our airway clearance products, increasing 24% year over year to $9 $1 million.
We were pleased to deliver notable improvements in our operating results.
Year over year reductions in our operating loss and net loss on both a GAAP and non-GAAP basis.
And positive adjusted EBITDA results.
This is the first time, we've generated positive adjusted EBITDA in the first quarter since 2019.
With that as a backdrop I'll share some of the primary factors that contributed to our revenue performance beginning with our lymphedema product line.
In the first quarter, we were pleased to see another strong quarter of retention and engagement within our sales team.
Our head count remained consistent throughout the first quarter with 250 sales representatives at quarter end unchanged since the beginning of 'twenty, three and up approximately 5% in comparison to the 238 reps that we had at the end of the first quarter of 2022.
We also saw improving contributions from our newer sales reps that have joined since late 2021 as they got another quarter under their belt.
The productivity of our sales team was aided by our recently introduced new products, most notably our comfort ease lower extremity garments.
<unk>, which we launched last summer continues to resonate with prescribers and patients and provide our reps with an opportunity to reengage with key accounts.
As a result, we saw our strongest growth among patients suffering from lymphedema related to vascular disease, who often require a therapy for bilateral and trunk will use in the lower extremities experienced is made easier with comfort ease.
Our sales performance also continued to benefit from our recent policy change made by CMS as of the first of the year when they discontinued the requirement for certificates of medical necessity, removing yet another administrative requirement for prescribers.
As I mentioned on our last earnings call our sales team focused on engaging with clinicians and educating them about this policy shifts in the months before it became effective.
This change in policy, along with a simpler internal submission process that we introduced was welcomed by clinicians as it helps reduce the administrative burden associated with prescribing our therapies for patients covered under Medicare.
And lastly from a macro perspective, we continue to see evidence of improvement in patient throughput at many of the clinics that we serve is staffing and patient velocity both continue to regain stability.
Moving to our airway clearance product line.
After working through some supply related challenges in 2022, we're pleased to enter this year with a more secure supply chain and a second supplier up and running to provide us with expanded production capacity to support customer demand.
This reassurance on the supply side is further empowered our team of respiratory specialists to engage our existing D. M E channel partners and work with them to constantly expand the availability of Aflow best to new prescribers branches and reps within their networks during.
During the first quarter, we saw solid demand from these DNV distributors as the reps continued to identify patients among existing customers that they already serve who qualify for aflow best airway clearance therapy and stand to benefit from its use.
As we've shared in the past we believe that the majority of these patients may have otherwise gone either undiagnosed or untreated.
And with this in mind, we're excited to play a role in helping expand the overall market by making good on our mission to both reveal and treat underserved patients with the chronic conditions like bronchiectasis.
Providing them with the only truly portable at home solution that is clinically proven to reduce recurring pulmonary infections and pneumonia.
Turning to an update on our operational performance during the first quarter, we made strong progress on multiple fronts.
Educating clinicians and their patients advancing the evidence to support the diagnosis and treatment of lymphedema.
Expanding our portfolio of new products.
Bolstering our balance sheet and enhancing our leadership team and board of directors.
I'll address each of these in a bit more detail starting with our initiatives to educate clinicians and patients in the lymphedema market.
Our team continued to develop and implement new educational programming to raise awareness of lymphedema and its comorbidities within the medical community.
We hosted a total of 39 educational programs during the first quarter, which were attended by approximately 1700 clinician participants.
We're also pleased to see important new additions to the overall body of clinical research focused on advancing the medical community's understanding of lymphedema, including the importance of its effective diagnosis and treatment.
At the American venous Forum's annual meeting in February Dr. Alexandra <unk> presented the results of a study whereby researchers analyzed claims data from nearly 86000 patients to determine the incidents and cost associated with various forms of lymphedema they've.
They found that amongst three common etiologies of lymphedema breast cancer related lymphedema chronic venous insufficiency related lymphedema known as Flyball lymphedema and lymphedema related to gun gynecological cancer the.
The incidents and costs related to episodes of cellulitis and these patients are deep and painful bacterial infection of the skin can present serious consequences.
