Q1 2025 Tactile Systems Technology Inc Earnings Call
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Please stand by. Welcome, ladies and gentlemen, to the first quarter of 2025 earnings conference call for tag-tile medical. At this time, all participants have been placed in a listen-only mall. 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 a replay shortly.
Speaker Change: I would now like to turn the call over to Sam Bentzinger and best relations at Gil Martin Group for a few introductory comments. Please go ahead.
Sam Bentzinger: Good afternoon and thanks for joining me today. With me, some Tactile's management team, Sheri Dodd, Chief Executive Officer, and Elaine Birkemeyer, Chief Financial Officer.
Speaker Change: 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, involvement, hair risks, and uncertainties.
Speaker Change: These could cause actual results to different materials from those indicated, including both identified in the risk factor section of our annual report of Form 10-Tay, as well as in most recent 10-2 filing to be filed with the Securities and Exchange Commission.
Speaker Change: Such factors may be updated from time to time on our filings with the SEC which were available on our website. We're going to take no opposition to publicly update or revise our forward listening statements as 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 gap. We generally further these as non-GAAP financial measures.
Speaker Change: Reconciliation of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with Gap are available in the earnings press release on the investor relations portion of our website. But that will now turn the call over to Sheri.
Sheri: Thanks Sam, good afternoon everyone and welcome to our first quarter 2025 earnings call. Here with me is Elaine Birkemeyer, our Chief Financial Officer.
Elaine Birkemeyer: In the first quarter total revenue grew 0.3% year-over-year to 61.3 million.
Sheri: In our lymphedema business line, revenue decreased 3% year-over-year to 50.6 million, and Airway clearance revenue increased 22% to 10.7 million.
Sheri: Q1 growth margins increased 290 basis points year-over-year, while adjusted EBITDA decreased 125% year-over-year, as expected, due to our planned technology and order process investments, including the launch of our new Salesforce CRM module.
Sheri: Ultimately, these investments will enable increased efficiency, speed, and data-driven analytical insights, all necessary components for mid and long-term growth.
Sheri: Meanwhile, we ended the quarter in a strong cash position with 83.6 million on the balance sheet. The 10.7 million sequential decreasing cash is attributable to stock buy back under our stock repurchase program.
Elaine Birkemeyer: Elaine will elaborate on our full financial results in greater detail shortly.
I'll focus my remarks in two categories for you.
Elaine Birkemeyer: A review of our business line performances including factors that impacted Q1 Lentidima results, the expected carry forward impact through the second quarter, and the rationale behind our full year of financial guidance revision.
Elaine Birkemeyer: I will also discuss market tailwinds and strategy execution milestones aligned with our key strategic priorities. We are making high-value investments and operational enhancements that will best position our business for mid and long-term success.
Elaine Birkemeyer: Beginning with the review of our lymphedema business line, lymphedema revenue declined on a year-over-year basis in the first quarter. The shortfall relative to initial expectations was driven by two primary factors.
Elaine Birkemeyer: First, due to a strategic optimization of our sales organization that we started in Q4 and completed this February , we experienced a decline in sales headcount, which resulted in a higher than expected headcount vacancy rate in Q1.
Elaine Birkemeyer: While sanitation is common earlier in the year, we saw an outsized impact this quarter. As I shared last quarter, we see value in investing in our sales organization with technology as well as resourcing with the right people in the right location and in the right type of role.
Elaine Birkemeyer: The first phase of the sales optimization process included an analysis of both our current and desired future state headcount with an eye on growth and future leverage.
Elaine Birkemeyer: During this phase, we paused on backfilling vacant roles until our rebalanced analysis was complete, avoiding prematurely placing resources that could be a mismatch in roles and location. The effect of this decision resulted in net fewer field resources.
Elaine Birkemeyer: as we ended the quarter with 264 total reps split between 161 account managers and 103 specialists. This compared to 280 total reps at the end of Q4.
Elaine Birkemeyer: We are working with a sense of urgency to mitigate the impact of vacant territories and accelerate efforts to achieve complete territory coverage
Elaine Birkemeyer: We have open head count requisitions aligned with the new territory alignment and have finalized role clarity for all customer facing roles.
