Q1 2024 Tactile Systems Technology Inc Earnings Call
Please standby welcome.
Speaker Change: Welcome, Ladies and gentlemen for the first quarter 2024 earnings conference call for tactile medical.
Speaker Change: This time, all participants have been placed in a listen only mode.
Speaker Change: At the end of the company's prepared remarks, we will conduct a question and answer session.
Speaker Change: Please note that this conference call is being recorded and will be available on the company's website for replay shortly.
Speaker Change: I would now like to turn the call over to Sam Ben singer from Gilmartin Group for a few introductory comments. Please go ahead.
Operator: Good afternoon, and thank you for joining the call today. With me from Tactile's management team are Dan Reuvers, President and CEO, and Elaine Birkemeyer, CFO.
Speaker Change: Good afternoon, and thank you for joining the call today with me from packed House management team are Dan reverse president and CEO and Alain Birchmeier CFO.
Operator: 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 SEC, which are available on our website.
Speaker Change: Before we begin I would like to remind everyone that our remarks and responses to your questions. Today may contain forward looking statements.
Operator: 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. Reconciliations 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. With that, I'll now turn the call over to Dan.
Speaker Change: Based on our current expectations of management and involve inherent risks and uncertainties, which could cause actual results could 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.
Speaker Change: We undertake no obligation to publicly update or revise our forward looking statements as a result of new information future events or otherwise.
Speaker Change: 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 reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press.
Speaker Change: The release on the Investor Relations portion of our website.
Speaker Change: With that I'll now turn the call over to Dan.
Daniel L. Reuvers: Thanks, Sam, and welcome everyone to our first quarter 2024 earnings call. Let me start by providing a quick agenda for today's call. I'll begin with a high-level overview of our strong first quarter financial results and the key drivers of our sales performance, followed by some color on how we've advanced each one of our strategic priorities that we laid out in February. Elaine will then walk through our quarterly financial results in greater detail. And I'll conclude with a few final thoughts before we open the call up to questions.
Daniel L. Reuvers: Thanks, Sam and welcome everyone to our first quarter 'twenty 'twenty four earnings call let.
Daniel L. Reuvers: Let me start by providing a quick agenda for today's call.
Daniel L. Reuvers: I'll begin with a high level overview of our strong first quarter financial results and the key drivers of our sales performance followed by some color on how we've advanced each one of our strategic priorities that we laid out in February.
Wayne will then walk through our quarterly financial results in greater detail.
Speaker Change: And I'll conclude with a few final thoughts before we open the call up to questions.
Daniel L. Reuvers: With that, let's turn to a review of our first quarter financial performance. Our total revenue grew 4% year-over-year to $61.1 million, in line with our expectations. We were pleased with this performance to start the year given our strong first quarter results last year and believe it provides a solid foundation to deliver on our 2024 operating plan. Looking at our revenue performance by product line, Lymphedema revenues increased 5% year-over-year to $52.3 million.
Speaker Change: With that let's turn to a review of our first quarter financial performance.
Speaker Change: Our total revenue grew 4% year over year to $61 $1 million in line with our expectations. We were pleased with this performance to start the year given our strong first quarter results last year and believe it provides a solid foundation to deliver on our 'twenty 'twenty four operating plan.
Speaker Change: Looking at our revenue performance by product line Lymphedema revenues increased 5% year over year to $52 $3 million.
Daniel L. Reuvers: And while our airway clearance revenues declined 4% year-over-year to $8.8 million, we demonstrated a second straight quarter of sequential improvement. Our lymphedema growth was in line with our expectations for the quarter, while sales of Aflovest were slightly ahead on a steeper year-over-year comp, reflecting broad-based growth among most of our DME partners and lending confidence for the rest of the year. Beyond our revenue performance, we also continued to gain momentum down the P&L, specifically with respect to a 100% increase in adjusted EBITDA versus the prior year.
Speaker Change: And while our airway clearance revenues declined 4% year over year to $8 $8 million, we demonstrated a second straight quarter of sequential improvement.
Speaker Change: Our lymphedema growth was in line with our expectations for the quarter, while sales of Aflow vest. We're slightly ahead on a steeper year over year comp, reflecting broad based growth among most of our <unk> partners and lending confidence for the rest of the year.
Speaker Change: Beyond our revenue performance. We also continued to gain momentum down the P&L.
Speaker Change: Specifically with respect to a 100% increase in adjusted EBITDA versus prior year.
Daniel L. Reuvers: Our cash balance reflected another strong finish, as we benefited from significant progress with our collections, working down our accounts receivable, a key element of our 2024 strategy to drive continued free cashflow generation, while also deploying investments in our technology roadmap, which I'll expand upon shortly. With our financial highlights as a backdrop, I'd like to share a bit more about the operational progress we made in the first quarter. As we shared during our last update in February, we cited three key areas of focus for 2024, an investment in growing headcount and productivity within both our lymphedema and respiratory channels, along with expanding our Aflovest DME participation.
Speaker Change: Our cash balance reflected another strong finish as we benefited from significant progress with our collections working down our accounts receivable a key element of our 'twenty 'twenty four strategy to drive continued free cash flow generation, while also deploying investments in our technology roadmap, which.
Speaker Change: Ill expand upon shortly.
Speaker Change: With our financial highlights as a backdrop I'd like to share a bit more about the operational progress we've made in the first quarter.
Daniel L. Reuvers: We also described a series of tech-related investments intended to improve our customers' prescribing experience, as well as our own internal effectiveness. And finally, we described a next-generation lymphedema therapy platform, as well as our commitment to conclude our head and neck study and share results near the end of the year. I'm pleased that we've moved every one of those initiatives forward in the first quarter, and we'll share more color on each.
Speaker Change: As we shared during our last update in February we cited three key areas of focus for 'twenty 'twenty four and.
Speaker Change: And investment in growing head count and productivity within both our lymphedema and respiratory channels, along with expanding our Aflow vest D M participation.
Speaker Change: We also described a series of tech related investments intended to improve our customers' prescribing experience as well as our own internal effectiveness and.
Speaker Change: And finally, we described our next generation lymphedema therapy platform as well as our commitment to conclude our head and neck study and share results near the end of the year.
Speaker Change: I'm pleased that we've moved every one of those initiatives forward in the first quarter and will share more color on each.
Daniel L. Reuvers: Beginning with our sales channels, from a headcount perspective, we ended the quarter with 269 field sales representatives, adding 15 since the beginning of 2024 and up approximately 9% in comparison to the 246 representatives that we had at the end of the first quarter of last year.
Speaker Change: Beginning with our sales channels from a headcount perspective, we ended the quarter with 269 field sales representatives.
Speaker Change: Adding 15 since the beginning of 'twenty 'twenty, four and up approximately 9% in comparison to the 246 representatives that we had at the end of the first quarter of last year.
Daniel L. Reuvers: The added reps came on later in the quarter, and we look forward to their increasing contributions in the second half of the year once they're fully trained. Productivity continued to advance among our legacy reps during the first quarter, specifically by continuing to focus on reducing the amount of time our reps spend on non-selling activities like in-home patient demos. As a reminder, our reps historically devoted a significant portion of their time conducting payer-required in-home patient demos and obtaining the necessary documentation to complete orders and submit claims.
These added reps came on later in the quarter and we look forward to their increasing contributions in the second half of the year. Once they are fully trained.
Speaker Change: Productivity continued to advance among our legacy reps during the first quarter, specifically by continuing to focus on reducing the amount of time, our reps spend on non selling activities like in home patient demos.
Speaker Change: As a reminder, our reps have historically devoted a significant portion of their time conducting payer required in home patient demos and obtaining the necessary documentation to complete orders and submit claims unnecessary task, but it clearly limits their time with prescribing clinicians.
Daniel L. Reuvers: A necessary task, but it clearly limits their time with prescribing clinicians. Our patient training staff is well-equipped to introduce our therapies to patients and educate them on their use. Thus, we've been focused on assigning more of these home-based demos to them. This was a significant contributor to sales productivity gains last year. As we started 2023, with the sales force performing the majority of these pre-sales demos in the home, and ramped to approximately 30% of them performed by our trainers by the end of last year.
Speaker Change: Our patient training staff is well equipped to introduce our therapies to patients and educate them on the juice. Thus we have been focused on signing more of these homebase demos to them.
Speaker Change: This was a significant contributor to sales productivity gains last year as we started 2023 with the Salesforce performing the majority of these pre sales demos in the home and ramp to approximately 30% of them performed by our trainers by the end of last year.
Daniel L. Reuvers: In the first quarter, we continued that momentum, completing 35% of in-home demos by trainers, allowing our reps to benefit from the added selling bandwidth. During the first quarter, we also continued to see a favorable response to our recently introduced products, particularly our Entrez Plus system. With Entrez serving as the entry-level treatment that many payers require the patient to try first, including Medicare, our focus on serving the patient wherever they enter the therapeutic funnel continues to pay dividends.
Speaker Change: In the first quarter, we continued that momentum completing 35% of in home demos by trainers, allowing our reps to benefit from the added selling bandwidth.
Speaker Change: During the first quarter. We also continued to see a favorable response to our recently introduced products.
Speaker Change: Particularly our entre plus system.
Speaker Change: With entre serving as the entry level treatment that many payers require the patient to try it first including Medicare our focus on serving the patient wherever they entered the therapeutic funnel continues to pay dividends.
