Q3 2023 Tactile Systems Technology Inc Earnings Call
Please standby.
Welcome, ladies and gentlemen to the third quarter of fiscal year 2023 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 it won't 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 as Bob 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 SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward looking statements 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 as non-GAAP financial measures.
Conciliations of those 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.
Today's call will be hosted by Dan Rivers, Tactile Medical's, President and Chief Executive Officer, along with Elaine Birchmeier textiles, Chief Financial Officer.
And I would now like to turn the call over to Mr. <unk>. Please go ahead Sir.
Thanks, operator, and welcome everyone to our third quarter earnings call.
I'll start with a quick agenda of what we intend to cover today first I'll review, our financial results at a high level and the key drivers of our performance in the quarter along with some recent operational highlights.
Wayne will then cover our financial results in greater detail as well as our 2023 financial guidance, which we updated in our earnings press release today, and then I'll share some additional thoughts regarding our outlook and strategic priorities before we open the call for questions.
So beginning with a review of our financial performance I was really pleased with our team's performance in the third quarter with $69 $6 million of total revenue, we posted our fourth quarter in a row of double digit lymphedema growth and exceeded our overall revenue and profit expectations for the quarter.
Our growth was driven by strong performance in our lymphedema product line with lymphedema revenue, increasing 15% year over year to $62 $5 million and exceeding our expectations for the quarter.
This performance was partially offset by softer than expected sales of our airway clearance products, which decreased 36% year over year to $7 $1 million.
In addition to our solid total revenue performance. We also achieved another quarter of profitability with year over year improvements in both our net income and adjusted EBITDA.
As a result of our revenue growth and profitability improvements, we generated $4 $1 million of cash flow from operations.
And in the quarter was $66 million in cash as we continued to improve our balance sheet.
With our Q3 financial highlights as a backdrop I'll now cover the primary drivers of our revenue performance in a bit more detail beginning with our lymphedema product lines.
Our strong lymphedema sales growth in the third quarter continued to reflect the increasing productivity of our field sales team, which again delivered double digit growth even as our sales head count remained consistent throughout 2023 with 246 reps at quarter and relatively unchanged compared to the beginning of the year.
In recent quarters, our efforts to increase the productivity of our sales reps is focused on two major components, improving the operational efficiency of our selling organization and enhancing our portfolio through the development and introduction of new products.
Our focus in recent quarters has been on reducing the time, our sales reps devote to non selling activities freeing them to optimize time with prescribers and clinics, specifically our reps have historically devoted a significant portion of their time to conducting in home patient demos and obtaining the necessary documentation to complete those orders can submit claims.
With respect to the in home patient demo process, we've been transitioning some of this responsibility to our patient trainers, who are well equipped to introduce our therapies to patients and educate them on its use this shift was an important contributor to our sales performance again in the third quarter and we see additional runway to drive incremental.
Activity gains over the coming quarters as we seek to expand this initiative.
Our efforts to improve productivity within the back office team included beginning to deploy new digital tools, such as optical character recognition for order input. This is consistent with our goal to introduce new technology and tools to even further improve our operational efficiency.
Our sales team also continues to benefit from the introduction of new products, most notably our next generation Entre plus system and our comfort east garments.
We continued to see significant commercial traction of our entre plus system during the third quarter.
As we progressed through the initial months following its full market release in March the.
The addition of Entre plus to our portfolio. The first generational update to our entre system. Since its introduction has energized our team to engage with prescribers showcase its user centric enhancements and worked with them to identify appropriate patients as a reminder, entre plus delivers the same clinically proven therapeutic benefits.
Our original Entre system, while offering a host of enhanced features to improve the user experience, including new LCD based interface active garment deflation and the ability to treat two limbs simultaneously.
Patient feedback has been consistently positive throughout the initial months of commercialization affirming that entre plus represents an important enhancement to our product portfolio.
The development and introduction of Entre plus as part of our increased focus as an organization on the subset of our addressable patient population that qualifies for a basic pneumatic compression device <unk>.
A significant portion of patients, including most covered under Medicare are required by their insurer to obtain and treat their lymphedema with a basic compression device before they may ultimately become eligible for an advanced pneumatic compression device like our flexi touch.
We're pleased to provide these patients with an optimized product to address their needs, while establishing brand awareness at the patient level in the process.