Elaine Birkemeyer: We have staffed our talent acquisition team and we are already seeing positive talent acquisition metrics, including an increase in our sales head count from quarter end to 277 total reps currently [inaudible]
Elaine Birkemeyer: with an expectation to be over 285 total reps by the end of Q2 and over 300 by the end of 2025. This path will put the most resources in the field that Tactile has ever had, and is an investment we can leverage and optimize as we scale our revenue and technology toolkit.
Elaine Birkemeyer: We also expect our sales optimization strategies to have a beneficial impact on our lymphedema channel mixed dynamics.
Elaine Birkemeyer: As a reminder, our sales reps have callpoints across vascular and oncology practices, vein centers, and lymphatic therapists who treat patients across government and commercial payers [inaudible]
Elaine Birkemeyer: Our Territory Optimization provides an appropriate human capital roadmap to strategically invest in the right roles in the right locations to meet and drive demand.
Elaine Birkemeyer: The second factor in driving Q1 weakness was lower sales productivity as a result of the launch of a new Salesforce CRM module in mid-sebruary.
Elaine Birkemeyer: From an execution standpoint, we experienced a smooth launch and have received positive feedback on our training and change management plan.
Elaine Birkemeyer: While support and enthusiasm for the tools are strong, mastering any technology requires the learning curve and the resulting impact on productivity for our reps included time out of the field for training and onboarding.
Elaine Birkemeyer: Reps also experienced the retirement of the previous tools that they had used to navigate their business with the launch of the new CRM. The temporary impact of this transition has been more pronounced than we had originally anticipated.
Elaine Birkemeyer: With two months of direct hands-on experience, our reps are becoming more proficient, and we have data that supports early learning curve associated productivity gains associated with the new CRM.
Elaine Birkemeyer: We have additional training plans throughout the remainder of Q2 and continue to share analytic insights and easy to use guides for the reps to accelerate their competency.
Speaker Change: From a strategic perspective, I firmly believe we have made the right decision to pause head count replacements until we completed our current and future state sales analysis and action plan.
Speaker Change: I am also pleased that we delivered the launch of our Salesforce CRM module on time. Both of these actions encompass transformational change management initiatives that were necessary to advance our business over the short, mid and long terms.
Speaker Change: That said, I am disappointed that the cumulative effect of these factors pressured results in Q1 more than I had expected.
Speaker Change: Looking ahead, we also expect the transient impact of the sales vacancies and CRM implementation to affect our expected revenue growth throughout the second quarter. Specifically, we project revenue in the second quarter to be in the range of 73 to 76 million and a full year revenue to now be in the range of 309 to 315 million.
Speaker Change: I also want to touch on our Q1 Airway Clarence performance.
Speaker Change: Sales of Aflovest increased 22% year over year in Q1, a strong start to the year that underscores the quality of the product as well as the strategic execution and partnership growth with the top 10 DMEs in the market.
Speaker Change: For example, we have secured prioritized placement agreements with a select number of these DMEs that further validates Aflovest as a proven patient-friendly and differentiated therapy offering that is clinically advantageous to the growing bronchi-actasis market.
Speaker Change: This priority position with our DMEs continues to be strengthened by field activities with physicians, including educating clinical, training and marketing, and sales leaders at all levels of the organizations.
Speaker Change: In Q1, our team educated nearly 800 respiratory DME partners and clinical customers on bronchi practices and the benefits of afloat in its care.
Speaker Change: Finally, broader awareness of bronchiectasis and its available treatment options among patients and clinicians continues to increase. Aflovese treats the entirety of the bronchiectasis disease process, so we are confident in its clinical necessity for generating better patient outcomes.
Speaker Change: The category is growing. Our market share continues to strengthen and we are maintaining a strong number two position.
Speaker Change: In short, we are pleased with our Airway Clarence performance in Q1. We will remain focused on fortifying relationships with each of our top DME partners and penetrating further within these accounts to continue the strong growth through 2025 and bring AfloVS to the 5 million diagnosed and undiagnosed bronchiatricist patients in the US.
Speaker Change: With that backdrop on our Q1 lymphedema and airway clearance results, I want to provide an update on our three strategic priorities for growth
Improving Access to Care
Speaker Change: expanding treatment options and enhancing lifetime patient value. These three areas of focus are designed to unlock our Kalia, and enable scalable, profitable growth.
