Q4 2024 Tactile Systems Technology Inc Earnings Call
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Speaker Change: Please stand by. Welcome, ladies and gentlemen, to the fourth quarter and fiscal year 2024 earnings conference call for Tactile Medical.
Speaker Change: At this time, all participants have been placed in a listen-only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly.
Speaker Change: I would now like to turn the call over to Sam Bentzinger, University Relations at Gilmartin Group, for a few introductory comments.
Please go ahead.
Sam Bentzinger: Good afternoon and thank you for joining the call today. With me from Tactile's management team are Sheri Dodd, Chief Executive Officer, and Elaine Birkemeyer, Chief Financial Officer.
Sam Bentzinger: Before we begin, I'd 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.
Sam Bentzinger: These 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, as filed with the Securities and Exchange Commission.
Sam Bentzinger: Such factors may be updated from time to time in our filings with the SEC, which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise.
Sam Bentzinger: 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.
Sam Bentzinger: 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 Sheri.
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Sheri: Thanks, Sam. Good afternoon, everyone, and welcome to our fourth quarter and full year 2024 earnings call. Here with me is Elaine Birkemeyer, our Chief Financial Officer.
Sam Bentzinger: We are pleased to report strong Q4 performance today, capping off a dynamic year for Tactile, where we delivered total revenue of $293 million, representing a 6.8% growth year-over-year.
Sam Bentzinger: In Q4, total revenue grew 10.2% year-over-year to $85.6 million. With respect to our Lymphedema business line, sales grew 11% year-over-year in the quarter, and we were up 18.1% on a sequential basis.
Sam Bentzinger: Q4 lymphedema results reflect strong commercial execution encompassing technology and workflow related investments, including growing adoption of our e-prescribing offering, the accelerated implementation of select tools from our new CRM, and reallocation of select back-office resources to support the increased field burden of non-selling administrative activities.
Sam Bentzinger: We also continue to see the benefits of our 2024 Channel Diversification Strategy with double-digit growth in the VA, commercial, and Medicare.
Sam Bentzinger: Further, we launched Nimble, our next generation basic lymphedema PCD offering in early October and we are pleased with how both clinicians and patients embrace the new platform for upper extremity symptoms. Our confidence continues to grow with the recent expansion of Nimble for lower extremity symptoms as well.
Sam Bentzinger: In airway clearance, sales of Aflovest were up 3.8% year-over-year and 8.8% sequentially.
Sam Bentzinger: We continue to see value in our AfloVest product as a proven, patient-friendly, and differentiated therapy offering that is clinically advantageous in the growing bronchiectasis market.
Sam Bentzinger: Coupled with an airway clearance sales organization that is highly tenured with deep product and disease knowledge, we believe we are well positioned to compete in this space as the number two market share leader.
Sam Bentzinger: We are focused on fortifying relationships with each of our top DME partners and penetrating further within these accounts to bring AfloVest to the 5 million diagnosed and undiagnosed bronchiectasis patients in the U.S.
Sam Bentzinger: Beyond double-digit top-line growth, our Q4 growth margins increased 310 basis points year-over-year.
Sam Bentzinger: Adjusted EBITDA grew 5.5% year-over-year, reflecting another consecutive quarter of year-over-year improvement. Cash and cash equivalents increased sequentially by $12.2 million, increasing our cash balance by $94.4 million to close out the year.
Sam Bentzinger: Notably, we achieved these results while also navigating, responding, and adapting quickly to an evolving Medicare policy environment.
Sam Bentzinger: The changes in the payer landscape that began in Q1 of 2024 proved to be a year-long headwind, but we remained focused throughout the year on what we could control, including execution of our Nimble Launch, completing our Head & Neck Study Enrollment and Follow-Up,
Sam Bentzinger: Publishing positive evidence differentiating Flexi-Touch clinical quality of life and compliance outcomes versus standard of care and delivering on our tech modernization agenda. At the end of the year, we're proud to have served over 79,000 patients.
Sam Bentzinger: Taken wholly, our financial and commercial execution in 2024 leaves us confident and well-positioned to further strengthen our market leadership in 2025 and over the long term while delivering sustainable, profitable growth.
Sam Bentzinger: As we look ahead, we anticipate full-year 2025 revenue to be in the range of $316 million to $322 million, representing year-over-year revenue growth between 8 and 10 percent on a full-year basis.
Sam Bentzinger: To achieve this, we have further benefited from the investments we made in 2024, focused on fortifying our business operations for scale and simplifying the patient, provider, clinician, and employee experience.
Sam Bentzinger: We have also finalized our lymphedema strategy for growth and have organized our work and teams around three strategic initiatives aimed at improving market access, driving further product innovation, and supporting patients during their entire care pathway.
Let's discuss these priorities in more detail.
Sam Bentzinger: At a high level, my experience as CEO over the past seven months has reinforced my conviction in our business fundamentals.
Sam Bentzinger: compelling market opportunity, and ability to further transform the care journey for the millions of patients suffering from a chronic progressive disease like lymphedema.
Sam Bentzinger: I've learned a lot during this time about the patient profile, including how patients initially come into the care pathway, how they are identified for our therapy, and what their experiences are after they receive one of our lymphedema solutions.