As a reminder, our entre plus system was also designed to be part of a consistent product family with our flexi touch plus enabling entre plus users to easily transition to our advanced pneumatic compression offering if their disease progression ultimately warrants it.
At the beginning of the third quarter. We also initiated the full market release of our company's upper extremity garments. The latest addition to our flexi touch plus portfolio since the introduction of our company's lower extremity garments last year.
Our company's garments are designed to make them easier to put on and take off and enhanced comfort and treatment as part of the redesign of our upper extremity garments are team sought to expand their therapeutic coverage capabilities, our new upper extremity garments can now accommodate bilateral upper body coverage.
Coverage of the axillary region, an important but historically difficult area of the body to provide effective therapy too has been enhanced as well in order to optimize the treatment of breast cancer related lymphedema.
In our post market patient monitoring of 260 patients. We were pleased to find that our company's upper extremity garments achieved 100% coverage of each patient's treatment area in all cases the <unk>.
Feedback we've received from clinicians and lymphedema therapists has emphasized their appreciation for the new design of our upper extremity garments and improved coverage and therapy. They provide.
In short through our combined focus on operational efficiency and new product innovation, we're pleased to drive 15% growth year over year in sales and rentals of our lymphedema products, while reducing our sales and marketing expense.
Turning to our airway clearance product line, our year over year sales performance in the third quarter continued to be impacted by the dynamic we discussed on our earnings call in August with one large <unk> customer experiencing slowed placements of our Aflow VAT system.
As a reminder may 11th so the exploration of the COVID-19, public health emergency or Phe waiver and a return to pre public health emergency eligibility requirements.
This large <unk> customer was one of the few we partner with that took advantage of the relaxed eligibility requirements under the phe waiver.
Transitioning their organization and referral base to the additional documentation and testing needed under the pre public health emergency requirements has continued to pace their processing and placements of our <unk> system. This year.
Importantly, we continued to see growth in third quarter across the rest of our <unk> customers specifically revenue from our other <unk> partners grew in the double digits year over year.
We've also taken additional proactive steps to mitigate the impact on our airway clearance product line.
During the third quarter, our team worked to raise awareness of a publication in the June edition of our T magazine publication, which I discussed on our last call summarize the results of a blinded randomized study demonstrating patient preference of Aflow vest over three other high frequency chest wall oscillation devices. We believe it provides an.
Resource for Dnb reps to feature in their discussions with prescribers facilitating their ability to convert accounts that may currently prescribed competing devices.
We also are adding several members to our team of dedicated DMA reps in the fourth quarter, increasing our coverage of the existing <unk> customers as we educate and train our reps on bronchiectasis and the role of our Aflow vest and its treatment.
We hired a dedicated reimbursement expert as well to support our customers, while freeing up additional bandwidth for existing reps.
Looking ahead, we expect the exploration of the Phe waiver will remain an ongoing headwind to the performance of this large <unk> customer until they reach its anniversary in may of next year.
With that said it is important to note that we continue to be an engaged they continue to be an engaged partner. We remain pleased with the performance we're seeing across the rest of the customer base and we continue to expect that this return of eligibility requirements will not impact our growth long term.
Turning to a discussion of our operational highlights during the third quarter.
In addition to the positive reception of Entre plus and comfort East garments, we continue to expand the features awareness and adoption of our Kylie mobile application.
Since we debuted Kylie last year, we've introduced additional updates to expand and enhance its capabilities. We continued this cadence during the third quarter, providing patients with the ability to setup and customized multiple treatment reminders and introducing utilization based motivational messages to encourage and congratulate them for.
Fulfilling their treatment regimes. We also added new support features making it easier for patients to directly communicate with our team.
Our continued product development and raising awareness efforts culminated in the strong growth and patient adoption with over 11000, new downloads year to date in 2023.
From a utilization standpoint, we also saw growth in the number of user check ins, which increased to over 110000 year to date.
And during the third quarter, our Kylie users also captured more than 10000 measurements to monitor their condition and disease progression.
All of this continues to enrich our database of those suffering from lymphedema as well.
By driving awareness and adoption of our Kylie App, along with our Entre plus system, we're developing our relationship with patients throughout their journey to diagnose and access effective treatment enhancing our market leadership position in the lymphedema space.
In addition to enhancing our patient engagement and education efforts, we continue to raise awareness at the clinician level.
During the third quarter, we hosted over 30 professional education programs, which drew participation from more than 1300 clinician attendees.