Speaker Change: We delivered tangible updates across each of these initiatives in Q1 and I will continue to provide updates on our progress throughout the year.
Speaker Change: Beginning with improving access to care, I want to build off the details from last quarter and provide highlights from three areas of focus, the first being human capital and technology investments to streamline the sales and order management process.
Speaker Change: We have routinely shared our progress on this front over previous quarters. In Q1, we again executed our strategies through the modernization of various workflows aimed at increasing efficiency of for both clinicians and our back office.
Speaker Change: Specific to Q1, we launched the sales for CRM Module in February , as mentioned earlier. This tool represents a substantial upgrade over the previous system and offers significant improvements in sales operations, such as streamlined workflows and visualization of task identification and completion status.
Speaker Change: Sales Rep Productivity will be enhanced with the tools data-driven decision analytic capabilities that informs the rep how best to focus their time and guides them to where the next best opportunity is to pursue.
Speaker Change: Our e-Berscribing platform, Parachute, is another example of a workflow tool designed to streamline the order process and more efficiently turn referrals into orders.
Speaker Change: We continue to see growing adoption of this tool, which we expanded from pilot to national rollout late last year.
Speaker Change: Since then, approximately a quarter of new orders of our basic pump, Entry Plus and now nimble, have been generated through this e-prescribing platform.
Speaker Change: Given its success since launch, we will be expanding parachutes e-prescribing functionality to our advanced pump flexi-tuts this year, and expect to see similar, favorable adoption among clinicians.
Speaker Change: We know not every clinician will choose to adopt e-prescribing technology to adopt e-prescribing technology.
Speaker Change: For those that prefer traditional documentation, we are looking forward to an upcoming pilot of an AI-based tool designed to improve speed and increased accuracy for the non-eperscribed order process.
Speaker Change: We expect to learn more over the next two quarters regarding the scaled application of this tool in our order management process and we'll share more details once we begin the pilot.
Speaker Change: and Adam Caplinger. And, I think, we're going to get a little bit of a break here. I'm going to turn it back over to Sam. Thank you. Thank you. Thank you. We'll be right back. And, I'm going to turn it back over to Sam. And, I'm going to turn it back over to Sam. Thank you. Thank you. Thank you. Thank you. Thank you. Good morning, everyone. It's good to see you. I'm Sam Bentzinger and I'm going to talk to you today about the
Sam Bentzinger: Clinical Evidence Generation is another driver for improving access to care. In June , two month data from the Flexi Touch for Siscandative Care for Head and Neck Lymphedema Child will be presented at the annual meetings for both the American Society of Clinical Oncology and the Multinational Association of Supportive Care.
Sam Bentzinger: While I cannot share the specific results ahead of these meetings, the abstracts are in line with our expectations that FlexiTouch provides clinical and quality of life benefits in this underserved population.
Sam Bentzinger: The six month data analysis is underway, an on track for journal submission and public dissemination in the second half of the year. We look forward to sharing the long-term results of this first of its kind study, and we'll be advocating for PCD therapy to be reflected in government and commercial payer policies, clinical guidelines, and provider and patient training and awareness.
Sam Bentzinger: Reenbursement has been a dynamic barrier to access to care, and I've spent considerable time on previous earning calls, both educating and bringing real-time awareness to the evolving coverage policy landscape.
Sam Bentzinger: The NCD coverage language continues to require documentation of, quote, unique characteristics, quote, for patients to progress immediately from conservative therapy to an advanced pump. The term unique characteristics remains undefined in the policy.
Sam Bentzinger: Through successful claims adjudication and ongoing engagement with the MAX, we are learning how the MAX are interpreting unique characteristics and we believe there is a supportive coverage environment for patients that need advanced pump placement.
Sam Bentzinger: We are increasingly confident that the Max approach aligns with our shared goal of ensuring the right patient receives the right product, a mission that is central to everything we do at Tactile
Sam Bentzinger: Our second strategic priority is focused on expanding the treatment options for lymphedema patients. In Q1 we saw strong growth in adoption of Nimble, a first product launched on our new lymphedema platform and the next generation of our basic PCD.