Sam Bentzinger: I have also learned more about the business, how we compete, why we win, and where additional growth opportunities exist for us to drive sustainable and profitable growth.
Sam Bentzinger: Taking all these learnings into view, I believe there are three clear priorities for us to focus on in 2025 that will further transform Tactile's ability to enhance the overall patient experience and support our growth moving forward.
Sam Bentzinger: These priorities include, number one, improving access to care for diagnosed and undiagnosed patients.
Sam Bentzinger: Number two, expanding the options available for diagnosed patients when they are determining the best way to proceed with treatment.
Sam Bentzinger: And number three, supporting patients more efficiently over a longer duration as they manage their lymphedema, including both prior to and during the order process, as well as after as they initiate therapy.
Sam Bentzinger: Remember, there is no cure for lymphedema. Once these patients develop the disease, they have it for life.
Sam Bentzinger: Taking these one at a time, our foundational priority is improving access to care. Our patients experience an unnecessarily protracted and complicated care journey, often beginning with time to initial diagnosis.
Sam Bentzinger: For the roughly 2 million Americans with a known diagnosis of lymphedema, we estimate there are roughly 20 million additional patients below the waterline who remain undiagnosed, suffering from chronic swelling, but likely unaware they have lymphedema, let alone know how to treat it.
Sam Bentzinger: In fact, the average patient in the U.S. with lymphedema is symptomatic for years, even before they get to a definitive lymphedema diagnosis. Once a diagnosis is made, patients often have a fragmented care journey that delays access to appropriate therapies.
Sam Bentzinger: Over time, we have seen an increase in the number of diagnosed patients in the U.S., which we attribute to expanded market awareness as opposed to growth in the actual number of patients with the disease.
Sam Bentzinger: With increased educational awareness, more clinicians are understanding how to both identify lymphedema in their patients and determine the appropriate care pathway, but this is not yet happening at a fast enough rate. We know there's work to be done.
Sam Bentzinger: More patients need an appropriate diagnosis. And once diagnosed, more patients need access to the right treatment options that best fit their condition.
Speaker Change: At Tactile, revealing and treating patients with underserved chronic conditions is our passion. And as the market leader, we recognize the responsibility to champion these efforts.
Sam Bentzinger: To do so, part of our strategy for 2025 includes key investments under the umbrella of improving access to care that will seek to further increase the percentage of diagnosed patients receiving PCD treatment.
Sam Bentzinger: The first way we're focused on improving access to care is through market development, which includes removing existing barriers through patient and clinician training and education.
Sam Bentzinger: To date, our efforts in this area have been focused on generating increased awareness at the clinician level, primarily through educational programming. Our medical affairs team has consistently made strong progress on this front, and 2024 was no exception.
Sam Bentzinger: Last year we hosted over 210 educational events focused on lymphedema diagnosis, its comorbidities, and its available treatments.
Sam Bentzinger: Through this programming, we were able to reach and train over 10,000 clinicians. In 2025, we plan to exceed that number with a goal to reach over 12,000 clinicians.
Sam Bentzinger: We believe our consistent investment in training and education has contributed to the growth in the overall diagnosed patient population that I mentioned earlier.
Sam Bentzinger: In tandem with clinical education, this year we will also increase focus on patient awareness, specifically through promoting the use of our Kiley patient engagement tool.
Sam Bentzinger: Kiley is a free tool available to anyone suffering from chronic swelling, including lymphedema, and provides patients a way to track symptoms and home-based therapy, and share results with their care team, regardless of which type of therapy they're using.
Sam Bentzinger: conservative therapy, compression therapy like tactile PCD, or even another type of compression therapy.
Sam Bentzinger: Kylie is also a powerful educational tool for patients who may be on the front end of their care journey, either undiagnosed or recently diagnosed, which includes information on lymphedema and its available treatments, so that patients can be informed when speaking with their clinician regarding their symptoms and self-management.
Sam Bentzinger: We believe increased utilization of Kylie will enable a more effective and connected care pathway for patients and their clinicians, and provide our organization more insights into opportunities to help support patients with product and service innovation.
Speaker Change: A second element of improving access to care is clinical evidence generation and dissemination. At Tactile, we are committed to driving evidence that supports the right products for the right patients.
Sam Bentzinger: In 2024, there were two published studies that supported the value of Flexi-Touch. One large study in the VA that we previously discussed.
Speaker Change: and a study published in November from Mayo Clinic, which showed statistical clinical benefit of Flexi-Touch after just one therapy session in patients with head and neck cancer related lymphedema.
Speaker Change: Further, our own RCT assessing FlexiTouch for head and neck lymphedema is progressing well and we will be starting the six-month data analysis this month.
Speaker Change: This is a significant trial and its potential implications are meaningful both for patients and for our business.
Speaker Change: Of the over 400,000 oral cavity and pharynx cancer patients in the U.S., 90% of them will have lymphedema. This is a large population of currently underserved patients who do not have access to adequate therapy.
Thank you.
Speaker Change: We believe the results from this trial will help influence payer policies, clinical guidelines, and overall provider and patient awareness, as well as improve access to care, more tangibly beginning in the second half of this year. We look forward to sharing the results of the study and expect commercial benefit once those results are peer-reviewed.