Most notably our programming included a symposium at the IP 2023 World Congress, a leading medical conference devoted to Venus and lymphatic medicine organized by the American vein and Lymphatic Society and the American venous Forum.
The symposium was titled Pneumatic pump Boot camp everything you wanted to know it was hosted by five prominent physicians, including our recently appointed Chief Medical Officer, Dr. Toni Good spares.
To discuss the differences between basic and advanced pneumatic compression devices and walk clinician attendees through the process of identifying patients pumped selection and a better understanding of reimbursement criteria and eligibility.
It ended up being a standing room only event and was very well received by attendees.
We also saw progress in patient enrollment within our randomized clinical trial of head and neck cancer survivors.
We now expect to have 180 patients enrolled by year end with the goal of reaching 200 by the end of Q1 of 2020 for.
This represents the kind of evidence based investment we've become known for and hope to use the eventual results to expand access for this significantly underserved segment of those suffering from lymphedema.
Lastly, we enhanced our board of directors with the appointment of Dr. <unk> and Dell Washington, Dr. Washington, Kurt currently serves as Chief clinical officer for care at barely a health technology company owned by alphabet.
He brings over 30 years of experience in the health care industry to our board, including senior leadership positions with Blue Cross Blue Shield of Louisiana, and the U S Department of health and human services.
We look forward to benefiting from his extensive experience across multiple facets of the health care industry as well as his track record in helping companies to develop and enhance their clinical and digital strategies.
And with that Alain will now review, our third quarter financial results in more detail.
Thanks, Dan.
For a review of our financial results.
Unless noted otherwise all references to third party quarter financial results are on a GAAP and year over year basis.
Revenue in the third quarter increased $4 $3 million or six 6% to $69 $6 million.
By product line sales and rentals of lymphedema products, which includes our flexi touching entre systems increased $8 $3 million or 15, 3% to $62.5 million.
Sales of our airway clearance products, which includes our I'll call. It a system decreased $4 million or 35, 9% to $7 1 million.
Continuing down the P&L.
Gross margin was 79% of revenue compared to 71, 7% non-GAAP gross margin, which excludes noncash intangible amortization in both periods were seven 1% 771, 4% compared to 72.2% GAAP and non-GAAP gross margins in the third quarter of 2023 were impacted.
Changes in our mix related to strong growth in sales of our entre Pos system and lower alcohol that sales along with higher labor rates and material costs.
Third quarter operating expenses decreased $7 million or 14, 5% to $41.4 million. The decrease in GAAP operating expenses was driven by a $7 $1 million decrease in non cash intangible asset amortization and earn out expense.
And a zero point $6 million decrease in sales and marketing expenses. These items were offset partially by research and development and reimbursement general and administrative expenses, which increased by zero point $4 million and is there a point $2 million respectively.
Operating income was $8 million compared to an operating loss of $1 six nine.
The $9 6 million dollar.
And our operating income was driven by a $2 $6 million of five 5% increase in our growth.
As well as the aforementioned $7.7 million or 14, 5% decrease in our operating expenses.
non-GAAP operating income was $5 $2 million compared to $3 $9 million in the third quarter of 2022, a three 4% increase year over year.
As a reminder, our non-GAAP operating income excludes noncash intangible amortization and earn out expense as well as certain non reoccurring operating expenses in the prior year period, we have provided a detailed GAAP to non-GAAP reconciliation in the earnings press release.
Other expense net was zero point $4 million compared to zero point $7 million last year. The decrease was primarily due to an increase in interest income.
Income tax benefit was $14 $7 million compared to 77000 in the third quarter of 2022, the year over year change in income tax was driven by a one time adjustment for releasing our evaluation allowance. This noncash impact reflects our projected return to more consistent profitability.
Net income increased $24 $6 million to $22 $3 million or <unk> 94 cents per diluted share.
non-GAAP net income increased $18 $4 million to $22 million compared to $1 $9 million in the third quarter of 2022.
Adjusted EBITDA increased zero zero point $5 million to $7 $7 million or 11, 1% of sales compared to $7 $2 million or 11% of sales last year.
Turning to the balance sheet, we're pleased with our continued improvements here as of quarter end, we had $66 million in cash and cash equivalents and $46 8 million of outstanding borrowings. This compares to $21 $9 million in cash and $49 million about see any borrowings as of December 31 2022.