Daniel L. Reuvers: We also saw a solid reception from our recently launched Comfort Ease garments to treat lymphedema for upper extremities, bringing relief to even more breast and head and neck cancer survivors. Before shifting to an update on airway clearance, it's worth noting that we achieved our lymphedema results in the first quarter despite being among the many health care companies impacted by the Change Healthcare cybersecurity breach within UnitedHealthcare's Optum branch that occurred earlier in the quarter.
Speaker Change: We also saw a solid reception from our recently launched comfort ease garments to treat lymphedema for upper extremities, bringing relief to even more breast and head and neck cancer survivors.
Speaker Change: Before shifting to an update on airway clearance.
Speaker Change: Worth, noting that we achieved our lymphedema results in the first quarter, despite being among the many health care companies impacted by the change healthcare cyber security breach within Unitedhealthcare and Optum branch that occurred earlier in the quarter.
Daniel L. Reuvers: On February 21, we were notified of a cyber event at Change, a third-party provider of technology used to verify patients' benefits and bill for medical insurance claims that led them to disconnect certain IT systems and services with customers, including Tactile Medical and Brightree, our external billing provider. We've been using Change Healthcare for electronic verification of patient benefits, while our actual claims processing and billing is conducted using Brightree. Upon learning of the cyber event, our team acted swiftly to address these operational gaps, pivoting to a new partner within days to conduct electronic benefits verification.
Speaker Change: On February 21st we were notified of a cyber event. It change a third party provider of technology used to verify patient benefits and bill for medical insurance claims that led them to disconnect certain I T systems and services with customers, including tactile medical and bright tree.
Speaker Change: Our external billing provider.
Speaker Change: We had been using change health care for electronic verification of patient benefits, while our actual claims processing and billing is conducted using breakthrough.
Speaker Change: Upon learning of the cyber event, our team acted swiftly to address these operational gaps pivoting to a new partner within days to conduct electronic benefits verification.
Daniel L. Reuvers: While Brightree was impacted by the cyber event, we again promptly found alternative ways to continue submitting claims, thereby further minimizing the impact on our patients, cash collections, and our broader operations. I'm proud of the way our entire team swiftly responded to this situation and believe it reflects the leadership in place at Tactile.
Speaker Change: While bright tree was impacted by the cyber event. We again promptly found alternative ways to continue submitting claims, thereby further minimizing the impact on our patients cash collections and our broader operations.
Speaker Change: I'm proud of the way our entire team swiftly responded to this situation and believe it reflects the leadership in place at tactile.
Daniel L. Reuvers: To have achieved our lymphedema growth this quarter with minimal disruption to both patients and our operations in the face of these unforeseen headwinds is a testament to our commitment to our tech-forward strategy and how nimble our organization has become. Now, a few comments on our airway clearance progress. As I mentioned earlier, our first quarter airway clearance results were slightly better than we expected thanks to the broad-based strength among most of our DME partners.
Speaker Change: To have achieved our lymphedema growth this quarter with minimal disruption to both patients and our operations in the face of these unforeseen headwinds is a testament to our commitment to our tech forward strategy and how nimble our organization has become.
Speaker Change: Now a few comments on our airway clearance progress.
Speaker Change: As I mentioned earlier, our first quarter airway clearance results were slightly better than we expected. Thanks to the broad based strength among most of our <unk> partners.
Daniel L. Reuvers: In fact, excluding the one large DME affected by the PHE waiver that we've discussed earlier, collective revenue from all other DME customers increased over 20% in the first quarter as compared to the first quarter of 2023. With respect to the DME customer whose ordering was particularly affected by the PHE waiver, we were pleased to see shipments continue to stabilize in the first quarter.
Speaker Change: In fact, excluding the one large <unk> affected by the Phe waiver that we've discussed earlier collective revenue from all other <unk> customers increased over 20% in the first quarter as compared to the first quarter of 2023.
With respect to the <unk> customer who's ordering was particularly affected by the phe waiver. We were pleased to see shipments continue to stabilize in the first quarter.
Daniel L. Reuvers: Over the long term, we continue to expect sustained growth from Aflovest, our airway clearance system, particularly following the anniversary of the PHE waiver expiration this May, when we anticipate the affected distributor will resolve the issue and no longer serves as a headwind to our growth. We remain focused this year not only on expanding our AfloVest sales specialist count but also onboarding additional DMEs and demonstrating how AfloVest can be a valuable new offering for their large base of existing complex respiratory patients. To that end, we made further investments during the first quarter in our sales specialist staff, increasing the number of airway clearance reps to 17 from just 12 a year ago.
Speaker Change: Over the long term, we continue to expect sustained growth from Aflow vest, our airway clearance system, particularly following the anniversary of the Phe waiver exploration. This may when we anticipate the effected distributor lapsed the issue and no longer serves as a headwind to our growth.
Speaker Change: We remain focused this year not only unexpected or aflow best sales specialists count, but also onboarding additional D M es and demonstrating how <unk> can be a valuable new offering for their large base of existing complex respiratory patients.
Speaker Change: To that end, we made further investments during the first quarter and our sales specialist staff, increasing the number of airway clearance reps to 17 from just 12 a year ago.
Daniel L. Reuvers: These investments in our sales team will help increase our coverage of existing DME customers as we educate, train, and support their reps on bronchiectasis and the role of AfloVest in their care, as well as to enlist even more branches to make AfloVest part of their treatment arsenal. Now, we will update you on another of our key focus areas for 2024. A number of our tech-related investments advanced in the quarter.
Speaker Change: These investments in our sales team will help increase our coverage of existing <unk> customers as we educate train and support their reps on bronchiectasis and the role of vast low best in their care as well as to enlist even more branches to make aflow vest part of their treatment Arsenal.
Speaker Change: Okay.
Speaker Change: Turning to an update on another of our key focus areas for 2024.
Speaker Change: A number of our tech related investments advanced in the quarter as.
Daniel L. Reuvers: As we shared during our February update, we're making strategic technology investments this year while still demonstrating leverage in our P&L, and they're progressing well. A portion of these investments involves enhancing various back-office processes, including our method of verifying patient benefits. As I mentioned earlier, we've recently transitioned to a new, more efficient electronic method of verifying benefits intended to accelerate order processing. Additionally, we've begun piloting an e-prescribing platform to streamline how we collect and exchange patient medical records with payers during the prescription process. This is intended to make documentation and authorization easier for health care providers as well as our sales and internal teams.
Speaker Change: As we shared during our February update, we're making strategic technology investments this year, while still demonstrating leverage in our P&L and they are progressing well.
Speaker Change: A portion of these investments involve enhancing various back office processes, including our method of verifying patient benefits.
Speaker Change: As I mentioned earlier, we have recently transitioned to a new more efficient electronic method of verifying benefits intended to accelerate order processing.
Speaker Change: Separately, we've begun piloting an E prescribing platform to streamline how we collect and exchange patient medical records with payers during the prescription process.
Speaker Change: This is intended to make documentation and authorization easier for health care providers as well as our sales and internal teams.
Daniel L. Reuvers: We also expect this to support our goal of maximizing our first-pass claims approval with Medicare, an area we've already made significant progress in over the last 18 months. As an update on Medicare, we continue to monitor the introduction and administration of the new Lymphedema Treatment Act. While we remain encouraged that it will bring more awareness and access to basic or conservative therapies, we continue to watch for any impact as the policy's interpretation emerges among Medicare administrators.
Speaker Change: We also expect this to support our goal of maximizing our first pass claims approval with Medicare and area. We've already made significant progress over the last 18 months.
Speaker Change: As an update on Medicare we continue to monitor the introduction and administration of the new Lymphedema treatment Act.
Speaker Change: While we remain encouraged that it will bring more awareness and access for basic we're conservative therapies, we continue to watch for any impact as the policies interpretation emerges among Medicare administrators.
Daniel L. Reuvers: That said, while our own local coverage determination, or LCD, has been in place for many years for lymphedema pumps, we've seen some subtle changes in how Medicare administers the policy. Our own movement toward an e-prescribing tool is intended to even more efficiently pair the necessary documentation with their adjudication process, striving for more efficiency among all parties. In fact, our recently deployed pilot across a handful of regions is off to an encouraging start. This tool will make the order and prescribing process easier for HCPs, while also positively impacting our Salesforce productivity. Given our reps and back office, we need to spend less time gathering patient documentation.
Speaker Change: That said, while our own local coverage determination or LCD has been in place for many years for lymphedema pumps, we've seen some subtle changes in how Medicare administers the policy.
Speaker Change: Our own movement toward an E. Prescribing tool is intended to even more efficiently pair the necessary documentation with their adjudication process striving for more efficiency among all parties.
Speaker Change: In fact, our recently deployed pilot across a handful of regions is off to an encouraging start.
Speaker Change: This tool will make the order and prescribing process easier for Hcp's, while also positively impacting our sales force productivity, given our reps and back office would need to spend less time gathering patient documentation.
Speaker Change: While broader deployment isn't expected until later in the year. We're excited about the impact it can have on our business in 2025.
Daniel L. Reuvers: While broader deployment isn't expected until later in the year, we're excited about the impact it can have on our business in 2025. We also remain on track to introduce a new Customer Relationship Management Tool, or CRM, later this year. While we have an incredible amount of data, we know that optimizing it for our users can improve internal communication, sales productivity, and ultimately growth. Among the benefits in mind, we expect to provide better visibility to both our sales and training teams, so we can more efficiently assign and deliver demos and training.