Sam Bentzinger: Since its full launch for upper and lower extremity of lymphedema in February , Nimble is outpacing the broader lymphedema market growth, which we believe reflects both patient and provider preference and enthusiasm for the product given its unique features and capabilities.
Sam Bentzinger: Our sales reps are also energized by nimble, and its ease of selling, particularly when coupled with our e-prescribing platform.
Thank you. Thank you.
Sam Bentzinger: Stronger Nimble adoption benefited from our Medicare channels specifically in the quarter, where sales grew 6% year-over-year. Our reps had a stronger presence in vascular practices in Q1, where we typically served more Medicare patients as compared to other channels.
Sam Bentzinger: This ultimately impacted the bandwidth of our sales reps in certain territories to support oncology and VA patients, and as a result sales in the VA and commercial channels where we have a higher proportion of flexi touch patients were pressured in Q1.
Sam Bentzinger: With the optimization of our sales organization now complete, we expect to see the return to growth in each of our channels moving forward.
Sam Bentzinger: We have resourced our organization and channels appropriately. We are the dominant market leader in advanced pumps. The patients are there and remain underserved. And we believe our nimble and
Sam Bentzinger: The rest of our product roadmap for our next generation advanced pump, nimble enhancements, and incremental features and functionality benefits to Kylie are progressing. We are committed to staying the market leader in medical device lymphatic therapy and delivering clinical effectiveness in both basic and advanced pump therapy.
Sam Bentzinger: Our third strategic priority is focused on enhancing lifetime patient value. One of the critical ways we can accomplish this is by helping patients more efficiently navigate the often complex end-to-end lymphedema care journey.
Sam Bentzinger: This corridor we centralize two existing teams comprising our patient education consultants or PEX and back office patient support team into one consolidated team called patient services led by a newly created role on our executive leadership team.
Sam Bentzinger: With this action, we combine the two groups who interface most directly with our patients into one team to ensure we have a consistent approach when engaging with patients pre, during and post-order
Sam Bentzinger: Certain elements of our business remain unchanged with this action. For example, our pecs continue to be a vital resource for our sales team. And we ended Q1 with 62% of in-home demos performed by our pecs up from 52% at the end of Q4 and 35% a year ago.
Sam Bentzinger: We are pleased to see consecutive utilization increases with our PEC staff and expect that trend to continue.
Sam Bentzinger: We are also looking at new ways in which our patient services team can engage with the patient earlier and more frequently in the order process, which will further alleviate sales rep engagement with the patient and increase patient support connectivity for our patients.
Sam Bentzinger: To that end, we will be implementing two pilot programs leveraging our patient services team that will seek to maintain consistent touchpoints with the patient to keep them engaged with the tactile throughout the pre-order process.
Sam Bentzinger: We know that this part of the patient journey is particularly complex and drawn out, and there are things we can do to create a better overall experience for our patients.
Sam Bentzinger: Finally, we are increasingly focused on market development initiatives, specifically with respect to generating patient awareness of lymphedema and its current treatment options. One way we are approaching this is through promoting the use of our Kylie Patient Engagement
Sam Bentzinger: Kylie is a free tool available to anyone suffering from lymphedema and provides patients a way to track symptoms, log their lymphatic therapy sessions, their compression garment utilization, and share results with their care team.
Sam Bentzinger: With Nimble, their PCD therapy is automatically connected and stored. This is a differentiated offering for patients with lymphedema and a great source of insight for our business. We have two milestones approaching. In the next month or so, we will have 50,000 individual patient profiles registered with Kylie and 1 million user check-ins.
Sam Bentzinger: These are two distinct but complementary value propositions associated with Kylie and these metrics.
Sam Bentzinger: First, in addition to tracking symptoms and treatments, Kylie is also a powerful education resource for patients who may be on the front end of their care journey, either undiagnosed or recently
Sam Bentzinger: It includes information on lymphodema and its available treatments so that patients can be informed when speaking to their clinician regarding their symptoms and self management. [inaudible]
Sam Bentzinger: We believe increase utilization of Kylie Wilhelm Able, 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.
Sam Bentzinger: Second, with access to 50,000 unique patients and 1 million check-ins to date, we have significant data that will inform insights on utilization and outcomes of our product and other treatment.