The researchers found that patients with a history of cellulitis, where four and a half times more likely to develop subsequent cellulitis infections.
He will lymphedema patients in particular were three to five times more likely to develop cellulitis in comparison to patients with other forms of lymphedema.
<unk> lymphedema patients also had the highest health care utilization for cellulitis episodes, ranging from 6000 to $9000 per episode.
This worked further underscores the importance of effective management of lymphedema to redeem reduce the incidence of cellulitis or flexi touch plus system has been clinically shown to reduce the incidence of cellulitis and patients by more than 70%.
And in March we were pleased to see a new clinical article published in the medical journal supportive care in cancer.
The article titled under recognition and treatment of lymphedema in head and neck cancer survivors. A database study featured the results of a study that evaluated commercial and Medicare claims data from nearly 17000 head and neck cancer survivors.
Well, the head and neck cancer head and neck lymphedema is estimated to be prevalent in approximately 90% of head and neck cancer survivors. The researchers found that only six 5% of those nearly 17000 patients that they evaluated had been diagnosed with head and neck lymphedema.
Among these patients that were evaluated for lymphedema treatment, 80% receive manual lymphatic drainage therapy, but completed only one and a half courses of treatment on average in less than 9% of patients received an advanced pneumatic compression device.
This publication adds to the evidence highlighting the fact that head and neck lymphedema remains a woefully underdiagnosed and undertreated condition among cancer survivors.
Our flexi touch plus system remains the first and only pneumatic compression device cleared and commercially available to treat this region and we remain committed to further expanding the clinical evidence demonstrating its effectiveness as we progressed through the enrollment of our 250 patient randomized controlled clinical trial.
The largest trial ever conducted for the treatment of head and neck cancer related lymphedema.
We're convinced that our resolve on behalf of this patient segment will lead to improved access in the future.
Shifting to an update of our new product efforts, we're seeing strong adoption and utilization of our Kylie mobile application following its launch last summer.
In February we introduced a new version of our Kylie application, which provides Bluetooth connectivity related features to our patients for the first time.
Our latest flexi touch plus systems now include Bluetooth compatibility, enabling users to automatically track and log their treatment activity with Kylie.
And generate summaries to share with their health care practitioner, an important first step towards providing patients and prescribers with a new resource to better inform and personalize their treatment process.
I'm also proud to announce that we commenced the full market release of our next generation Entre system at the end of the quarter.
Our new basic pump system Entre plus has been redesigned to enhance the patient's experience during daily therapy without compromising therapeutic coverage.
Its features include a new LCD screen with an enhanced user interface as well as multiple ports to enable patients requiring bilateral therapy to treat both limbs simultaneously.
Plus also features garments that actively deflate following the treatment, making them easier to take off in store.
It's important to remember that the market for basic pneumatic compression devices like entre plus is significantly larger today than that of advanced pumps like our flexi touch plus.
The introduction of our next generation Entre system as part of our commitment to enhance the experience for patients whether they qualify for a basic pump or demonstrate the need for advanced pump therapy.
And establishing tactile medical as the provider of choice for all at home Lymphedema therapy options.
With this goal in mind entree plus has been redesigned to be part of the consistent product family with our more advanced flexi touch plus system, which we believe will also make it easier for patients that may graduate to flexi touch plus with reduced learning curve if their condition warranted.
With respect to Aflow vest, we introduced an additional size in March adding to our ability to treat an even larger patient population.
And with these enhancements across our product portfolio, we're continuing to maintain the pace of product innovation that we began with the introduction of Kylie and comfort ease last year, another way in which we're enhancing and establishing our leadership positions in the markets we serve.
And with respect to our balance sheet.
On February 27th we raised $35 million in net proceeds through an underwritten public offering of common stock the first equity raise since the Companys IPO in 2016.
This offering provided us with additional capital to strengthen our balance sheet and support our initiatives as we progress towards achieving our stated longer term revenue profitability and free cash flow goals.
I'd like to thank our new and existing shareholders for their participation and support.
And lastly, during the first quarter, we enhanced both our leadership team and board of directors with the addition of key personnel.