We also remain on track to introduce a new customer relationship management tool or CRM later this year.
Speaker Change: While we have an incredible amount of data, we know that optimizing it for our users can improve internal communication sales productivity and ultimately growth.
Speaker Change: Among the benefits in mind, we expect to provide better visibility to both our sales and trainer teams. So we can more efficiently assign and fulfill demos and trainings.
Daniel L. Reuvers: A CRM, along with Kylie, is also expected to help us follow each patient's journey, ensuring we introduce the right progression of therapy based on their progress. Our sales force is excited about these new tools and the ability to ultimately advance customer orders faster.
Speaker Change: Our CRM along with Kylie is also expected to help us follow each patient's journey, ensuring we introduced the right progression of therapy based on their progress.
Speaker Change: Our sales force is excited about these new tools and the ability to ultimately advance customer orders faster.
Speaker Change: Our product development efforts continued to advance as well.
Daniel L. Reuvers: Our product development efforts continued to advance as well. Development on our Next Generation Lymphedema Therapy Platform remains on track for a late 2024 introduction. It is expected to bring a host of new, lifestyle-friendly attributes to patients, even further improving the user experience and demonstrating our ongoing leadership in this space. We also continued to see patient uptake of our Kylie mobile application during the first quarter. At the end of the first quarter, we had over 26,000 unique user profiles registered in Kaila.
Speaker Change: Development on our next generation Lymphedema therapy platform remains on track for a late 2020 for introduction.
Speaker Change: It is expected to bring a host of new lifestyle friendly attributes to patients even further improving the user experience and demonstrating our ongoing leadership in this space.
Speaker Change: We also continued to see patient uptake of our Kylie mobile application during the first quarter.
Speaker Change: At the end of the first quarter, we had over 26000 unique user profiles registered in Kylie.
Daniel L. Reuvers: Moreover, we saw almost 50,000 user check-ins during the quarter. As a reminder, the Kiley application provides direct access to education resources and tools for patients to track symptoms and their disease progression. We continue to believe Kylie is an important part of their therapy experience. Now, a few updates on our clinical education and clinical evidence progress. On the heels of a record year for medical education in terms of patient and clinician engagement.
Speaker Change: Moreover, we saw almost 50000 user check ins during the quarter.
Speaker Change: As a reminder, the Kylie application provides direct access to education resources and tools for patients to track symptoms and their disease progression we.
Speaker Change: We continue to believe Kylie as an important part of their therapy experience.
Speaker Change: Now a few updates on our clinical education and clinical evidence progress.
Speaker Change: On the heels of a record year for medical education in terms of patient and clinician engagement.
Daniel L. Reuvers: We started 2024 off even stronger, reaching over 3,000 clinicians in the first quarter alone across our Lymphedema and AfloVas product lines. Our first quarter medical education programming was specifically focused on lymphedema and bronchiectasis diagnoses, their comorbidities, and available treatment. We also hosted a number of targeted CEU-eligible education events for respiratory therapists, focused on specific patient populations, including bronchiectasis, that drew over 200 attendees, as well as training on detecting radiation fibrosis for oncology clinicians. That attracted over 400 attendees.
Speaker Change: We started 2024 off even stronger reaching over 3000 clinicians in the first quarter alone.
Speaker Change: Across our lymphedema and Aflow avast product lines.
Speaker Change: Our first quarter medical education programming was specifically focused on lymphedema and bronchiectasis diagnosis their comorbidities and available treatments.
Speaker Change: We also hosted a number of targeted CE eligible education events for respiratory therapists focused on specific patient populations, including bronchiectasis that drew over 200 attendees as well as training on detecting radiation fibrosis for oncology clinicians that attracted over.
Speaker Change: 400 attendees.
Speaker Change: In addition to our progress on education, we continue to fortify the clinical evidence supporting the impact of our products on lymphedema patients.
Daniel L. Reuvers: In addition to our progress in education, we continue to strengthen the clinical evidence supporting the impact of our products on lymphedema patients. During the first quarter, we completed enrollment in our multi-center, randomized control clinical trial evaluating FlexiTouch Plus for the treatment of lymphedema among head and neck cancer survivors. With enrollment complete as of the end of last month, we now move to following these last in patients for six months before tallying all of the results.
During the first quarter, we completed enrollment in our multi center randomized control clinical trial evaluating flexi touch plus for the treatment of lymphedema, among head and neck cancer survivors.
Speaker Change: With enrollment complete as of the end of last month with 235 patients. We now move to following these last in patients for six months before tallying all of the results.
Daniel L. Reuvers: As a reminder, this trial compares the effectiveness of FlexiTouch versus standard of care over a six-month duration. Outcome measures include both physical improvements as well as bio-social quality of life results. With over 400,000 oral cavity and pharynx cancer patients currently living in the United States, and the majority likely to have or develop lymphedema, we remain committed to providing a more accessible path for those needing and seeking treatment. We're proud and enthusiastic about this trial so far, as it represents the largest randomized clinical trial ever conducted among head and neck lymphedema patients. The study has 10 enrolling sites, including preeminent cancer institutions like Vanderbilt, Johns Hopkins, and Rush University Medical Center.
Speaker Change: As a reminder, this trial compares the effectiveness of flexi touch versus standard of care over a six month duration.
[noise] outcome measures include both physical improvements as well as bio social quality of life results.
Speaker Change: With over 400000, oral cavity and fairings cancer patients currently living in the United States and the majority likely to have or develop lymphedema.
Speaker Change: We remain committed to providing a more available path for those needing and seeking treatment.
We're proud and enthusiastic about this trial so far as it represents the largest randomized clinical trial ever conducted among head and neck lymphedema patients.
Speaker Change: The study has 10 enrolling sites, including preeminent cancer institutions like Vanderbilt Johns Hopkins and Rush University Medical Center.
Daniel L. Reuvers: Given the six-month patient follow-up period, we expect initial results from the trial to be available near the end of the year and look forward to sharing additional details with you once available. We were also pleased to see results from a new clinical study among VA patients published in the Journal of Vascular Surgery last month. The study, a Foresight multi-center trial, followed 179 veterans with lymphedema that were being treated with Flexi-Touch. This is the largest ever peer-reviewed prospective study among lymphedema patients using pneumatic compression therapy, among the statistically significant findings.
Speaker Change: Given the six month patient follow up period, we expect initial results from the trial to be available in near the end of the year and look forward to sharing additional details with you once available.
Speaker Change: We were also pleased to see results from a new clinical study among VA patients published in the journal of vascular surgery last month.
Speaker Change: The study of fore sight Multicenter trial, followed a 179 veterans with lymphedema that were being treated with flexi touch.
Speaker Change: This is the largest ever peer reviewed prospective study among lymphedema patients using pneumatic compression therapy.
Speaker Change: Among the statistically significant findings.
Daniel L. Reuvers: Patients using Flexi-Touch therapy demonstrated improvements in quality of life, as well as decreases in cellulitis events and limb girth and improvements in skin changes. Patients were evaluated at four intervals over 52 weeks, and while compliance to self-MLD was well below 10% among subjects. It reflected 92% compliance with their FlexiTouch at four weeks, and 72% remain compliant 5 to 7 days a week even after a full year of therapy. These results not only reinforce the clinical efficacy of FlexiTouch on patients with varied disease levels but also underscore how the positive results patients experience with our therapies yield high compliance.
Speaker Change: Patients using flexi touched therapy demonstrated improvements in quality of life as well as decreases in cellulitis events and limb girdle <unk> and improvements in skin changes.
Speaker Change: Patients were evaluated at four intervals over 52 weeks and while compliance to self MLD was well below 10% among subjects.
Speaker Change: It reflected 92% compliance with their flexi touch at four weeks.
Speaker Change: 72% remain compliant five to seven days a week, even after a full year of therapy.
Speaker Change: These results not only reinforce the clinical efficacy of flexi touch on patients with very disease levels, but also underscore how the positive results patient's experience with our therapies yields high compliance.
Daniel L. Reuvers: Overall, I'm proud of the work our team accomplished surrounding all of our education and research initiatives, and I look forward to continuing to raise awareness at each of the payer, clinician, and patient levels as we progress through the year. With that said, Elaine will now review our first quarter financial results in more detail.
Speaker Change: Overall I'm proud of the work our team accomplished surrounding all of our education and research initiatives.
Speaker Change: And I look forward to continuing to raise awareness at each of the Payor clinician and patient levels as we progressed through the year.
Speaker Change: With that Alain will now review, our first quarter financial results in more detail.
Speaker Change: Helane.
Elaine M. Birkemeyer: Thanks, Dan. Unless noted otherwise, all references to first quarter financial results are on a GAP and year-over-year basis. Total revenue in the first quarter increased $2.2 million, or 3.8%, to $61.1 million. By product line, sales and rentals of lymphedema products, which include our Flexi-Touch and Entrez systems, increased $2.6 million, or 5.1%, to $52.3 million, and sales of our airway clearance products, which include our AfloVest system, decreased $319,000, or 3.5%, to $8.8 million. Continuing down the piano.
Elaine M. Birkemeyer: Thanks, Dan unless noted otherwise all references to first quarter financial results are on a GAAP and year over year basis.
Helane: Total revenue in the first quarter increased $2.2 million or three 8% to $61 $1 million.