Shifting to a review of our 2023 outlook, which we updated in today's press release, we now expect full year of 2023 total revenue of approximately $273 million to $277 million representing year over year growth of 11% to 12% compared to our prior guidance of 11% to 13%.
Our 2023 total revenue guidance range now thing.
And rentals of our lymphedema product increased approximately 14% to 15% compared to our prior expectation of 13% to 14% increase.
And sales of our airway clearance products decreased approximately 9% to 8% versus our prior expectation of a zero percent to 5% increase.
These updated gross assumptions reflect better than expected sales of our lymphedema product in the third quarter. They also reflect softer sales upper airway clearance product in the third quarter and reduced expectations for the fourth quarter as well as we continue to face the headwinds related to a large female customer at that Dan discussed through May of next year from.
For modeling purposes for the full year 2023, we expect our GAAP gross margins to be approximately 71%.
Our GAAP operating expenses to be down approximately 4% year over year compared to our prior expectation of a flat to down 1% year over year.
Interest expense of approximately $2 $6 million compared to our prior expectation of $3 $8 million. We now expect a benefit on the GAAP tax line at a rate of 112% to 139% compared to a tax expense rate of 57% previously the change in expectation is primarily the result of the valuation allowance removal.
In the third quarter and fully diluted weighted average share count of approximately $23 5 million shares.
We continue to expect to generate adjusted EBITDA of approximately $25 million to $27 million in 2023.
Our adjusted EBITDA expectation assumes certain noncash items, including stock compensation expense of approximately $7 $7 million compared to $9 $8 million previously intangible amortization and changes in fair value of contingent consideration and approximately $100000 to $150000 compared to our prior expectation.
As approximately $5 $8 million, the depreciation expense of approximately $2 $8 million compared to approximately $2 $5 million previously.
With that I'll turn the call back to Dan for closing remarks.
Thanks Helane.
Stepping back we're pleased to have delivered solid financial performance in the third quarter with revenue growth and our lymphedema business of 15% year over year record operating profit and expanded cash flow from operations or.
Our financial results demonstrate the improved productivity of our sales team as well as our enhanced operational efficiencies overall.
In Q4, our teams focused on bringing 2023 to a strong conclusion and by continuing to execute on the following four strategic initiatives for this year improved.
Improve the productivity of our lymphedema is field sales team.
Expand airway clearance therapy through broadened <unk> relationships.
Introduced new products and innovations to address the lifestyle needs of our patients improving digital functionality and optimizing therapy, and finally, enhancing our operational efficiency to reduce our cost to serve while maintaining strong patient satisfaction.
Lastly, with demonstrated progress towards our multiyear strategic and financial goals, along with an enhanced balance sheet. We remained confident in our ability to deliver sustainable long term growth and value creation as we continue to expand our market share by empowering patients to care for themselves at home.
And before we open the call for questions I'd like to briefly address the subject of G. L. P. One medications for weight loss and our perspective on its potential impact on those suffering from lymphedema.
This afternoon, we posted information on the events and Webcasts section of the Investor page of our website.
While the information we assembled is intended to provide some additional context, it's clear that rich third party data on this topic is scant.
That said I wanted to call out a few of the key points from the information we assembled on our slides ill.
I'll start with a reminder, that the data points to a universe of approximately 20 million Americans suffering from lymphedema.
Do you see evidence also indicates that lymphedema can be either congenital or more often the consequence of comorbidities, including cancer venous disease trauma and obesity among others.
However, tying the incidence rate to body mass index or BMI is difficult from the currently published data.
Thus, we attempted to frame the patient base in two ways.
First we broke down the lymphedema community into segments based on the available literature.
But perhaps more importantly, and relevant was the second view, we assembled which breaks down our own patient data argued.
Arguably the largest source within this patient population.
In fact, we broke down our year to date patients of over 50000 based on BMI among other things.
Literature suggests that obesity plays a more significant role in the development of lymphedema once BMI exceeds 40 and can be the primary cause only when BMI exceeds 50.
Once we isolated cancer survivorship is the primary cause within our own database, we found that only 8% of our current patients had a BMI over 50, and an additional 16% above 40.
While there is more detail in the data we posted on our site our own demographic data of over 50000 patients underscores the lymphedema diagnoses and those seeking care to treat it is far from limited to the severely obese and even if these weight loss drugs deliver the promise that we all hope for the consequence of.