In January we announced the appointment of Carmen Volker.
Who joined our board of directors with over 40 years of financial and managerial experience Madhu.
The majority of carbons career has been within the medical device industry, where she served as the chief financial officer for Nextera torn yay.
Spine wave and American medical systems.
More recently in March we were pleased to announce the appointment of a lane birchmeier as our Chief Financial Officer.
Elaine joined our executive leadership team following a more than 25 year career in healthcare consumer and retail industries with senior leadership experience at leading companies, including United Health Group Bestbuy sleep number and target.
And of course, it for nearly nine year tenure at Unitedhealth group prior to joining tactile medical Elaine served as Chief Financial Officer of Rally Health.
<unk> health portfolio company focused on digital health and most recently as Chief Financial Officer of Optum Optum care solutions portfolio.
And I'm proud of the level of talent, we've been able to attract with our recent appointments and I'd like to take this opportunity on today's call to welcome both carbon and a lane to our team.
And Alain will now review, our first quarter financial results in more detail along with our financial guidance for 2023, which we updated in this afternoon's release Helane.
Thanks, Dan I'm excited to have joined the tactile medical teams during a pivotal time in the company's history, and especially pleased to have such strong operating performance to outline on my first quarterly earnings call.
Turning to review of our financial results unless noted otherwise all references to first quarter financial results are on a GAAP and a year over year basis.
Total revenue in the first quarter increased $10 9 million or 23% to $58 $8 million.
By product line sales and rentals, Atlanta, Dana products, which includes our flexi touch an entre systems increased $9 $1 million or 22% to $49 $8 million and sales of our airway clearance products, which includes our alpha that system.
$1 $8 million or 24% to $9 $1 million.
Can you bring down the P&L gross margin was 75% of revenue compared to 76%.
non-GAAP gross margin, which excludes noncash intangible amortization in both periods was 71% compared to 71, 2%.
GAAP and non-GAAP gross margins in the first quarter of 2023 were impacted by higher labor rates and material costs as well as higher costs related to new product launches relative to the first quarter of 2022.
First quarter operating expenses decreased $3 $5 million or 7% to $45 3 million. The decrease in GAAP operating expenses driven by a $5 8 million dollar decrease in noncash intangible asset amortization and earn out expense and a 783000 decrease in reimbursement in general.
Administrative expenses. These items were offset partially by a $2 4 million dollar increase in sales and marketing expenses and a 710000 increase in research and development expenses.
Operating loss decreased $11 $1 million or 74% to $3 $8 million non.
non-GAAP operating loss decreased $3 $2 million or 59% to $2 $2 million.
The decrease in non-GAAP operating loss was driven by a 22% increase in non-GAAP gross profit offset partially by a 10% increase in sales and marketing expenses, a 9% increase in reimbursement general and administrative expenses and a 47% increase in research and development expense.
A reminder, our non-GAAP operating loss, excluding noncash intangible amortization and around expenses as well as certain non reoccurring operating expenses and prior year period, we provided a detailed GAAP to non-GAAP reconciliation in our earnings press release.
Importantly, our non-GAAP operating loss in Q1 reflects our continued focus on prudent investments in the business to support our longer term strategic and financial goals. We are pleased to deliver strong operating leverage in the first quarter at our non-GAAP operating margin improved by approximately 750 basis points year over year.
Other expense net increased by <unk> $5 million or 118% to $1 million, primarily due to an increase in interest expense.
Income tax benefit was $2 $9 million compared to an expense of $211000 in the first quarter of 2022.
Net loss was $1.9 million or seven cents per diluted share compared to a net loss of $15 $6 million or 78 cents per diluted share non-GAAP net loss was <unk> $7 million compared to $8 $4 million.
Adjusted EBITDA was $25 million compared to adjusted EBITDA loss of $2 $6 million.
Turning to the balance sheet and our recent financing activities.
Dan mentioned in February we closed an underwritten public offering which consisted of $2 million 875000 shares of common stock at a public offering price of $13 per share we raised $334 $6 million of net proceeds from this offering after deducting underwriting discounts commissions and offering expenses.