Speaker Change: And, as we move into the commercialization phase of Head & Neck, we are fortunate to benefit from a strong intellectual property moat, not only in PCDs, but also in this particular therapeutic area, which should help ensure our positioning in the Head & Neck space will be well protected from a competitive perspective.
Speaker Change: A third element of improved access to care is payer advocacy. This includes influencing policy changes where appropriate to further break down the barriers preventing access to care.
Speaker Change: Tactile has always taken a leadership role in this area and we had a particularly busy year in 2024.
Speaker Change: One of the biggest administrative hurdles we faced last year was the increased documentation required by the MACs through their interpretation of the LCD policy for PCDs, specifically around the completion of conservative therapy by patients before being eligible to move on to a lymphatic pump.
Speaker Change: As a reminder, conservative therapy is the most appropriate first treatment step to see if patients can be managed through exercise, manual lymphatic drainage, or compression garments before moving on to more advanced compression therapies.
Speaker Change: The MAC requirement under the LCD mandated all patients, regardless of disease severity, have four weeks of this conservative therapy, then four weeks of a basic pump trial, like Entrez+, before being eligible for an advanced pump like FlexiTouch.
Speaker Change: While the completion of conservative therapy has always been a long-standing requirement of the LCD, the MACs took a more stringent approach to interpreting the policy last year, requiring more specific documentation around the start and end dates that required our team to spend a greater time reviewing patient medical records to find this information.
Speaker Change: or working with the patient's physicians to gather if those details weren't originally included in the medical records. The requirement of a basic pump trial, even when the patient's etiology required lymphatic drainage support that was not remediated by a basic pump, was an administrative-driven access.
Speaker Change: to care for certain patients that could have otherwise benefited more quickly from an advanced compression device like FlexiTouch.
Speaker Change: In November, the LCD was officially retired and we are now back under one policy, the National Coverage Determination, which is a win for patients and a more positive policy environment for tactile. We believe our active approach to payer advocacy influences change and I am proud of the collective efforts from our team.
Speaker Change: Since the LCD's retirement, we have been in discussions with the MACs on their interpretation and intended approach to the NCD.
Speaker Change: The NCD represents a less restrictive, more patient-friendly coverage policy with fewer administrative burdens that has the potential to improve access to the right therapy options that are appropriate for each patient based on their individual symptoms and needs.
Speaker Change: For example, the NCD removes the requirement for all patients to try a basic pump therapy first, even if it wouldn't have been helpful for their symptoms, especially since basic pumps don't treat certain parts of the body.
Speaker Change: What this means is patients with unique characteristics, such as chest and trunk swelling, can progress from conservative therapy immediately to an advanced pump if their clinician believes this is an appropriate therapy for them.
Speaker Change: While the increased documentation around start and end dates of conservative therapy will remain under the NCD,
Speaker Change: We are confident we now have a much better understanding of how to navigate these requirements based on our 2024 experience.
Speaker Change: We had a steep learning curve in the middle of the year, but I was pleased that our Medicare sales grew 16% year-over-year in the fourth quarter, and we are up 83% sequentially over Q3, reflecting a return to a more normalized quarterly channel mix.
Speaker Change: As we enter 2025, we have a firm grasp in understanding what the MACs are looking for in terms of documentation.
Speaker Change: The final element to our Access to Care initiative is further streamlining the entire order process for an improved patient care experience.
Speaker Change: There are multiple phases involved in generating the patient referral, qualifying the referral based on payer requirements, completing all aspects of the order, and submitting the claim. And each phase has its own set of activities and interdependencies with the patient and clinicians.
Speaker Change: It's critical that we continue to simplify this process in order to convert all clinically appropriate referrals into orders and to minimize patient leakage from the funnel.
Speaker Change: Our second strategic priority for 2025 focuses on ensuring diagnosed patients have appropriate treatment options available to them based on their individual condition, symptoms, and needs after they come into the treatment funnel.
Speaker Change: Thanks to a strong history of continued product innovation, Tactile is well-equipped to treat lymphedema across the whole body with our historical portfolio of patient-centric solutions, including our current Flexi-Touch and Entrez Plus systems.
Speaker Change: However, we constantly seek to identify ways to improve the patient experience through our technology, and the recent introduction of our Lymphedema platform is a testament to delivering products designed specifically to meet the patient where they are in their care journey.
Speaker Change: As discussed last quarter, the first product launched on our new platform is Nimble, the next generation of our basic PCV.
Speaker Change: The first phase of Nimble's launch announced last year was targeted specifically for upper extremity lymphedema treatment.
Speaker Change: Since launch, NIMBL continues to generate enthusiasm among clinicians and patients. Both groups have shared that the connectivity to Kylie has been an effective way to increase patient therapy engagement and disease and treatment education.
Speaker Change: Two weeks ago, we expanded NIMBL's applicability to include patients with lower extremity lymphedema. As the largest segment, 16 million Americans suffer from chronic swelling in this region, and with NIMBL, these patients now have an effective and convenient at-home option that is easy to use.