Lymphedema is expected to remain for millions of patients a reality that continues to energize our mission to reveal and treat patients with underserved chronic conditions.
I'd like to thank everyone on the tactile team for their efforts this past quarter and to our customers suppliers shareholders as well for helping to support our mission.
With that operator, we'll now open the line for questions.
Yes.
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.
If you would like to ask additional questions. We invite you to add yourself to the queue. Once again by pressing star one.
And our first question will come from the line of Adam Mater with Piper Sandler. Please proceed with your question.
Hi, Dan Hi Lane Zimmern on.
On for Adam Thank you for taking the question.
So I just kind of wanted to start off with a full best it sounds like the.
Headwind with the one D E.
Expected to linger into Q4 and at least.
The first half of 2024.
Can you.
This is a two parter can you quantify what percentage of the alcohol. That's business that this particular DNV comprises or are you able to give a growth rate for apple that's in the quarter.
The one D M D.
And then two how do we think about also about longer terms and longer term in terms of the potential growth trajectory.
Is it still accretive to your 2025 financial target.
Yeah. So we haven't broken out what the distributor was responsible for but quite clearly it's a you know a meaningful portion the entire reduction for the full year is associated with that distributor. So.
Some of their base number came down and then obviously the growth didn't materialize and that's what really represented the reduction.
As far as the future implications, yes, we do think that we're probably going to have to lap may to get back into kind of a more predictable growth trajectory with them in the meantime, we're really pleased that the balance of the field. The rest of our <unk> customers have continued to grow.
And we really don't think it has any impact on our longer term targets, we still are.
We're still very committed to those and we don't see any change in the underlying segment. I mean this is one I think that I've shared I've had a interest in four years in this segment of treating pulmonary patients and we continue to believe that the Tam is is every bit as large there.
It wasn't I think we've talked about 500000 patients with bronchiectasis and more than $4 million that have gone on diagnosed and we continue to stay very focused on that and see it as a long term growth contributor to the business.
Yes.
Okay very helpful. And then just for my follow up here.
I know you're not providing formal guidance for 2024 today, but you know.
The business has showed pretty impressive scale P&L leverage over the past couple of quarters.
So just help us think about a how durable this metric is going forward you know it.
Should we expect to see a pretty sustainable net income profitability just going forward from from this quarter forward.
Yeah.
Hi, it's ilene yeah.
We're not providing 2024, but we are continuing to focus on the 'twenty 'twenty five targets that we put out at the beginning of the year again that was the $350 million in revenue $50 million of adjusted EBITDA, which would be a little bit over a 14% adjusted EBITDA margin, we still feel good about our path to achieving that and I think you know.
The profitability we are demonstrating this here is I think showing good progress in that direction and I would just add too I think to <unk> point is.
As it relates to the durability, particularly as some of the growth that we've seen on the lymphedema side.
You know I think this is reflective of a more stable environment that we've probably not been in since 2023 over the course of last few years.
We think the sales productivity gains that are contributing to some of this.
It has some additional runway as we havent completed all of the demos.
At Hach, not all shifted over to our <unk>.
Trainers, so we still see an opportunity to continue to expand that capacity with our sales team and I think the strong reception, we're seeing to some of our new products, namely Entre plus.
And hopefully.
More of the same with with our comfort east garments.
Certainly point to.
Some good continued.
Sustainable growth as we look forward.
Great. Thank you.
Okay.
And the next question comes from the line of Ryan Zimmerman with BTG. Please proceed with your question.
Good evening, thanks for taking the questions.
One wanted to ask two first.
I appreciate you guys given some context on the G. L. P. One debate and the patient population, but I just want to understand it.
So assuming I think it was about 24% of your patients have BMI is over 40, just based on the slide that you showed.
What happens if their BMI drop assuming they are taking a G. L. P. One for example are you assuming that those patients go away completely because it sounds like obesity is maybe one factor in what can be driving lymphedema here are you assuming that if the people who are over 50.
You know they go away or.
There's just maybe less severe lymphedema.
Going forward, if they are taking those those drugs.
Yes, it's a really good question Ryan and it's.
There's a lot of variables that we're all trying to anticipate and I think that a few things that we've learned one is if a patient has done enough damage to their venous and lymphatics, meaning they're well above a BMI of 50, it's unlikely that their lymphedema will recover even if they lose the weight I think the other is we have also.
Our understanding is that.