As of quarter end, we had $55 million in cash and $48 $3 million outstanding borrowings.
This compares to $21 $9 million in cash and $49 million of outstanding borrowings as of December 31, 2022.
Shifting to a review of our 2023 outlook, which we updated in today's press release.
And now expect full year 2023, total revenue of approximately $271 million to $275 million representing year over year growth of approximately 10% to 11, 5% compared to our prior guidance by approximately 9% to 11% or.
Our 2023 total revenue guidance range now assumes sales and rentals of our lymphedema product increased approximately 9% to 10% compared to our prior guidance of 8% to 9% and sales of our airway clearance products increased approximately 18% to 21% largely unchanged versus our prior guidance.
<unk>.
But for modeling purposes for the full year 2023, we expect our GAAP gross margins to be in the low 70% range. Our GAAP operating expenses to increase in the low single digits year over year interest expense of approximately $4 million a year.
GAAP tax rate of 16, 1% compared to our prior guidance of 25%.
And our fully diluted weighted average share count of approximately $23 5 million shares.
Based on the stronger than expected profitability performance in Q1, we now expect to generate adjusted EBITDA of approximately 23.5 to $25 $5 million in 2023, an increase of approximately <unk> $5 million versus our prior guidance range. Our adjusted EBITDA expectation has seen certain noncash items.
Stock compensation expense of approximately $11 million compared to 12 million previously and tangible amortization and changes in fair value of contingent consideration of approximately $5 8 million and depreciation expense of approximately $2 5 million both unchanged versus prior guidance.
With that I'll turn the call back to Dan for closing remarks.
Thanks, Helane in summary, we're proud of the financial performance and the operational progress we achieved in the first quarter, which exceeded our expectations. We're raising our full year guidance based on this strong start to the year, while keeping an eye on the emerging macro economic backdrop is 23 unfolds and we remain committed to achieving.
Double digit organic revenue growth on an annual basis, along with year over year improvements in our profitability.
As we progressed through 2023, we intend to continue our recent pace of progress as we execute against the following four strategic priorities that I outlined at the beginning of the year.
First to improve the productivity of our lymphedema field sales team.
Next to expand and deepen relationships with Dms providers and their reps for our airway clearance product line.
To develop and introduce new products and innovations focused on addressing the lifestyle needs of our patients and improving digital functionality and therapy optimization and.
And finally, enhancing our operational efficiencies to continue to reduce our overall cost to serve.
In light of our recent performance and progress we believe our continued execution with respect to these strategic priorities will position tactile medical to deliver strong sustainable growth in 2023 in the years ahead, as we progress towards achieving our longer term strategic and financial goals.
Thanks to everyone on the tactile medical team for your efforts this past quarter.
And to our customers suppliers shareholders and as well as those on today's call for your support.
Operator, we'll now open the call for questions.
Thank you ladies and gentlemen at this time, we'll be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the Q.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.
We ask that you limit yourself to one question and one follow up and then re poll if you have additional questions.
Our first question comes from the line of Adam Maeder with Piper Sandler. Please proceed with your question.
Hey, Dan hailing this system run on for Adam. Thank you for taking the question.
I I said, we will start out with.
Hi, Hi, I.
I wanted to start out with a guidance for a moment here you raised your revenue outlook by about $2 million. Despite about a $5 million be at the mid point of your prior Q1 guide So maybe just walk us through what you're seeing in the prestige or environment.
You know throughout the quarter and exiting Q1 or and then also from a macro perspective to help inform that decision and then I also didnt hear our Q2 guidance. So what are your expectations for this quarter.
Yeah. So let me try and unpack that one if I can cimarron I'll start a little bit with what are we seeing in Q2, So far I think you know nothing.
Nothing terribly surprising we've seen some ongoing stability resuming in the clinic volumes I think we saw that through Q1 and I think that's continued largely into into Q2 as well we've said.
Several times that I don't know that we see velocity of volumes getting back to a 100% of pre COVID-19 levels, but we don't need to get back to that level, either I think that we have seen good recovery on a macro basis and I think that's been consistent with our expectations were.