Speaker Change: The features of Nimble for lower extremity are similar to the upper extremity garment using 94% less hosing than Entree Plus.
Speaker Change: This significant reduction makes the device easy to transport and store in the home so that patients can manage their condition on their own terms.
Speaker Change: We believe the full launch of Nimble will be a growth driver for us in 2025 and we look forward to sharing additional updates on uptake and patient and provider feedback over the coming months.
Speaker Change: Development of our next generation advanced pump remains in progress and we'll be sharing updates with respect to commercialization timing as we are able to. In the meantime, we remain committed to serving patients with our leading clinically proven Flexi-Touch advanced pump.
Speaker Change: Finally, our third strategic priority for 2025. We believe there's an opportunity for us to support patients more efficiently over a longer duration as they manage their lymphedema, both prior to and during the order process, as well as after they progress with their therapy.
Speaker Change: Several of the workflow-related investments we made in 2024 are specifically focused on this.
Speaker Change: In 2025, we will again be intentional in identifying new ways our team can best support the end-to-end patient journey and not just at the point of sale.
Speaker Change: As both a medical device company and a DME, we are involved at every step of the order process.
Speaker Change: To that end, we will focus more on how we serve patients across the whole care journey. And this starts with the initial point where we meet the patient, introducing them to our therapy and then helping them navigate the reimbursement qualification process so they can obtain the therapy affordably.
Speaker Change: We have already identified a few ways to best accomplish this, namely we're focusing first on optimizing our commercial organization and ensuring we have the right leadership, appropriately defined roles across our organization, and the balance of resources and tools to best enable success across the entire sales process.
Thank you.
Speaker Change: As announced today, we are making a change in our sales leadership with the promotion of Aaron Snodgrass to Senior Vice President of Sales, succeeding Sheri Fersler, effective today.
Speaker Change: Erin is a 10-year tactile veteran, having served in various sales and sales leadership roles, most recently as one of our Area Vice Presidents.
Speaker Change: He has a proven track record of sales performance and brings well-developed skills in creating, implementing, and executing sales and channel strategies, as well as building high-performance sales teams.
Speaker Change: He possesses a thorough understanding of our business and opportunities, and he's already earned an incredible sense of followership within the field sales team, as well as internal teams. I'm pleased to have him join our senior leadership team.
Speaker Change: I'll be working closely with Erin over the next several months reviewing our entire sales organization in greater detail and identifying areas of opportunity that could benefit from additional investment in people and technology.
Speaker Change: Part of that focus has and will continue to be on also ensuring we have appropriately defined roles and responsibilities across our field and back office teams so that we are resourcing each step of the clinician, patient, and order management workflow with the right resources deployed at the right time.
Speaker Change: To that end, beginning in Q4, and now moving forward, we are refining the tasks of our lymphedema field sales team into two even more specific roles, along with new nomenclature.
Speaker Change: account managers, and specialists, which we believe will help ensure internal alignment on selling versus support roles.
and the responsibilities for each.
Speaker Change: Account managers will focus their efforts on educating clinicians on the disease condition, referral network development, patient identification, clinical guidelines, and product features and benefits, while specialists will support account managers with clinician office support for documentation, e-prescribing onboarding, and in-clinic patient demo assistance.
Thank you.
Speaker Change: In Q4, we ended with 280 total field sales reps within our target range for the year and split between 169 account managers and 111 specialists.
Speaker Change: In 2025, we expect to invest further in specialist headcount to support the volume growth of our business.
Speaker Change: We fortunately continue to see strong referral generation through our account managers and additional specialist staff will help ensure pull-through and conversion of more of these leads into sales to drive growth.
Speaker Change: To be clear, we view the specialist role as an integral part of the revenue-generating sales order process, and an investment here is key to our growth.
Speaker Change: Supporting both our account managers and specialist staff are our patient education consultants, also known as PECs, who are separate from our field sales team and not included in our reported headcount. Our PECs, focused on in-home patient demos and patient training, continue to be a vital resource for our field sales team.
Speaker Change: In Q4, 52% of in-home demos were performed by our PECs, exceeding our goal for the full year. This compares to 48% in Q3 and up from 30% at the beginning of 2024. Increasing PEC utilization will continue to be a focus for us in 2025.
Speaker Change: These three strategic priorities are well underway, and we will continue to build out tactics to support execution resulting in increased referrals, yield, and ultimately revenue growth. With that, I will now have Elaine review our Q4 financial results in more detail and provide an overview of our guidance for 2025.
Elaine Birkemeyer: Thanks Sheri. Unless noted otherwise, all references to fourth quarter financial results are on a gap and year-over-year basis.
Elaine Birkemeyer: Total revenue in the fourth quarter increased $7.9 million or 10.2% to $85.6 million.
Elaine Birkemeyer: By product line, sales and rentals of lymphedema products, which includes our Flexi-Touch and Entrez systems, increased $7.6 million or 11% to $77.1 million.
Elaine Birkemeyer: and sales of our airway clearance products, which includes our AfloVest system, increased 0.3 or 3.8 percent to $8.5 million. Continuing down the P&L.
Elaine Birkemeyer: Gross margin was 75.2% of revenue compared to 72.1% of revenue in the fourth quarter of 2023.