Helane: By product line sales and rentals of lymphedema products, which includes our flexi touch an entre systems increased $2 $6 million or five 1% to $52 $3 million.
Helane: And sales of our airway clearance products, which includes our asphalt that system decreased $319000 or three 5% to $8 $8 million.
Helane: You mean down the P&L gross margin was 71, 1% of revenue compared to 75% in the first quarter of 2023.
Elaine M. Birkemeyer: Growth margin was 71.1% of revenue compared to 70.5% in the first quarter of 2023; non-gap growth margin, which excludes non-cash intangible amortization in both periods, was 71.6% compared to 71% in the prior year. The increase in non-gap growth margin was attributable to lower manufacturing and freight costs. First quarter operating expenses increased $1.1 million, or 2.5%, to $46.4 million. The change in GAAP operating expenses reflected a $1.1 million increase in sales and marketing expenses and a $0.8 million increase in reimbursement, general, and administrative expenses.
non-GAAP gross margin, which excludes noncash intangible amortization in both periods was 71, 6% compared to 71% in the prior year.
Helane: The increase in non-GAAP gross margin with.
What's attributable to lower manufacturing and freight costs.
Helane: First quarter operating expenses increased $1.1 million or two 5% to $46 $4 million.
Helane: The change in GAAP operating expenses reflected a $1 1 million dollar increase in sales and marketing expenses and 0.8 million dollar increase in reimbursement general and administrative expenses.
Elaine M. Birkemeyer: These items were partly offset by a $0.7 million decrease in non-cash intangible asset amortization and earn-out expense. Operating loss decreased $0.8 million, or 22.1%, to $3 million. The decrease in operating loss was driven by a $2 million or 4.7% increase in our gross profit, offset by the aforementioned $1.1 million increase in operating expense. Non-GAAP operating income excludes non-cash intangible amortization and earn-out expense, as well as certain non-reoccurring operating expenses.
Helane: These items were partly offset by a zero point $7 million decrease in noncash intangible asset amortization and earn out expense.
Helane: Operating loss decreased zero point $8 million or 22, 1% to $3 million. The decrease in operating loss was driven by a 2 million dollar or four 7% increase in our gross profit offset by the aforementioned $1.1 million increase in operating expenses.
Helane: non-GAAP operating loss decreased zero point $5 million or 22, 3% to $1 $7 million.
Helane: As a reminder, our non-GAAP operating income excludes noncash intangible amortization and earn out expense as well as certain non reoccurring operating expenses.
Elaine M. Birkemeyer: We provided a detailed gap-to-non-gap reconciliation in our earnings press release. Other income net increased $1.1 million, or 115.6%, to $0.2 million. The increase was due to higher interest income and lower interest expense, primarily driven by the retirement of a revolving line of credit at the end of 2022. Income tax benefit decreased $2.3 million, or 79.4% year-over-year, to $0.6 million, driven primarily by a lower taxable loss.
We provided a detailed GAAP to non-GAAP reconciliation in our earnings press release.
Helane: Other income net increased $1.1 million or a hunter at 15, 6% to 0.2 million. The increase was due to higher interest income and lower interest expense, primarily driven by the retirement of our revolving line of credit at the end of 2023.
Income tax benefit decreased $2 $3 million or 79, 4% year over year to zero point $6 million, driven primarily by a lower taxable loss.
Elaine M. Birkemeyer: Net loss increased $0.3 million, or 17%, to $2.2 million, or $0.09 per diluted share, compared to $1.9 million, or $0.09 per diluted share. Non-GAAP net loss increased $0.6 million, or 87.6%, to $1.3 million compared to $0.7 million. Adjusted EBITDA doubled to $1,000,000 or 1.7% of sales compared to $0.5,000,000 or 0.9% with respect to our balance. We had $60.7 million in cash and cash equivalents and $28.5 million of outstanding borrowings at quarter end. This compares to $61 million in cash and $29.3 million of outstanding borrowings as of December 31, 2023. We were pleased to see our cash position remain relatively constant since the end of 2023.
Helane: Net loss increased zero point, $3 million or 17% to $2.2 million or nine cents per diluted share compared to $1 $9 million or nine cents per diluted share.
Helane: non-GAAP net loss increased to zero point $6 million or <unk>, 87, 6% to $1 $3 million compared to zero point $7 million.
Adjusted EBITDA doubled to $1 million or one 7% of sales compare it to zero point $5 million or is there a 0.9% of sales.
Helane: With respect for our balance sheet, we had $67 million in cash and cash equivalents and $28 $5 million of outstanding borrowings at quarter end. This compares to $61 million in cash and $29 $3 million of outstanding borrowings as of December 31st 2023.
Helane: We're pleased to see our cash position remained relatively constant since the end of 2023.
Elaine M. Birkemeyer: This is particularly noteworthy when considering the one-time impacts in Q1 from several cash outflow items, including $6.6 million related to our annual bonus payout. As Dan mentioned earlier, our team made significant progress this quarter with cash collections and working down our accounts receivable balance even further, both of which help offset the one-time cash outflows as well as our strategic investments. Now, turning to a review of our 2024 Outlook, which we reaffirmed in our earnings press release today.
Helane: This is particularly noteworthy when considering the one time impacts in Q1 from several cash outflow items, including $6 $6 million related to our annual bonus payout.
Helane: As Dan mentioned earlier, our team made significant progress this quarter with cash collections and working down our accounts receivable balance even further both of which help offset the one time cash outflows as well as our strategic investments.
Helane: Turning to review of our 2024 outlet, which we reaffirmed in our earnings press release today.
Helane: We continue to expect full year 2024, our total revenue in the range of $300 million to $305 million representing growth of approximately 9% to 11% year over year.
Elaine M. Birkemeyer: We continue to expect full-year 2024 total revenue in the range of $300 to $305 million, representing growth of approximately 9% to 11% year-over-year. As a reminder, our 2024 total revenue guidance range assumes that growth in both our lymphedema and airway clearance product lines will be in a similar range. For modeling purposes for the full year 2024, we expect our gap growth margins to be up slightly as compared to the prior year, our gap operating expenses to increase by low double digits as we advance our tech-related investments throughout the year, interest income of approximately $0.4 million, a tax rate of 30%, and a fully diluted weighted average share count of approximately $24 million.
Helane: As a reminder, our 2024 total revenue guidance range, it seems that growth and thus our lymphedema and airway clearance product lines will be in a similar range for modeling purposes for the full year 2024, we expect our GAAP gross margins to be up slightly as compared to prior year, our GAAP operating expenses too.
Helane: Increased low double digits as we advance our Tac related investments throughout the year interest income of approximately zero point $4 million, a tax rate of 30% and our fully diluted weighted average share count of approximately 24 million shares.
Elaine M. Birkemeyer: We also continue to expect to generate adjusted EBITDA of approximately $33 to $35 million in 2024. Our adjusted EBITDA expectation assumes certain non-cash items, including Stock Compensation Expense of approximately $8.3 million, Changeable Amortization of approximately $3.9 million, and Depreciation Expense of approximately $3 million. With that, I'll turn the call back to Dan for some closing remarks. Thanks, Elaine.
Helane: We also continue to expect to generate adjusted EBITDA of approximately $33 million to $35 million in 2024.
Helane: Our adjusted EBITDA expectation assumes certain noncash items, including stock compensation expense of approximately $8 $3 million intangible amortization of approximately $3 $9 million and depreciation expense of approximately $3 million with that I'll turn the call back to Dan for some closing remarks.
Helane: Dan.
Daniel L. Reuvers: Thanks, Elaine. The first quarter was another opportunity for us to demonstrate continued progress across our key financial and operational priorities. I'm pleased with how the company is set up for further execution through 2024 and especially proud of the way our team continues to lead through change, all with the goal of delivering the best products and therapy possible for lymphedema and bronchiectasis patients. Before concluding our prepared remarks, I'd like to comment on the press release we issued on April 23rd announcing my retirement as of the end of June and the appointment of Tactile board member Sherry Dodd as the company's next Chief Executive Officer, effective July 1st.
Daniel L. Reuvers: Thanks, Helane the first quarter was another opportunity for us to demonstrate continued progress across our key financial and operational priorities I'm pleased with how the company is set up for further execution through 2024, and especially proud of the way our team continues to lead through change all with the goal of delivering that.
Daniel L. Reuvers: Best products and therapy possible for lymphedema and bronchiectasis patients.
Daniel L. Reuvers: Before concluding our prepared remarks I'd like to comment on the press release, we issued on April 23rd announcing my retirement as of the end of June and the appointment of tactile Board member Sherri Dod as the company's next Chief Executive Officer effective July 1st.
Daniel L. Reuvers: Sherry has an extensive track record as a healthcare industry veteran, having served in leadership roles at companies such as Medtronic and Johnson & Johnson, where she focused specifically on the chronic care space and developed health economics and reimbursement expertise.
Sherri Dod: Sure. He has an extensive track record as a health care industry veteran having served in a leadership roles across companies such as Medtronic and Johnson <unk> Johnson, where she focused specifically on the chronic care space and developed health economics and reimbursement expertise.
Daniel L. Reuvers: She's also developed a deep familiarity with our business through her service as a member of our board of directors since 2021. As a board member, she's contributed a thoughtful perspective to our current direction, and her experience will undoubtedly enable her to quickly focus on advancing strategies to drive Tactile's next phase of growth. I'm excited to welcome her to our new operating role and look forward to working with her to ensure a smooth, uninterrupted transition. Personally, I'm excited about my next chapter, including more time with my family, but I'll remain as an advisor to Sherry following our transition, as well as continuing to serve on our Board of Directors.