Current users of these drugs might lose 15% to 25% of their body weight, but if you've got a BMI over 50.
You're still going to be north of 30, and probably potentially north of 40, depending on how high you start which still doesn't take you out of the universe of likely developing or having lymphedema I think it's going to be a long time before these patients start to show any potential impact in large part.
Because even if.
These drugs help patients avoid becoming these over 50 P. M is the existing universe of those patients are unlikely to recover.
And and see their lymphedema get resolved without ongoing treatment. So it's going to take a long time, we think for this to wash itself out some will step down.
But I don't know if the lane as a little bit and anything else you want to add.
No what I think you're right I think if you look at the very last slide you know that's what we're trying to demonstrate there is and this will take some time as the existing people who have BMI greater than 40, Unfortunately will likely not see a reduction of their lymphedema and its really preventing people to take that that place in that.
The time to come in the future.
Okay.
Very helpful and then the second question.
Just on.
On the airway clearance dynamics.
Aberrate on what the impact of profitability is for airway clearance. If this is a headwind for the next.
Six months or so into may.
What impact of what drags that have on the adjusted EBITDA margin line, what impact and drag does it have on the gross margin line any color there would be helpful. Thanks.
So I think we we've talked about all of US it was accretive to a little creep cigarettes margin creep.
Freedom to our operating income.
Thank you. This area we've added definitely you've seen that impact that we're really excited that we're able to maintain our 25 to 27 million guidance and adjusted EBITDA. Despite that again really strong focus on our Opex and you I think we'll be able to continue to do that as we go for it and again reiterating.
You know our 2025 target as growing at 14% adjusted EBITDA margin, Yeah, I would just add Ryan I think I agree with <unk> comments and I think that.
If if we would've done better on the on that segment.
No doubt would've done even better I think on the adjusted EBITDA line that said.
The ongoing progress we've been able to demonstrate now for a series of quarters in a row about salesforce productivity expansions operational efficiencies.
All of those have led us to really solid profitability contributions from the lymphedema business. So.
It allowed us to maintain our full year adjusted EBITDA target, even knowing that.
We saw a step down in Q3 and predictably in Q4 on that segment. So I think as we get back on the train again.
Next year once we lap this may thing.
Certainly it should be a good guy for us.
Yes.
Thank you.
And the next question comes from the line of Margaret Kayser with William Blair. Please proceed with your question.
Hey, good afternoon, thanks for taking my questions.
I wanted to start on the increased sales rep productivity, which obviously.
Quite impressive.
You know you had referenced that theres still going to be some some improvement from here I don't know I watch baseball. So yeah. It was just like the third inning of that process isn't the eighth inning.
We have close to the end of the game or not.
Then.
As we think about that and other efforts are not.
Not only over the next six months or 12 months, but as we look out towards that 2025 EBITDA margin target. What other efforts can you guys put into it to kind of drive that margin expansion.
Yes, I think.
We could probably use a good middle reliever if you know one.
That that that might be a reasonable interval probably for us as we said that.
There's lots I mean tens of thousands of in home patient demos, we hosted in.
The last 12 months, so being able to start liberating more of those from the reps. So they can optimize their time in clinic I think its clearly having an impact we are not doing the majority of them with our trainers, yet, but clearly, they're making a big impact I think the opportunity for us to continue with that progression.
We will take us through 2024.
We're trying to be careful about it.
But I think it'll continue to play itself out over 2024, and then I think by the time, we get to 'twenty five we should certainly be in a position, where we've kind of shifted some of those tests to the extent that they still have to exist that all depends on payer policy of course, and I think that the other piece Margaret that we still think there's opportunities for us certainly.
As we get to 2025 is the impact of some ongoing investment in tech.
We have a handful of things that are that we're working on to examine how we can deploy technology.
To make the processing of orders more efficient.
And that includes trying to introduce it and find ways to bring easier ways for us to work with our prescribers as well as an easier process for our internal team and may be just as importantly, those folks caught in the middle which is the sales team. So.
If we can if we can make some of those advances in 2024, I think they should they should be able to demonstrate some contribution.
And I think those are the kinds of things that give us good good enthusiasm I think for the next couple of years.
Okay. That's helpful.
And then you know it's kind of hit on half of asked a little bit.
Part of the question is you know what.
What's your comfort level at this point, because we've maybe been surprised a couple of quarters in a row now to the downside.
Are you trying to take another even more conservative stab at Q4.