Elaine Birkemeyer: The increase in growth margin was attributable primarily to lower manufacturing and warranty costs, a testament to improvements in product design and improving collections reflected in our revenue.
Elaine Birkemeyer: Fourth quarter operating expenses increased $7.6 million or 17.3% to $51.9 million. The change in GAAP operating expenses reflected a $2.6 million increase in sales and marketing expenses.
Elaine Birkemeyer: a $0.2 million increase in research and development expenses and a $4.8 million increase in reimbursement, general and administrative expenses including and primarily driven by strategic technology investments.
Operating income increased $0.7 million, or 6.1%, to $12.5 million.
Elaine Birkemeyer: Interest income increased $0.1 million or 10% to $0.9 million due to an increased cash position.
Elaine Birkemeyer: Interest expense decreased $0.4 million or 47.4% to $0.5 million primarily driven by the retirement of a revolving line of credit at the end of 2023.
Elaine Birkemeyer: Income tax expense decreased $0.3 million or 8.1% year-over-year to $3.3 million.
Elaine Birkemeyer: Net income increased $1.5 million, or 18.3%, to $9.7 million, or $0.40 per diluted share, compared to $8.2 million, or $0.35 per diluted share.
Elaine Birkemeyer: Adjusted EBITDA increased $16.2 million or 18.9% of sales compared to $15.4 million or 19.8% of sales.
with respect to our balance sheet.
Elaine Birkemeyer: We had another solid year of cash generation, adding over $33 million of cash even after sponsoring $3.5 million of stock buyback.
Elaine Birkemeyer: We had $94.4 million in cash and $26.3 million of outstanding borrowings at quarter end.
Elaine Birkemeyer: This compares to $61 million in cash and $29.3 million of outstanding borrowings as of December 31, 2023.
Elaine Birkemeyer: Our cash growth was driven by a combination of operating income and an increase in networking capital.
Turning to a review of our 2025 Outlook.
Elaine Birkemeyer: For the full year 2025, we now expect total revenue in the range of $316 to $322 million, representing growth of approximately 8% to 10% year-over-year.
Elaine Birkemeyer: We expect to see benefits from the strategic initiatives that Sheri outlined earlier to begin contributing to growth more meaningfully in the second half of the year.
Elaine Birkemeyer: Our 2025 total revenue guidance range assumes that growth for our lymphedema product line will be 8% to 10% and growth for our airway clearance product will be 6% to 9%.
Elaine Birkemeyer: For modeling purposes for the full year 2025, we now expect our gap gross margins to be approximately 74 percent.
Elaine Birkemeyer: Our GAAP operating expenses to increase mid-double digits as we invest in our sales organization and advance our tech-related investments throughout the year. Net interest income of approximately $2.5 million, a tax rate of 28%, and a fully diluted weighted average share count of approximately 24 million shares.
Elaine Birkemeyer: As a result of our continued investment in the business, we expect to generate adjusted EBITDA of approximately $35 to $37 million in 2025.
Elaine Birkemeyer: Our adjusted EBITDA expectation assumes certain non-cash items including stock compensation expense of approximately $8.8 million, intangible amortization approximately $2.4 million, and depreciation expense of approximately $4.3 million.
Elaine Birkemeyer: With that, I'll turn the call back to Sheri for some closing remarks. Sheri?
Sheri Fersler: Thanks, Elaine. In closing, we're pleased with our financial results and the progress made in 2024 against our operational and commercial priorities.
Sheri Fersler: This performance enabled us to serve almost 80,000 patients last year, and we look forward to serving even more in 2025 through our new growth strategies.
Sheri Fersler: Finally, before concluding my remarks, I'd also like to thank our employees for their collective efforts this past year. None of what we achieved would have been possible without them. Thanks as well to our customers and investors for their continued support. With that, Operator, we'll now open the call for questions.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate a line is in the question queue.
Speaker Change: You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment as we poll for questions, please.
Speaker Change: Our first question comes from the line of Margaret Taxor with William Blair. Please proceed with your question.
Speaker Change: Hey everybody, it's Naxon from Margaret. Thanks for taking the question. I just wanted to start on the 25 sales guide.
Speaker Change: There's a lot of moving parts with, you know, Nimble, e-prescribing tools, the NCB, maybe a next-gen Apple vest. So I just wanted to understand how you guys came up with the eight to ten percent for the guide and what makes you confident you can see growth accelerate to eight to ten percent versus the seven percent this year. Thanks.
Speaker Change: Hi Max, thank you. When we put together the guidance for 2025, we definitely did take into account
Speaker Change: and Janice Everything and we are also continuing to see our ability to generate the back office support. Whether that is a grant or community impact invaluable informed service obviously for
Speaker Change: You know, the right resources in the right place, as well as the e-prescribing tool. Just reduce the friction that's currently out there in the collection of documentation.
Speaker Change: And then two other points I'll say, one is then on the policy landscape.
Speaker Change: So, as we shared in the script, you know, there's been a lot of changes that have happened between the LCD and the NCD, and when we announced this in this change at our last earning calls, we still didn't have good understanding about how the MACs would be adjudicating the NCD. We have a lot better understanding now. We've had both training as well as engagement with the MACs, and as I shared on the script, we're feeling that there's going to be opportunity for patients who could benefit from an advanced pump. We'll have a more streamlined way to get there.