Sherri Dod: She has also developed a deep familiarity with our business through her service as a member of our board of directors since 2021.
Sherri Dod: As a board member she has contributed a thoughtful perspective to our current direction and her experience will undoubtedly enable her to quickly focus on advancing strategies to drive tactile next phase of growth.
I'm excited to welcome her to our new operating role and look forward to working with her to ensure a smooth uninterrupted transition.
Speaker Change: Personally I'm excited about my next chapter, including more time with my family, but I'll remain as an advisor to Sherri following our transition as well as continuing to serve on our board of directors.
Daniel L. Reuvers: Indeed, I remain heavily invested in the ongoing success of Tactile Medical, and my interests remain aligned in delivering shareholder value. Stepping back, I'm proud of what we've achieved during my tenure at Tactile. We refreshed our best-in-class product portfolio across the pneumatic compression segment, added HFCWO vest therapy to treat bronchiectasis, advanced clinical evidence, and served thousands of new patients in both segments.
Speaker Change: Indeed, I remained heavily vested in the ongoing success of tactile medical and my interests remain aligned in delivering shareholder value.
Speaker Change: Stepping back I'm proud of what we've achieved during my tenure at tactile, we refreshed our best in class product portfolio across pneumatic compression segment added H F. C. W will vest therapy to treat bronchiectasis.
Daniel L. Reuvers: We have also assembled a world-class leadership team, strengthened our balance sheet, and have delivered solid growth in both revenue and profitability. Our progress and momentum underscore my confidence in Tactile's future. I believe the company is well positioned and on track to deliver consistent, sustainable, and profitable growth in 2024 and beyond. We have clear and actionable initiatives in place to help fuel this growth, and the right leaders in the right seats to execute it.
Speaker Change: Advanced clinical evidence and serve thousands of new patients in both segments.
Speaker Change: We also assembled a world class leadership team strengthened our balance sheet and have delivered solid growth in both revenue and profitability are.
Speaker Change: Our progress and momentum underscore my confidence in tactile future.
Speaker Change: I believe the company is well positioned and on track for delivering consistent sustainable and profitable growth in 2024 and beyond.
Speaker Change: We have clear and actionable initiatives in place to help fuel this growth and the right leaders in the right seats to execute it.
Speaker Change: I'd also like to take this opportunity to thank the tactile team.
Speaker Change: It's been humbling to have been able to attract such capable talent across the organization.
Speaker Change: And the passion they bring to our mission every day is inspiring.
Speaker Change: I'm certain there will continue to deliver for patients and shareholders.
Daniel L. Reuvers: I'd also like to take this opportunity to thank the Tactile team. It's been humbling to have been able to attract such capable talent across the organization, and the passion they bring to our mission every day is inspiring. I'm certain they'll continue to deliver for patients and shareholders. And with that operator, we'll now open the call for questions.
Speaker Change: And with that operator, we'll now open the call for questions.
Speaker Change: Thank you.
Operator: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our ears. 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 again by pressing star 1. And our first question will come from Adam Maeder with Piper & Sandler. Please proceed with your question.
Speaker Change: You'd like to ask a question. Please signal by pressing star one on your telephone keypad.
Speaker Change: 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.
Speaker Change: I'd like to ask additional questions. We invite you to ask yourself into the queue again by pressing star one.
Speaker Change: And our first question will come from Adam Maeder with Piper Sandler.
Adam Carl Maeder: Please proceed with your question.
Hi, Dan Malloy and good afternoon, and thank you for taking the questions. Congrats on the nice start to the year and Dan It's been a pleasure certainly wishing you well in retirement.
Adam Carl Maeder: Hi Dan and Elaine, good afternoon, and thank you for taking the questions. Congratulations on the nice start to the year, and Dan, it's been a pleasure wishing you well in retirement.
Adam Carl Maeder: I wanted to start on the modeling side.
Adam Carl Maeder: I wanted to start on the modeling side, for you, Elaine, or Dan, but I wanted to ask about the phasing of quarterly revenue for the rest of the year. And for Q2 specifically, I show consensus at about $73 million, which is, I think, close to a 20% increase sequentially quarter over quarter. So, wondering if you have any comment on the phasing of revenue on the top line? And then, you know, similar question as it relates to adjusted EBITDA. I know margins in Q1 are seasonally weaker, but just help us kind of bridge to that 33 to 35 million guidance for the full year 24 and then add a follow-up. Thanks.
Speaker Change: But for you Elena or Dan.
Speaker Change: Wanted to ask about phasing of quarterly revenue for the rest of the year and for Q2, specifically I shall consensus at about $73 million.
Speaker Change: Which is I think close to a 20% increase sequentially quarter over quarter. So wondering if you have any comment to the phasing of revenue on the top line and then similar question as it relates to adjusted EBITDA.
Speaker Change: Margins in Q1 are seasonally weaker, but just help us kind of bridge to that $33 million to $35 million guidance for the full year 'twenty four and then I had a follow up thanks.
Speaker Change: Yeah.
Daniel L. Reuvers: Yeah, thanks, Adam, for the questions. I'll take a shot at the beginning and let Elaine kind of clean up on this one.
Speaker Change: Thanks, Adam for the questions I'll take a shot at the beginning and let Elaine kind of back clean up on this one but you.
Daniel L. Reuvers: But I'd say that we continue to provide, as we're happy to reinforce, our guidance for the full year. I'm not going to necessarily provide quarterly guidance, but I think it's fair to expect some modest improvements in growth in both our pneumatic compression business, as well as in the AfloVest category. As is typical, you'd typically see some ramp into the second quarter and sequential improvements in revenue each of the next three.
Speaker Change: You know I'd say that we continue to provide us we're happy to reinforce our guidance for for the full year I'm not going to necessarily provide quarterly guidance, but I think it's fair to expect some modest improvements in growth in both our pneumatic compression.
Elaine: As well as in the Aflow vest category as well so.
Elaine: As is typical you know you'd typically see some ramp into the Q into the second quarter and sequential improvements in revenue each of the next three so I don't think anything terribly out of the ordinary in some of the kind of step.
Daniel L. Reuvers: So I don't think anything terribly out of the ordinary in some of the kind of step up that we've seen in the past. I think you had a question about operating income, as well. I think I'll let Elaine take a shot.
Elaine: Step up that that we've seen in the past I think you had a question about.
Elaine: Operating income as well I think I'll, let literally yet.
Elaine M. Birkemeyer: Yeah, I think as you mentioned, our first quarter is always the leanest in terms of profitability, so this followed a very similar pattern, but we were pleased to see that adjusted EBITDA did double from a year-over-year perspective, and as in years past, that adjusted EBITDA margin does continue to build.
Speaker Change: Yeah I think.
Speaker Change: As you mentioned, our first quarter, we're always on the Leanness in terms of profitability. So just followed a very similar pattern, but we are pleased to see that adjusted EBITDA did double from a year over year perspective, and you know as in years past that.
Speaker Change: Adjusted EBITDA margin does continue to build scientific yes, typically the back half is where we end up realizing the majority of our our.
Elaine M. Birkemeyer: Typically, the back half is where we end up realizing the majority of our operating contribution. It's been that way for the last few years. I think we were just happy to be able to see a healthy, positive number in the first quarter, which hasn't always been the case.
Speaker Change: Operating contribution it's been that way for the last few years I think we were just happy to be able to see a healthy positive number in the first quarter, which hasnt always been the case.
Speaker Change: Yes, good color there guys. Thank you for that and for the follow up wanted to ask about head and neck.
Adam Carl Maeder: Yeah, good, good color there, guys. Thank you for that. And for the follow-up, I wanted to ask about the head and neck. I guess it's a multi-part question here. First, can you just remind us that, you know, the key objective for that trial is to develop clinical evidence to support payer coverage, but I wanted to confirm that. And then, you know, when should we think about a potential contribution or impact commercially on your business?
Speaker Change: I guess, a multipart question here.
Speaker Change: First can you just remind us the key objective for that trial I believe its to develop clinical evidence to support payer coverage, but wanted to confirm that and then when should we think about a potential contribution or impact commercially to your business.
Adam Carl Maeder: Assuming a positive trial, is that beginning of 2025, back half 2025; presumably, there's some blocking and tackling with pairs? And lastly, would you expect this to be, you know, a tactile specific benefit, or would this lift the entire lymphedema category for head and neck?
Speaker Change: Assuming a positive trial is that the beginning of 2025 back half of 2025, presumably there is some blocking and tackling with Payors and lastly would you expect us to be.
Speaker Change: No.
Tactile specific benefit or would this lift the.
Speaker Change: Entire lymphedema category for head and neck. Thanks, so much.
Daniel L. Reuvers: Thanks so much for taking the question. Yep, thanks. Thanks for the question. Just to remind you, there's
Daniel L. Reuvers: Thanks for the question. Just to remind you, there are over 400,000 head and neck lymphedema patients or survivors in the United States. Evidence points to about 90% of them having or will develop lymphedema. The study that we just completed enrollment on, 235 patients, which is about 10 times as big as the pilot study we did a few years ago with really compelling results. We knew that a bigger N was likely going to be necessary to persuade the right audiences. And when you talk about who's the end market for this data, it's really threefold. Certainly, the first one is the payer.