Or should we just kind of continue to assume you know some some sequential weakness I guess until we get into May and then hopefully things start to pick up.
On a sequential or year over year basis. However, you want to look at.
Yeah, we did reduce the guidance for Apple and it really what's taking into consideration what we saw in Q3 and what we're anticipating for Q4 Q3 was our first full quarter really being able to fully see the impact of what that the large Ami partner. We've got you know we've got more line of sight to what we think for the remain.
Under of the year and really our expectation is that Q4 is going to look quite similar to Q3, maybe a little bit better but in that in that same range and that's what we reflected in our latest guidance.
Okay. Thank you.
And ladies and gentlemen, if you would like to ask additional questions. We invite you to address self to the queue again by pressing star one.
As a reminder, if you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
And the next question comes from the line of Suraj Kalia with Oppenheimer and company. Please proceed with your question.
Good afternoon, Dan Elaine can you hear me all right.
We can.
Perfect.
So.
It done.
Ask a very high level question.
The time you have come on board done how would you characterize the type two patient acquisition.
Within the three buckets and as we stand today.
What are the main structural factors you think are.
Changing somewhat positively or somewhat negatively.
I'm not sure I understand the question Suraj when you say time to acquisition can you be more specific.
So then I guess, what I'm trying to understand is you have a certain list of docs you have a certain amount of patients out there from the point that you identify a patient you have identified suraj, having lymphedema blah blah Blah you know it takes you let's say.
Three months to basically book a sale right just trying to understand how is that shaping up based on all the changes that you all are you're implementing.
Yeah, I don't know that the time to serve I guess is kind of what you're asking from the time, we get a referral is the top of the funnel until the time, we ship the product.
I don't know that Theres been a dramatic change over the time I've been here and there.
It can ebb and flow a little bit also based on payer requirements. So.
Some players from time to time, we will add some requirements that are more rigorous some will be more relaxed and I think all of those have variables.
I think what what we're really focused on at this point is especially as we continue to scale I mean.
Certainly we're a bigger business than we were a few years ago and as we continue to scale, making sure that we've got a scalable infrastructure in tech that.
I think can more efficiently help us process orders.
We brought in a new CIO back in the earlier part of the year good rich experience I think in.
Enriching the platforms that we're going to need and and you know I think we still see some good runway there ultimately I would be optimistic about the impact it's going to have on how long, it's going to take us to process in order and how much of it can be electronic versus manual and the more we can reduce those handoffs and.
And automate some of those things I think it'll be good for patients.
Because our goal is certainly to make sure that we can serve them as efficiently as possible.
Got it he lane with price.
Can you help us quantify if price was a factor in nominal growth within the within the three buckets of commercial VA.
Medicare and also identify could on following up on your.
The tech part of the equation.
Forgive me I jumped a little late on the call are we seeing any shift in patient compliance with the Mike Mike Heidi and thank you for taking my questions.
Yeah. So I think we had talked about at the beginning of the year that there were some price increases you know that hasn't changed throughout the year and so it's been fairly consistent really the majority of the growth that we have seen throughout the year end of quarter. Two has been largely driven by shipment increases.
Yes.
Yeah, and I think as far as your other question I think it was what impact do we think Kylie is having or have we seen on patient compliance I think this is a really interesting one because.
Compliance has kind of been a bit of a black box for all of US, we've followed up with patients with phone calls and more.
Call manual efforts over the years, but its certainly less pure as we continue to deploy Kylie we are collecting a lot of information.
And I don't know that it's so much about compliance improvements because we think that.
Certainly the outcomes that we've been able to demonstrate imply that our patients have regularly used the therapies that are that we've delivered but kylie.
I think as one of the really important opportunities for us among all of the other benefits for the patient for us to continue to collect a lot of really rich data, even responding to questions about the <unk> impact I think we've got a database just based on our leadership and our girth and number of patients served over the years that along.
How's us to know more about this.
Constituents. So I think Kylie will continue to enrich that we're getting a lot more information than we had before about the.
The progression of their measurement as they record those weaken even capture photos were being able to collect information about.
Their usage patterns and I think to your point over time that database becomes really helpful and important as we continue to choose how we deploy new products what opportunities we have to better serve these patients.
Yeah.
Thank you.
Hmm.
We are currently seeing no remaining questions at this time that does conclude our conference for today. Thank you for your participation.
Thanks, operator.
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