Speaker Change: It's still being conservative in our guidance here because we'll need to see what's written on paper versus how the MACs actually adjudicate, but we're feeling very positive it was the right decision for patients and for our business.
Speaker Change: And then you mentioned on Aflovesc, we do not have a product launch in 2025, but what we do have now is we'll have a full year of being under contract with the top 10 DMEs where that was not the case last year.
Speaker Change: So, I'm looking forward to seeing the growth both in lymphedema as well as in the Afovest pick up for 2025 and feel we have the right strategies behind that.
Speaker Change: Great, thanks. And just to follow up, if I may, on the e-prescribing tool, you know, you guys piloted that throughout 2024 and rolled it out in October. Can you just give us some color on, you know, how that progresses throughout 25, maybe a ballpark percentage of how many accounts are currently using it? Are you seeing, you know, quick adopters or should we think of that more as like a steady uptick?
Speaker Change: You know what we were really pleased to have piloted with multiple generations through majority of 2024 to fine-tune that tool so it was easy for physicians to use and it reflected their appropriate documentation for our providers and when we launched in October kind of nationally our reps were really happy to have that in their hands so that they could go and talk to prescribers so we're going to continue to focus on that we're not sharing a target in terms of the number there's certainly going to be some physicians
Speaker Change: some that aren't potentially going to adopt Parachute, and we'll not just have our entire efficiency on Parachute. We'll be looking at other tools, AI tools, etc, that help with that more efficient way of collecting the appropriate documentation.
Speaker Change: Something for everyone on the physicians even those that don't want to to adopt parachute
Speaker Change: Great, thanks for taking the question. Yeah, I appreciate it. Thanks, Max.
Speaker Change: Thank you. Our next question comes from the line of Adam of Made Air with Piper Sandler. Please proceed with your question.
Adam: Hi Sheri, Elaine, good afternoon and congrats on the finish of the year. Thanks for taking my questions.
Adam: I wanted to start with one on guidance and specifically adjusted EVDI guidance, which
I believe it's flat to down a couple million bucks.
Adam: You've driven really good leverage in the past year, so I guess the question is, why is 2025 different? And I heard some of the comments and the prepared remarks around.
Speaker Change: investments, you know, focused on access to care, specialist headcount growth, but still trying to get, I guess, my arms around the guide a little bit more and just wanted to flesh that out. And then as we looked at 2026,
Speaker Change: Should we expect adjusted EBITDA to grow and move in the right direction again? And then I had a follow-up. Thanks.
Thank you. Thank you.
Elaine Birkemeyer: Yeah, thanks Adam for the question. So I'll have Elaine weigh in on this as well. You know, there's been a really nice history with Tactile of improving EBITDA for years, right? So the business has gone from that focus on profitability and collections and has continued to show really nice gross margins as well as everything dropping to the bottom line on EBITDA.
Elaine Birkemeyer: Where we're at right now as I shared on this growth strategy We need to make and continue to make the right investments that's going to be both in people We talked about you know the role that our field team has not just in selling which is going to be that account manager tool management
Elaine Birkemeyer: people, but also the specialists, that collection, the documentation, that's more on the DME side, if you will, of our business. So we have a need to be investing in both the sales work as well as the documentation collection. Some of that can be leveraged from tools, some of it can be leveraged by back office support, and some of it is going to be by adding the appropriate headcount in the field. So that...
Elaine Birkemeyer: Investments that we're making is both in headcount from the specialist standpoint to make sure that we can collect that documentation quickly and move the patient through that order process quickly. So we don't have leakage of patients and we have the best possible experience. And then the investments will continue to be in modernizing our technology. So next phase is of CRM, which will bring us into.
Elaine Birkemeyer: cloud-based services, et cetera, is all in our pipeline for this year.
Speaker Change: I would just say, I think the EBITDA guy was a conscious decision that this was really the right time for us to make these investments in the organization. I think as Sheri mentioned, we spent the last couple of years is really
Speaker Change: both during both our P&L and balance sheet, and all the investments we're making are really going to help us have sustained long-term top-line growth as well as profit growth. And so everything that we're doing is kind of aimed at both, and we felt that, you know, both our cash flow and kind of where we've been in profitability affords us to be able to make those investments this year.
Speaker Change: I got it. That's really helpful, Culler. Thank you for all that and for the follow-up, I guess.
Speaker Change: And then, you know, as it relates to the head and neck opportunity, are you contemplating anything from head and neck into the back half of 2025 in the guide, or should we really view that as a potential upside lever? Thank you.
Speaker Change: Sure. I'll start with the head and neck piece. So, you know, as I mentioned, really pleased to be in the position now where patients have been enrolled, all the follow-up has taken place, locked down the database.
Speaker Change: We've submitted the two-month data into conferences for presentation, but the most important data is really going to be that six-month data for us. The six-month data is what the CMS had asked for in terms of what was going to be important
Speaker Change: and basically a criteria to help support two aspects of reimbursement. One is coding and the other is coverage. And so with that data and as soon as the six-month study is resolved, they still need to get presented.