Speaker Change: Yeah. Thanks, Thanks for the question just reminders about over 400000.
Speaker Change: Head and neck lymphedema patients or survivors in the United States evidence points to about 90% of them have or will develop lymphedema.
Speaker Change: This study is that we are that we just completed enrollment on 235 patients, which is about 10 times as big as the pilot study, we did a few years ago with really compelling results.
Daniel L. Reuvers: We want to make sure that we're demonstrating the kind of evidence that we think that a study like this can provide that makes sure that availability for patients becomes more readily accessible. We think that compelling outcomes should also influence HCPs. And the ability to ensure that they're screening for lymphedema and treating it when it's presented is an important step that is not necessarily commonplace in an awful lot of practices, even in some really well-regarded cancer facilities.
Speaker Change: We knew that a bigger N was likely going to be necessary.
Speaker Change: To persuade the right audiences and when you talk about who's the end market for this data it's really threefold certainly the first one is the payer we want to make sure that we're demonstrating the kind of evidence that we think that a study like this can that make sure that availability for patients becomes more readily.
Speaker Change: Accessible we think that compelling outcomes should also influence H C piece and the ability to.
Speaker Change: Ensure that their screening for lymphedema and treating it when presented.
Speaker Change: Is an important step where it's not necessarily commonplace in an awful lot of practices, even in some really well regarded cancer facilities and then certainly I think the patient awareness can benefit from this one as well I think from a contribution standpoint, theres a six month follow up.
Daniel L. Reuvers: And then certainly, I think patient awareness can benefit from this one as well. From a contribution standpoint, there was a six-month follow-up after the last patient came in, which was just about the end of April. So we have to go ahead and fulfill that period, and then we can start to see the data assembled and turned into some kind of a manuscript that can be made publicly available and either presented or published.
Speaker Change: After the last patient in which was just.
Speaker Change: Just about the end of April so.
Speaker Change: So we have to go ahead and fulfill that period and then we can start to see the data assembled and turned into some kind of a manuscript that can be made publicly available in either presented <unk> published.
Speaker Change: It's probably a back half 2025, a contributor but we ultimately believe that this one will have material impact I think on our on our business and I think the last part of your question is a particularly encouraging one while sometimes rising tides lift all boats. This is one that we think.
Daniel L. Reuvers: I think the last part of your question is a particularly encouraging one. While sometimes rising tides lift all boats, this is one that we think will particularly benefit from because, actually, a year or so ago, we got some new IP issued that really ring-fenced that part of the body. So any compression, pneumatic or otherwise, that treats the head and neck region of the body, we feel like we've really got that space protected. So this was an investment in helping more patients, but also one that we think we will uniquely benefit from.
Speaker Change: We will particularly benefit from because we are we actually shared a year or so ago, we got some new IP issued there.
Speaker Change: That really ring fenced that part of the body, so any compression pneumatic or otherwise that treats the head and neck region of the body we.
Speaker Change: We feel like we've really got that that space protected. So this was an investment in helping more patients, but also one that we think we will uniquely benefit from.
Speaker Change: Yeah.
Speaker Change: Thanks for the color Dan.
Speaker Change: Okay.
Speaker Change: Thank you.
Margarate Elizabeth Boeye: Thank you. Our next question comes from the line of Margarate Cagzor with William Blair. Please proceed with your question.
Speaker Change: Our next question comes from the line of Margaret.
Speaker Change: Okay.
Margaret: And Blair. Please proceed with your question.
Margaret: Hey, good afternoon, guys. Thanks for taking the question.
Margarate Elizabeth Boeye: Hey, good afternoon, guys. Thanks for taking the question. I guess just to start, it's partly a guidance question, you know, partly a, you know, growth outlook question, but you know, how do you get to the high and low ends of the guide? And I want to focus maybe a little bit more on Lymphedema. You know, how should we think about the cadence of impact for the new sales reps that you
Blair: I guess, just a garden, it's partly a guidance question partly.
Blair: Gross outlook question.
Blair: How do you get to the high and low end of the guidance and I want to talk maybe a little bit more on lymphedema, yeah, how should we think about the cadence.
Blair: In fact for the new sales reps that you hired obviously not a huge impact this quarter and maybe not huge next quarter, but you know as we get towards the second half of the years that the right planning or further out.
Margarate Elizabeth Boeye: Obviously, not a huge impact this quarter, maybe not a huge next quarter. But, you know, as we get towards the second half of the year, is that the right timing or further out? And, you know, just in general, as we think about the catalyst for Lymphedema, you know, how does this get to be that sustainable low double-digit plus growth? You know, I don't know if you can point to touch points to clinicians, you know, what's the relative number of those 3000 new products, etc. Just trying to frame that up a little bit.
Blair: Just in general you know as we think about the catalyst for lymphedema, Yeah, how does it get to be.
Blair: Sustainable low double digit plus growth.
Blair: I don't know if you can point to touch points to coalition.
Blair: The relative number of about 3000, new products et cetera, just.
Blair: Trying to frame that up a little bit.
Speaker Change: Hi, Thanks for the question Oh, we outlined several drivers of growth and yeah. We were pleased that we made good progress and all of them will be drivers that well on build sales over time, it's not overnight.
Elaine M. Birkemeyer: Hi, thanks for the question. We outlined several drivers of growth, and we were pleased that we made good progress. And all of them will be drivers that will build sales over time. It's not an overnight, large increase.
Speaker Change: To increase but again just to.
Speaker Change: Reiterate them.
Speaker Change: Our sales reps, we did add some actually in Q4, we started our hiring larger chunk in Q1, our plan to add a little bit more than half two with the plan of those coming on could maybe hit their full stride and have to I'd say your progressive Yeah. We are making continued progress in transitioning our in home Dan.
Elaine M. Birkemeyer: But again, just to reiterate, you know, our sales reps, we did add some, actually, in Q4, we started hiring a larger chunk in Q1. We'll plan to add a little bit more in half to the plan of those coming to maybe hit their full stride in half as the year progresses. We are making continued progress in transitioning our in-home demos to our trainers, and that is giving additional bandwidth to our sales reps. Our technology roadmap is well underway.
Speaker Change: Chu, our trainers and that is giving us additional bandwidth to our sales reps are our technology roadmap is well underway.
Speaker Change: As Dan talked about yeah, we are we've piloted and E. Prescribing tool, we will be launching a CRM later in the year are all things that again will start to help the momentum that's ear Park passes and then I know you wanted to mainly focus on lymphedema, but also alpha vaccine.
Elaine M. Birkemeyer: As Dan talked about, we've piloted an e-prescribing tool, and we will be launching a CRM later this year. In the year, all things that will start to help the momentum as the year progresses. And then I know you want to mainly focus on lymphedema, but also an outfit. You know, as we've been talking about, we expect either to recover that business in the back half of the year as well.
Speaker Change: We've been talking about we expect the recovery in that business in the back half of the year with Paul.
Margarate Elizabeth Boeye: And I'm going to push on this second time, and again, maybe it's just my, you know, more simplistic mindset, but, you know, if you're growing your sales reps by 9%, and, you know, realistically, I would assume revenue growth should grow at least 9%, especially if you highlight these time efficiencies and other efficiencies within the system to, you know, try to accelerate that more. So, am I understanding that correctly, and that's kind of how you get to that double-digit growth? Yeah, I think that's right, Margarate.
Speaker Change: And I'm Gonna push second time long question and again, maybe it's just my you know more simplistic mindset, but you know if you're growing your sales reps nine for something.
Speaker Change: Realistically I would assume revenue growth should grow at least 9%, especially as you highlight these time efficiency.
Speaker Change: Efficiency within the system.
Speaker Change: You know try to accelerate that more so am I understanding that correctly and that's kind of how you bridge to that double digit growth.
Elaine M. Birkemeyer: I mean, when you think about the fact that, yeah, we're adding reps, but we know that typically it takes a couple quarters for their productivity to kick in once they get fully trained, so that's really a back-half kind of contribution item. And then the productivity piece that we really benefited from last year, which was starting to get the patient trainers to take some of these in-home demos, our goal is to actually continue to expand that in the back half, which should give us some additional productivity gains on top of a bigger head count.
Speaker Change: Yeah, I think that's.
Speaker Change: I think that's right Margaret I mean, when you think about the fact that yeah, we're adding reps, but we know that typically it takes a couple of quarters for their productivity to kick in once they are they get fully trained so it's really a back half kind of contribution item and then you know the productivity piece that we really benefited from last year, which was.
Speaker Change: You're starting to get the patient trainers to take some of these in home demos. Our goal is to actually continue to expand that in the back half, which should give us some additional productivity gains on top of a bigger head count and you know I think.
Elaine M. Birkemeyer: And I think we know we had the toughest comp in Q1. So, yeah, I think if you look at the guidance that we reaffirmed, clearly, we're going to have to do better in the back half. So all of those assumptions are embedded in that.
Speaker Change: We know we had the toughest comp in Q1.
Speaker Change: So yeah I think if you look at the guidance that we reaffirmed clearly we're gonna have to do better in the back half so all of those assumption.
Speaker Change: Assumptions are embedded in that.
Speaker Change: Okay. That's that's helpful and I think I'm trying again best of luck in requirement I think we're all telephone Nicolas.