We're hearing staffing issues are getting progressively better in the clinics and the therapy are clinics that we serve.
And I think so far we've had a good reception to the recent introduction of our Entre plus and ultimately you know all of those are kind of considered in the guidance. We are not updating quarterly guidance at this point, but rather we just opted to update annual guidance and I think to your question that where you started relative.
Relative to.
How we got there. So first of all we knew Q1 was going to be our strongest quarter. Our original guidance suggested that it would grow faster than our overall full year.
But if you take a look at where we finished up we beat our high end by about $3 $6 million.
We raised it by two on the high end, so it's about $1 million, a little over 1 million and a half delta and frankly I'm not sure. We're good enough to have that much precision at this point.
We got nine months of wood left to chop and I think that.
With.
A more balanced comparison of sales head count as we progressed through the year, we got the biggest benefit in Q1, where we were still trying to get a roll staffed ultimately those are some of the things that contributed to that we have not seen any of the macroeconomic backdrop that would take us to the lower end and I think.
We talked about that we initially posted guidance in February but that's certainly something that that we'll keep an eye on and in the meantime, we were just really really pleased to be able to raise guidance.
And feel confident about.
The latest guidance, which puts us in.
In the double digit kind of 10 to 11, 5% range.
Awesome. Thank you for that response and I guess for my follow up I'll ask about Oh gosh. Another nice quarter here in Q1 did you see any impact from higher supply chain headwinds in Q1 and was there any pull through from.
<unk> backlog.
That being from those headwinds.
I guess, what I'm trying to get out is are you in a position now to take full advantage.
<unk> the market.
Well I think the answer the last question is we are in a full position to supply the market and we didn't really carry anything in the in the line of a back order.
Into Q1 or into Q2 for that matter, but I think that now that we've been able to communicate our expectation that we have ample.
Ample supply capacity I think it's an opportunity for us to make sure that the sales channels are fully reengage. There were some I would say admittedly in the.
At points throughout the last handful of quarters that wood.
Would would express some reluctance to put their shoulder behind it with the uncertainty about whether or not we'd be able to supply them.
At the higher end, so I think that we've certainly.
<unk>. The fact that we feel like we're in a good spot from a supply chain standpoint going forward.
And we're hopeful that that will lead to ongoing demand that will continue to increase and those are things that we factored in as well.
Perfect. Thank you.
Our next question comes from the line of Margaret Kaczor with William Blair. Please proceed with your question.
Hey, good afternoon, everyone and thanks for taking the questions and I'm going to try my hand, one more time on the guidance side.
A follow up.
So I'm just kind of going through the math on the multiples, especially on the <unk> side of the business. You know you guys had this tremendous 22% growth I know the comps get a little bit tougher as we go on throughout the year, but if all I do is try to average to that nine or 10% for the full year for the full year guidance number.
I get to this kind of mid to high single digit wants to be in my breath for that for the next three quarters. So one tell me, if I'm right or wrong about that and yeah. That's below the long term guidance that you've given for lymphedema. So.
I appreciate the conservatism on the thoughts around macro but it seems like maybe there's a little bit of room to that number and why or why not.
Yeah, I think that I'm not sure of the answer is a lot different Margaret I think that we certainly tried to express our confidence by raising our full year guidance that said I think it's a little early for us to declare a victory.
But we felt really good about the fact that we saw some solid productivity from our sales force.
I think the administrative process that we've tried to streamline has been certainly good for the business in the first quarter.
And you know comfort ease as continue I think to resonate well so I'd.
I'd say, we feel confident about the double digit growth guidance that we've updated too.
And I think we'll have a lot clearer vision of this once we get through Q2 and into our into the later part of the summer.
So I think that's a that's still pretty consistent.
Okay I appreciate it I had it tracks.
So just to follow up on some other things right you had talked about some of the CMS changes eliminating certificates of medical necessity at the beginning of the year that seems like it's it's maybe.
It's potentially more meaningful chain. So how does that help accelerate getting the product to the patient may be there in sales rep productivity if at all and then put it even increase the close rate.
For a patient.