Speaker Change: both in publication and or and or in conferences. So we were conservative in baking in any head-and-neck upside just because the timing of when that conference and acceptance.
Speaker Change: could be slightly varied. But again, we're super excited about this as a benefit for us. I mentioned the IP moat we have around this. I mentioned that the 90% of the 400,000 patients with head and neck cancer...
Speaker Change: are going to have lymphedema and we have a great product for them. So we'll need to work through all that, but I would say that that is going to be very conservative and it would be in the back half of the fiscal year.
Speaker Change: From a timing standpoint of everything else, very indicative of what's happened in the past where
Speaker Change: Not just because of the seasonality of our business in terms of Q4 being a bigger year because of the patient deductibles
Speaker Change: But the first part of the year, Q1, tends to be slow for that very reason because patients haven't yet met their deductible. So we'll have a normal cadence that I think you've seen in previous years.
Speaker Change: Growing pains as a team. Learn that tool with really increasing productivity as they become proficient, which we'll start to see as the year progresses.
Thanks for the color.
and Daniel Reuvers.
Speaker Change: Thank you. Our next question comes from the line of Ryan Zimmerman with BTIG. Please proceed with your question.
Speaker Change: Hi Sheri and Elaine, this is Izzy on for Ryan. Thanks for taking the questions.
Speaker Change: So just to start out, I was curious about the strength of the balance sheet. You know, it's pretty clear that you guys are going to be prioritizing investments back into the business with those priorities that you outlined in the prepared remarks, but I was curious if you could speak to your appetite around inorganic growth, if there's anything that, or any opportunities that you see there.
Speaker Change: Thanks Izzy and we definitely are very proud of the balance sheet and where we're at you know when I mentioned before we have the you know this underserved population
Speaker Change: You've got an underpenetrated population, and then you have a business that is profitable, has strong gross margins, has cash to invest back in the business, as well as, as you know, we did the stock buyback, another great.
thinking through would be very strategic investments based on
the scope of our business.
And so...
Speaker Change: We are not thinking of being a holding company with multiple small companies in this space. So the strategic investments will fall very much in line with the strategies for growth that I laid out. Investments that allow us to increase access to care, help support patients through their full care pathway, and this lifetime value. So that's where we'll be focused on any of those external inorganic spend.
Speaker Change: Helpful, thank you. And then as we look bigger picture for tactile, I was just curious if you feel that there's anything that might be underappreciated by the street in the story right now.
You know, I think that
and the growth in areas that could be.
Durable and sustainable growth at the same time, keeping profitability
Speaker Change: overall being able to make smart investments back in the business to help serve patients.
Speaker Change: That that is where we are. It's where we're planning to go I think the health of the of the balance sheet and health of the bottom line if you will has been kind of appreciated But what I've heard from the street is show me your plans to grow and I hope that I was able to outline that
Speaker Change: in talking about the strategic imperatives. We have to develop the market, and we have to do that through educating clinicians and educating patients, and we have to do it through having the right reimbursement landscape, and we have to do it from having the right technology and innovations, and it has to be easy to work with us.
Speaker Change: We have to be able to do all this quickly. So, that is all the things that we're working on, and I hope that the strategies that we've laid out will resonate with or straighten our investors, and they'll see our path to growth.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Kyle Balzer with B Riley Securities. Please proceed with your question.
Kyle Balzer: Great, thanks for taking my question. Maybe just following up on the guide for EBITDA.
Kyle Balzer: Obviously the top-line guide of 8 to 10 percent for sales with 8 to 10 being the length of deal in business and 6 to 9 percent for the airway clearance.
Speaker Change: Can you break out the kind of business outlook or profitability for each business as well, like you did on the top line? So, I think the guide for 25 EBITDA is about 11.2%. How does that look for AfloVest versus Lumpedino?
Thank you. Thank you. Thank you.
For more information visit www.FEMA.gov
Kyle Balzer: Hey Kyle, thanks for the question. We actually don't break out profitability by our product lines. We're a single segment reported business, so the only breakout we have is at that top line.
Kyle Balzer: Okay, got it. And so the growth of six to nine percent in the airway clearance business would imply, you know, share loss?
Kyle Balzer: a slight chair loss. I think that's growing a little bit slower than the market.
Speaker Change: Are there, since this is kind of a transition year from a profitability standpoint, since you're investing in the business, are there ways to kind of invest in the Aquavest business and enhance margins here, or have it become more of a meaningful contributor to the overall business?
Speaker Change: So I'd say a couple things about Aflo. So Aflo is accretive to our business. I don't know, maybe I misheard you, Kyle, by thinking that it wasn't profitable. So it is and always has been accretive to the business.
The
Speaker Change: You know, we play number two in this space with, you know, and in a market that is adding more technologies, which we actually think is a positive, because this, again, is a population that is underdiagnosed and underserved. So more patients becoming aware of bronchiectasis and physicians understanding what bronchiectasis is and knowing that these type of therapies can be beneficial. I think we have the exact right therapy.