Margarate Elizabeth Boeye: Okay, that's helpful. And thanks for chiming in. Best of luck in retirement. I think we're all jealous of Nicola here, but it's for your future.
Margarate Elizabeth Boeye: You know, maybe just last one, you know, as we look at the adjusted EBITDA guide, which remained unchanged despite what seemed like a great quarter. You've increased your guidance a little bit on gross margin. You know, you clearly outlined a variety of drivers for margin expansion. So I'm just trying to get a sense, is that conservatism? You know, are you spending some of that upside, you know, and other optics items as you think about guidance throughout the year? Thank you. Yeah, so firstly, I think
Speaker Change: Sure.
Speaker Change: Maybe just last one you know as they look at the adjusted EBITDA that you know that remained unchanged. Despite what seemed like a great quarter, you've increased your guidance a little bit in gross margin and.
Nicolas: You clearly outlined a variety of drivers to see margin expansion. So.
Speaker Change: I'm just trying to get a sense is that is that conservatism or you're spending some of that upside you know in other opex items. When you think about guidance throughout the year. Thank you.
Speaker Change: Yeah. So firstly I think it's you know it's still early in the year. So I'm kind of the rationale for not changing the adjusted EBITDA guidance, but I think also as we think back to our last call. We talked a lot about this being an investment year and that continues to prove true and we do continue to.
Elaine M. Birkemeyer: Yeah, so firstly, I think it's, you know, it's still early in the year. So, kind of the rationale for not changing the adjusted EBITDA guidance. But I think also, as we talk, think back to our last call. We talked a lot about this being an investment year, and that continues to prove true. And we do, you know, continue to expect to see a leverage in productivity, but we will be reinvesting some of that savings to help fund our technology roadmap, as well as the additional hires that we made in the first.
Speaker Change: Expect to see a leverage and and productivity and thought we will be reinvesting some of that savings to help fund our technology roadmap as well as the additional hires that we made in the first half.
Speaker Change: I appreciate it.
Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Suraj Kalia with Oppenheimer and company. Please proceed with your.
Operator: Thank you. Please proceed with your call.
Speaker Change: Yes.
Operator: Dan, Elaine, can you hear me alright? Yes, we can.
Suraj Kalia: Yes can you hear me all right.
Suraj Kalia: We can.
Suraj Kalia: Perfect.
Suraj Kalia: Perfect. First and foremost, Dent, it's been a pleasure working with you all these years. I wish you a very healthy and enjoyable time.
Suraj Kalia: First of all most Dan it's been a pleasure working with you. All these years Vichy is very healthy.
Suraj Kalia: L D and enjoy the retirement.
Suraj Kalia: Hey Dan, just following up on the head and neck line of questioning. So if memory serves me right, in the pilot study, patients are required to use a pneumatic compression device twice a day. I guess, is the protocol the same in the pivotal studies? And also, if I could follow up on a sub part of this question, there are different measures for inflammation and swelling. I believe it's CT, you know, digital photography and grading and endoscopy and whatnot. Can you help us understand that, you know, how do you reconcile a difference between readings for the same patient using two different methodologies?
Speaker Change: Hey, Dan just following up on the head in that line of questioning.
Speaker Change: So if I.
Speaker Change: If my if memory serves me right in the pilot study patients are required twice a day.
Speaker Change: Use a pneumatic compression I guess.
Daniel L. Reuvers: Is the protocol the same in the in the pivotal study.
Daniel L. Reuvers: Also if I could follow up on a sub part of this question there are different measures for inflammation.
Daniel L. Reuvers: Formation, and and swelling I.
I believe that Cte you know digital photography and.
Daniel L. Reuvers: Grading in endoscopy and whatnot can you help us understand that you know how do you reconcile a difference between readings for the same patients using two different methodologies.
Speaker Change: Yeah, I think that so first of all it's not the exact same protocols as the pilot study, but what we saw in the pilot study was encouraging enough that we thought that this was a responsible investment and one that the market needed which is a bigger in on some of the evidence available in using pneumatic compression to try.
Daniel L. Reuvers: Yeah, I think that, first of all, it's not the exact same protocols as the pilot study, but what we saw in the pilot study was encouraging enough that we thought that this was a responsible investment and one that the market needed, which is a bigger N on some of the evidence available for using pneumatic compression to treat this part of the body. Quality of life characteristics are certainly part of that. There are also some changes in skin swelling, et cetera, but all of those would be part of some of the outcome metrics that the study is evaluating.
Speaker Change: This part of the body.
Speaker Change: They are life characteristics are certainly part of that there's also some changes in skin swelling et cetera.
Speaker Change: But all of those would be a would be part of some of the outcome metrics that this study is evaluating.
Speaker Change: Got it okay.
Suraj Kalia: Got it. Okay.
Speaker Change: Okay.
Speaker Change: In terms of the Nextgen flex it that showed that.
Speaker Change:
Speaker Change: Can you give us a sneak peek in terms of the upgrades.
Suraj Kalia: In terms of the next-gen Flexi-Dutch, Dan? Can you give us a sneak peek in terms of the upgrades? It is, is it more, you know, just in terms of form factor, or are you thinking about changing the algorithm per se, i.e. the time duration for a pneumatic compression, you know, maybe higher pressure, just kind of, you know, what the next gen, how should we think about the next gen system later this year and going into next year? Yeah.
Speaker Change: It just is it more.
In terms of form factor.
Speaker Change: How are you thinking about changing the algorithm per se I E.
Speaker Change: The time duration for pneumatic compression.
Speaker Change: Maybe higher pressure just kind of.
Speaker Change: But the Nexgen, how should we think about the next Gen system later, this year and going into next year.
Daniel L. Reuvers: Yeah, sure, Suraj. First, it's not necessarily a next-gen FlexiTouch. What we said is a next-gen pneumatic compression device, and the attributes that we've been focused on are trying to make this a much more patient-friendly experience. We know this is a lifestyle that the patient has to follow. They're using and depending on this therapy literally daily, for the most part, for life.
Suraj Kalia: Yeah sure Suraj.
Speaker Change: It's not necessarily a nextgen flexi touch what we said is the nextgen pneumatic compression device.
Suraj Kalia: And the attributes that we've been focused on trying to make this a much more patient friendly experience. We know this is a lifestyle that the patient has to follow their using and depending on this therapy literally daily for the most part for life and we want to make sure that it integrates more seamlessly. So there's a what I would call a host of can.
Daniel L. Reuvers: And we want to make sure that it integrates more seamlessly. So there's what I would call a host of consumer-friendly attributes. We're being a little bit cautious about some of the details until the product is closer to launch, but yeah, I think that the components that we've assembled, we're quite enthusiastic about what kind of reception we can get from our customers.
Suraj Kalia: Fair enough. And then, the final question from my side in terms of you, I think, as I heard in the prepared remarks.
Suraj Kalia: Sumer friendly attributes.
Suraj Kalia: We're being a little bit cause.
Suraj Kalia: Cautious about some of the details until the product is closer to launch, but yeah. I think that are the components that we've assembled we're you know we're quite.
Suraj Kalia: Quite enthusiastic about what kind of reception, we can get from our customers.
Speaker Change: Fair enough and then final question from my side in terms of <unk> I.
Speaker Change: I think so I heard in the prepared remarks.
Suraj Kalia: The home training gone from 30 to 35% by the trainers, leaving the sales guys, you know, more bandwidth. You know, obviously, VA and commercial saw pretty nice growth. What kind of a correlation should we think about quantitatively, you know, between bandwidth being freed up over time for the existing 250 or so sales reps in the lymphedema part of the business? Thank you for taking my question. Sure, Suraj, good question. Remember last year we grew by 14,000.
Speaker Change: The home training gone from 30% to 35% by the trainers, leaving the sales guys more bandwidth.
Speaker Change: Obviously, VA and commercial saw pretty nice growth.
What kind of a correlation should we think about quantitatively.
Speaker Change: Between bandwidth being freed up over time.
Speaker Change: Existing 250, or so sales reps in the lymphedema part of the part of the business. Thank you for taking my questions.
Speaker Change: Sure Suraj. Good question remember last year, we grew 14% in lymphedema and we didn't raise head count at all and I think that that's really indicative of the kind of expanded productivity that giving the sales force more selling time is capable of.
Daniel L. Reuvers: Sure, Suraj. Good question. Remember last year we grew 14% in lymphedema, and we didn't raise the head count at all. And I think that that's really indicative of the kind of expanded productivity that giving the sales force more selling time is capable of. We were up to 35% with our patient education coordinators in the first quarter, and our goal is to continue to expand that. Ideally, I'd like to see us get to 50% by the end of the year.
Speaker Change: We were up to 35% with our patient education coordinators in the first quarter and our goal is to continue to expand that ideally I'd like to see us get to 50% by the back part of the year and ultimately that should continue to free up our sales force.
Daniel L. Reuvers: And ultimately, that should continue to free up our sales force from all of the home visits that they're doing and spend more time in high-volume clinics that see a high volume of the kind of patients that we can help. So I think those are kind of the key pieces.
Speaker Change: From all of the home visits that Theyre doing and spend more time in high volume clinics that see a high velocity of the kinds of patients that we can help them.
Speaker Change: So I think those are those are kind of the key pieces and you know the other thing I would add is that we have not had to add as many patient trainers to expand this capacity because one of the things that we've seen is the patient trainers tend to do a really comprehensive demonstration that has led to fewer.