Yeah, I think I think it remains to be seen but it's a really good question. So there's a couple of things going on in the in that space with our with the Medicare patients first of all I think there had been a fair amount of those patients that would've been overlooked partly because the administrative effort was frankly pretty burdensome to the clinic. So the elimination of the <unk>.
And then maybe just as importantly, it some new processes that we introduced as far as how we can collect that information what information is going to be necessary. Some forms that are more user friendly and I think all of those we're hopeful we will continue to help make sure that patients that can benefit from our therapies get recognized.
Not overlooked and that we don't make the the work harder than it's going to need to be for the for the Hcp's. As a result, we hope to reveal more of those patients that we can treat on the flip side you know.
The phe waiver is ending in Q in mid Q2.
Actually it's in it's in a few days if my.
<unk> memory is right.
So there's a little bit of an offset there that there.
There were some things that were a little bit easier that'll go back to the old way olden days, but we think that the offset on the goods on the good side is that the processes that we've introduced.
We're hopeful to continue to demonstrate that.
It shouldnt be a burden on the HCP to do the right thing and help these patients that they haven't gotten therapy to date.
Okay, great. Thank you guys.
Our next question comes from the line of Ryan Zimmerman with B T. O. G. Please proceed with your question.
Hey, good afternoon, congrats on the quarter I want to ask.
I know youre not guiding quarterly here Dan.
It's pretty evident as we've all tried but but remind us about seasonality and kind of how you expect the seasonality of progress, particularly in the second and third quarters. You've historically had this nice linear improvement recently, but as we come out of Covid kind of help us think about.
The pace for the next three quarters.
Yeah.
I think you can look at history and see that typically our revenue ramps throughout the year and kind of resets. So we would certainly expect to continue to see incremental growth sequentially throughout the year with Q4 of course continuing to be our biggest one is co pays.
Come down and typically the device gets effectively less expensive for the patient.
Probably even more true with the outflow vest just because of the average sell price is higher than some of our lymphedema therapy products, but sequential growth would certainly continue to be an expectation that I would say it's fair.
Okay.
And in a lane that's nice to have you on the call and especially on a strong quarter.
<unk> your time here attacked out well.
Wind is kind of your near term goals that you have and the position.
I should take hold here.
Yeah, No I think yeah, maybe I'll take the time to do parallel, but I have what my observation is and kind of how that leads me into my my goals here. So you know coming from a larger organization I've been really impressed by the talent the alignment around our strategy and really how mission driven the organization is in fact I was just at our National sales meeting last week and it was clear.
That are missing permeates everything that we do and we're really making a difference in people's lives and I think that's going to be a key to our SaaS and what I was looking for when I joined the organization and I also had a chance to dive into our long range financials.
And so if you look at the guidance that we put out for 2025 and just as a reminder, there. We said we would deliver over $350 million in revenue and over 50 million in adjusted EBITDA and $75 million F. T. Net free cash flow am I feel confident we can deliver that and you know I see a team here.
Our focus on driving topline growth, while expanding profitability and that she was going to be one of my objectives and things that I focus on this here and then lastly, I know theyre, probably stinker, yet for me Oh, sorry, yeah, it would be to leverage it.
I'm sorry go ahead.
Please go ahead, I'm, sorry, I'm, sorry for interrupting Okay, Yeah, no no problem and I would just say lastly in other opportunity I see is really to be able to leverage my health care experience to drive improvements in our revenue cycle management I think this represents a significant opportunity for tactile and should result in improvements in our net working capital as we were able to lower.
Our accounts receivable, so I see that too as a focus area and a way for us to achieve the 2025 calls that I mentioned.
Oh very helpful. In the mention of counts, you'll actually prompts me to sneak in one more question, which is Medicare as a percentage of sales. This quarter was up you know.
Pretty significantly relative to last year.
And you know just given the payment terms on those Medicare cases, you get how do you think about that dynamic come in through.
And in terms of your cash balance and just the overall shifting dynamics of the payer mix of the business.