Speaker Change: And, as I said, this year will be our first year of having a full DME, where our, sorry, full contracts with the top 10 DMEs, and even some of those DMEs we have a priority or preferred
Speaker Change: So I'm bullish on our ability to get to the growth as we outlined in the guide on AfloVest. Again, based on having a great product.
Speaker Change: based on having the depth of contracts and breadth of contracts with DMEs as well as again some of these DMEs have a prioritized preference for our product.
Speaker Change: Okay, yeah, and I wasn't saying that business wasn't profitable, I was just saying that the top line gross rate implies that it's growing slower than the overall market, so we're just kind of curious about that, but it sounds like, you know, you've got some good contracts in place to...
Speaker Change: Maybe I'll perform that potentially. It may be one last question. I on the patient education consultants. I think you finished
Speaker Change: The year you said that 52% of in-home demos being done by
Thanks.
Speaker Change: and that you hope to increase that. Is there a goal for kind of the end of this year to go north of 52%? Thank you.
Speaker Change: Yeah, we're not going to call out a specific number there. It's very hardwired in, and as we described, this role clarity that we're putting in place between the account managers, as well as the specialists.
Speaker Change: and the PECs, making sure that we understand and we do understand the work and jobs to be done and then making sure that we've got the right territory placement of all of those individuals and that they're working well as a team. So I fully expect that the PECs will be taking on more of the in-home demos. It'll be a big part of the overall strategies. And it's also a great opportunity when the PEC is side-by-side with the patient to actually help the patient on board with Kylie.
Speaker Change: just an app. Kylie is really a really unique patient engagement tool. The patient can take photos of their limbs, they can record measurements, they can talk about symptoms, they can track their entire therapy session. So the PECS being close and and proximal to those patients in the home will be a great opportunity of onboarding Kylie as part of their whole kind of care package.
Thank you.
Speaker Change: Okay, got it. Thanks for taking my questions. Appreciate it. Yeah, thanks Kyle.
Speaker Change: Thank you and as a reminder if anyone has any questions you may press star 1 on your telephone keypad. Doing so will join you into the Q&A queue to ask your question.
Speaker Change: Our next question comes from the line of Siraj Kalia with Oppenheimer & Company. Please proceed with your question.
Sherri, Elaine, thank you for taking my questions.
Siraj Kalia: So Sheri, a couple of questions from my side. The first one, you know, throughout your commentary,
Speaker Change: And even last quarter, you've mentioned and brought up many times the burden of documentation.
and specifically patient leakage.
Speaker Change: Sheri, can you put some guideposts around, you know, define patient leakage a little more for us? Just quantify it to the extent that you can.
Speaker Change: And also, you know, how should we think about leverageability implicit in the model because of, you know, if you reduce patient leakage?
Hi, Suraj. Thank you for the question.
Fun.
Speaker Change: When I talk about patient leakage, if you think about the entire journey of a patient, and we've mentioned before, it can take years sometimes for them to get to a diagnosis. They get in kind of a rule-out condition, they finally get a diagnosis, and the physician says, I think you would benefit from a pneumatic compression pump. Go.
Speaker Change: Well, the difference between, you know, a patient getting a pharmaceutical product was when the patient would go to the pharmacy and pick up a script.
Speaker Change: on our side, of course, because this is managed through DME.
Speaker Change: there is the documentation that the physician has to have that's going to meet the payer requirements. So that has to be in the record, and it isn't all the time in the record. So we mentioned before what happened with the LCD interpretation. The patient could have been on conservative therapy for months, but if it hadn't been documented the start date with measurements, and then the end date at four weeks with measurement, that patient had to redo that entire.
Speaker Change: episode of care, if you will. And so patients sometimes said, I'm dropping it, like, why do I have to do this all over again? I need something else. And then they may they may drop out. So that would be a potential leakage point.
Speaker Change: Once the patient does complete all the documentation, we have to qualify their insurance.
that insurance could take a while depending on the benefits.
Speaker Change: The patient has to be available for us to do the in-home demo, and that has to be done. So there's multiple steps that are part of the DME piece, and the longer that takes and the more protracted that is.
Speaker Change: there it becomes more chance the patient will just say, I give up, I'm done, and they drop out. That would be the leakage that I'm talking about. So it is in our interest and the patient's interest to make sure that we're collecting all the information up front.
Speaker Change: so that patient gets qualified and that we can move through all those processes quickly and with the right information for the patient so that they understand what's happening next, there's great communication all the way through, and then they can get onboarded with their product. I hope that's helpful.
Speaker Change: Got it. Sheri, one other thing, and I don't believe in your prepared remarks.
Speaker Change: You made any reference to the QI-TAM. Do we know the latest and greatest on whether the government is going to take it up? I think that there was a date coming for a decision and maybe my memory is failing me. Any update there would be great. Thank you.
Speaker Change: And at this time, the government has not chosen to intervene, which would mean that, you know, at the moment they haven't. They can intervene at any time, which means that they would take over the litigation. But right now, they have not chosen to intervene.
Speaker Change: Regardless of whether they intervene or they don't intervene, we'll defend the matters as they proceed, and we're still very early in the process.
Thanks, Sriracha.
Thank you.
Speaker Change: And this does, we have reached the end of the question and answer session and this also concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
The End
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