Daniel L. Reuvers: And the other thing I would add is that we have not had to add as many patient trainers to expand this capacity because one of the things that we've seen is that patient trainers tend to do a really comprehensive demonstration that has led to fewer in-home trainings after the device has been shipped to the patient. So keep in mind there's a pre-sales demo that we're obligated to do for Medicare patients, and then there's a post-sales training.
Speaker Change: In home trainings. After the device has been shipped to the patient so keep in mind, there's a pre sales demo that we're obligated to do for Medicare patients and then Theres a post sales training, most or not most but certainly more of our patients are finding themselves capable of.
Daniel L. Reuvers: Most, or not most, but certainly more of our patients are finding themselves capable of using their therapy right out of the box with the Quick Start Guide and the available online tools, having gotten a really comprehensive demo. So if you've got a trainer that now doesn't have to do that post-sales training because they just did a really good job on the pre-sales demo, it certainly continues to allow us to expand capacity from within that existing group as well.
Speaker Change: Using their therapy right out of the box with the quick start guide and the available online tools, having gotten a really comprehensive demo.
Speaker Change: So if you've got a train or is it now doesn't have to do that post sales training because they just did a really good job on the pre sales demo.
It certainly continues to allow us expanded capacity from within that existing group as well.
Speaker Change: Thank you.
Speaker Change: Thank you Raj.
And our next question comes from the line of Ryan Zimmerman with <unk>. Please proceed with your question.
Ryan Benjamin Zimmerman: And our next question comes from the line of Ryan Zimmerman with BTIG. Please proceed with your question.
Ryan Benjamin Zimmerman: Good afternoon, thanks for taking the question.
Ryan Benjamin Zimmerman: Good afternoon. Thanks for taking the question. Dan, congrats on the retirement. Expect a lot of pictures of the grandkids. I want to talk about...
Ryan Benjamin Zimmerman: Then Ah congrats on the retirement and spent a lot of pictures of the grandkids.
Speaker Change: Wanted to talk about.
Daniel L. Reuvers: Long-term Margin Targets, or long-term targets, really. I know we have Sherry coming in, but I think one of the things that investors are probably going to be concerned about is just the commitment to these long-term targets that you guys established late last year. And so I know you're staying on the board, and you're involved. Maybe you can just kind of opine on what the thought process is right now, with obviously the caveat that Sherry's coming in as CEO.
Speaker Change: Long term.
Speaker Change: <unk> targets, our long term targets.
Speaker Change: I know, we have sherri coming in but I think one of the things that investors are probably going to be concerned about is just.
Speaker Change: <unk> to these long term targets that you guys established late last year and so.
I know you're staying on the board you're involved maybe you can just kind of opine on.
Speaker Change: What's the thought process is right now.
Speaker Change: With the obvious caveat that share is coming in as CEO.
Daniel L. Reuvers: Sure, so I think they're to some extent apples and oranges, right? Mine's a personal decision and I think that as it relates to targets beyond 2024, I think the first one is, I know when Sherry gets into the seat she's going to be very focused on the same thing I am, which is delivering on our 2024 plan, so that's kind of project number one. I think as far as 2025, you know, we will clearly be providing guidance at the end of 2024 as we usually do in our normal cadence, but as far as the long-term targets are concerned, we established them in 22, not in 23, and we did it in the fall of 2022 with a particular intention, which is we were emerging from COVID and we wanted to make sure that we extended an expectation of ourselves beyond just 2023 that said, what do we expect within a normalized environment?
Speaker Change: Sure.
Speaker Change: So I think to some extent apples and oranges right minds, a personal decision and I think that as it relates to.
Speaker Change: Targets beyond 2024, I think the first one is.
I know when Sherry gets into the seats she's going to be very focused on the same thing I am which is delivering on our 2024 plan. So that's kind of a project number one.
Speaker Change: I think as far as 2025.
Speaker Change: We will clearly be providing guidance at the end of 2024 as we usually do in our normal cadence but.
Speaker Change: As far as the long term targets are concerned we established them in 'twenty two 'twenty three and we did it in the fall of 2022 with a particular intention which is we were emerging from Covid and we wanted to make sure that we extended an expectation of ourselves beyond just 2023.
Speaker Change: Said, what do we expect within a normalized environment.
Daniel L. Reuvers: We typically, I think historically, hadn't given long-term targets. The company had typically been on an annual cadence, but as I said, emerging from COVID, I think to your point, folks were curious about, okay, is this what 2023 looks like, or is this indicative of what we should expect on a longer-term basis? And what we laid out was a top-line growth rate in the teens. We said we wanted to continue to expand our operating margins and demonstrate stronger cash conversion, and I think just in that framework, those are really still very good sustainable targets for ourselves. So I know Sherry will be looking forward to providing 2025 guidance when we get a little deeper into 2024, but I think that we still think those are good sustainable targets for ourselves.
Speaker Change: We typically I think historically hadn't given long term targets.
Speaker Change: Company had typically been on an annual cadence, but as I said emerging from Covid I think to your point folks were curious about okay is this what 2023 looks like or is this indicative of what we should expect on a longer term basis than what we laid out was a topline growth rate in the teens. We said we are we want.
Speaker Change: To continue to expand our operating margins and demonstrate stronger cash conversion and I think just in that framework. Those are really still very good sustainable targets for ourselves.
Speaker Change: So I know sure you'll be looking forward to providing 25 guidance when we get a little deeper into 2024.
Speaker Change: But I think that we still think those are good sustainable targets for ourselves.
Ryan Benjamin Zimmerman: Okay, very helpful, and then the other big question is around margins. Your gross margins are up slightly this year, Elaine, as you alluded to. You do have, you know, you just talked about some of the features of this new system that's coming. Where do you see opportunity to improve your gross margins, maybe on a longer term basis? Because I think that's certainly important to drive in some of the expansion and even margin.
Okay.
Speaker Change: And then the other big question is around I think you know margins. Your gross margins are up slightly this year Lane as you alluded to you do have you know you just talked about some of the features of this new system that's come in.
Speaker Change: Where do you see opportunity to improve your gross margins maybe on a longer term basis, because I think that's certainly important to.
Speaker Change: Driving some of the expansion in EBITDA margin.
Speaker Change: Yes, I think maybe kind of two parts to the question here.
Elaine M. Birkemeyer: Yeah, so I think maybe kind of two parts of the question here. We did see improvements in growth margin this quarter, largely due to achieving scale on some of our new products and just the good work that our manufacturing team is doing in lowering COGS. We do expect to continue to see some of those drivers come into play for the remainder of the year, which is why we took up our outlook to slightly above-average growth from a year-over-year perspective.
We did see an improvement in gross margin this quarter.
Speaker Change: Largely due to achieving scale in some of our new products and just so you know good work that our manufacturing team is doing and lowering Cogs I. Yeah. We do expect to continue to see some of those drivers on that come into play for the remainder of the year, which is five <unk>.
Speaker Change: Check up our outlook to a growth of slightly above from a year over year perspective, I think longer term, we've always talked about gross margins.
Elaine M. Birkemeyer: I think longer term. We've always talked about growth margins. We're not a place we expected to see being the big growth driver of just the EBITDA expansion. Rather, it was continuing to get operating expense leverage. And while this year, our leverage will be relatively modest given it's a heavy investment year for us, longer term, these investments are going to allow us to continue to improve productivity in our sales force and our back office. And that will be the driver of the adjusted EBITDA operating margin growth going forward. I would just add, Ryan, that even the deployment on the pilot...
Speaker Change: Not a place we expected to see being the big growth driver of our adjusted EBITDA expansion, rather it was continuing to get operating expense leverage and while this year.
Speaker Change: Our leverage will be relatively modest given it's a heavy investment year for us longer term. These investments are going to allow us to continue to get productivity in our sales force and our back office and it really that will be the driver of the adjusted EBITDAR operating margin growth going forward I would just add Ryan that even the <unk>.
Daniel L. Reuvers: I would just add, Ryan, that even the deployment on a pilot basis so far of this e-prescribing platform is one of the really consequential pieces that we think will have an impact on our operating model. The more efficient we can create a process where we collect patient data from the HCP, the easier we can make it on them, and the more efficient we can process that order when it comes in. These are material contributors to operating expense reduction.
Deployment on the pilot basis. So far this E. Prescribing platform is one of the really consequential pieces that we think will have an impact on our operating model. The more efficient we can create a process, where we collect patient data from the HCP the easier we can make it on them and the more efficient we can.
Assess that order when it comes in those are material contributors to operating expense reduction.
Speaker Change: I know, we talk a lot about productivity gains within the sales force, but we have a material portion of our organization that sits in the back office and processes claims.
Daniel L. Reuvers: I know we talk a lot about productivity gains within the sales force, but we have a material portion of our organization that sits in the back office and processes claims on the administrative side. And I think the tech investments that Elaine's talking about have always been designed to be the drivers of expanding operating margins. So those are some of the other pieces I think that will certainly play into it.
Speaker Change: On the administrative side and I think the tech investments that elaine's talking about have always been designed to be the drivers of expanding operating margins. So those.
Speaker Change: Those are some of the other pieces I think that that will certainly play into it.
Thanks, guys.
Speaker Change: Mhm.
Speaker Change: Thank you. We are currently seeing no remaining questions. At this time that does conclude our conference for today. Thank you for your participation.
Operator: Thank you. We are currently seeing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.
Speaker Change:
Speaker Change: [music].