Yeah. So I think one one thing I've been excited to see that you know the team as I moved in here, it's been spending a lot of time with our Medicare administrative contractors to increase our first pass approval I'm really encouraged by the way it's engagements that we have with them, we've gotten greater alignment of our solutions and we're seeing them.
Preventing our first passage indication. So I, you know that really points to a really good momentum, especially as you mentioned that we see strong growth in the Medicare space Yeah.
I would just add too right.
Lane's comments that I think this team is doing a really good job working with the Macs. We've made some pretty good progress and I think we're going to demonstrate that.
It's not a curse hub to support the Medicare business that it was a few years ago as we go forward.
As we continue to get better at it working at the first past adjudication, which her team I think is making really good progress on.
Okay. Thanks, Thanks for taking the questions.
Okay.
As a reminder, it is star one to ask your question. Our next question comes from the line of Shiraz Collier with Oppenheimer. Please proceed with your question.
Okay.
Good afternoon, Dan Day line can you hear me all right.
We can.
Yeah.
Perfect apologies I'm under the weather a little bit.
So.
And then in terms of highly remote.
Remind us what percentage.
Ah patients currently are highly.
And more specifically.
What kind of tools do you envision <unk> to be would it help improve patient compliance.
Or is this more of a data capturing tool for payers so to speak.
Yeah.
Yeah, I think good question, Suraj, and frankly, <unk> got a variety of different complexions to it.
We originally talked about Kylie as.
A learning tool.
That we can make available to patients. So they can better understand their condition and frankly advocate for themselves. We know that so many lymphedema diagnosis are missed or misdiagnosed. So equipping the patients with more information via this Kylie App was the first goal of the application and then the next one is.
We think that it can have an impact on our training.
We have training vignettes and that's a cost to serve component.
We can meet patients where they want to be met if they want to be trained in the home. We can support that if they've if their adept with a smartphone we may be able to provide them the assistance that they need more efficiently like so many of us depend on our smartphones. There is another piece, which then becomes.
The ability to communicate with their physician they're progress.
Well there's.
Kylie was introduced back in the Summertime last year, we've continued to have incremental drops with new features. The most recent addition was we started adding Bluetooth chips to flexi touch in December we've already had over 35000 patient sessions.
That had been captured and downloaded through Kylie these are opportunities for patients to bring the results to their physician share with them when and how they're using it and how they are benefiting or responding from it.
So I think that those are some of the ways that we see poorly currently they're also able to track their order so from a contacting customer service. It offload some of the human burden and can even more immediately given that feedback and then as we get into the back half of this year Suraj I'm, we're going to continue to have some advances on house.
Patients can record and track their measurements.
Prompts just like my I watch does about it's probably time to do your therapy or celebrate the fact that you did and a number of other things I think on the cost to serve side as far as order processing engagements. So.
I'd say in summary, it's an opportunity to educate it's an opportunity to engage with patients and reduce our cost to serve and also an opportunity for them to share more useful information with their providers.
Got it and then if I could ask a higher level question.
Then what do you think would be the next iteration of product development.
More specifically to reduce the minutes spent per day.
By the patient and thank you for taking my questions.
Yeah really.
Good question Theres, a lot of ways that we want to continue to improve the.
The utility and the efficiency of patient's therapy sessions I think the introduction of Entre plus is a great example, where it's.
It's easier for patients with bilateral limpet lymphatic disease to treat.
Both legs at the same time.
And we've already got the ability to do that with the flexi touch as well so I think that <unk>.
Being able to treat multiple parts of the body and one treatment session is already a way to optimize that there are certain limits about I think that we.
No we can't shortchange it because there's a there's a component that's necessary to make sure that therapeutic outcome is good but again being able to do multiple parts of the body simultaneously certainly helps.
Rather than having to treat those.
Parts of the body sequentially. So I think that that's one that is certainly more visible in the latest iteration of our entre system and then Suraj. We are we continue to invest in product development there are additional.
Solutions that we continue to work on and ultimately.
We expect those to produce a better therapeutic experience, that's always optimizing efficacy, but I'm starting to continue to appreciate some of the consumer features that we know patients want.
Thank you.
Yeah.
It appears there are no further questions in the queue. This does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Okay.