Patient Symptoms and Disease Progression [inaudible]
Sam Bentzinger: Additionally, it serves as a communication tool where we can personalize touch points with patients, survey product features and functionality preferences, test innovation concepts and much more. We are just getting started and will continue to optimize Kyle as a patient and provider asset and as a tactile asset for our own market development and innovation plans.
Sam Bentzinger: With that, I will now have a Lane review our Q1 Financial Results in more details and provide an update on our guidance for 2025.
Elaine Birkemeyer: Thanks, Sheri. Unless noted otherwise, all references to first-quarter financial results are on the gap in your view of your basis.
Elaine Birkemeyer: Total revenue in the first quarter increased $180,000 or 0.3% to $61.3 million [inaudible]
Elaine Birkemeyer: By product line, sales and rentals of lymphedema products, which includes our Flexi Touch, Entry, and Nimble Systems, decreased $1.8 million or 3% to $50.6 million.
Elaine Birkemeyer: and Failed of our Airway clearance products, which includes our Aflova system, increased $1.9 million or 22% to $10.7 million.
Continuing down the P&L [inaudible]
Elaine Birkemeyer: Growth margin was 74% of revenue, compared to 71% in the first quarter of 2024. The increase in growth margin was attributable primarily to lower manufacturing and warranty cost, a testament to improvements in product design, and improving collections reflected in a revenue.
Elaine Birkemeyer: 1st quarter operating expenses increased $3.5 million or 8% to $49.9 million [inaudible]
The change in gap operating expenses reflected [inaudible]
Elaine Birkemeyer: A $0.2 million increase in sales and marketing expenses, a $0.4 million decrease in research and development expenses, and a $3.7 million increase in reimbursement general and administrative expenses, including and primarily to revise strategic technology investments.
Elaine Birkemeyer: Fritting loss increased $1.6 million or 53% to $4.5 million. Interest income increased $0.2 million or 26% to $0.9 million due to our increased cash position.
Interest Expense Decrease $0.1 million or 25% to $0.4 million [inaudible]
Elaine Birkemeyer: Incontact benefit increased $0.5 million or 83% year-over-year to $1.1 million $1.2 million.
Elaine Birkemeyer: Net loss increased $0.8 million or 35% to $3 million or $13 cents per diluted chair compared to $2.2 million or $9 cents per diluted chair.
Elaine Birkemeyer: Adjusted EVA Dodd Decreased, as expected, to a loss of $0.3 million compared to income of $1 million.
Elaine Birkemeyer: With respect to our balance sheet, we had $83.6 million in cash in cash equivalent and $25.5 million about standing borrowings at quarter-end.
Elaine Birkemeyer: This compares to $94.4 million in cash and $26.3 million of outstanding borrowings as of December 31, 2024.
Elaine Birkemeyer: Our Q1 cash balance reflects one-time impacts from certain cash outflow items, including $5.7 million related to our annual bonus payment.
Elaine Birkemeyer: We office sponsored an additional $10 million of stock buyback during the first quarter under our Repurchase Program
Turning to review of our 2025 Outlook
Elaine Birkemeyer: For the full year 2025, we now expect total revenue in the range of $309 to $350 million, representing growth of approximately 5% to 8% year-over-year.
Elaine Birkemeyer: This revision reflects the sales they can see and the impact of the CRM launch on sales rep productivity in the lymphodema business during the first half of the year. Along with strength, we are observing in the area clearance business.
Elaine Birkemeyer: Our 2025 Total Revenue Guidance range assumes that growth for a lymphodema product line will be 4% to 5% and growth for our aeroid clearance product line will be 20% to 23%.
Elaine Birkemeyer: For modeling purposes, for the full year 2025, we now expect our gap growth margins to be approximately 74%.
Elaine Birkemeyer: Our gap operating expenses to increase 9-11% year-rear as we invest in our failed organization and advance our tech-related investments throughout the year.
Elaine Birkemeyer: Met interest income of approximately $2.4 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 32 to $34 million in 2025.
Elaine Birkemeyer: Our adjusted EBITDA expectation has seen certain non-cash items, including stock compensation expense of approximately $8.6 million in tangible amortization of approximately $2.4 million in deep depreciation expense of approximately $4.3 million.
Elaine Birkemeyer: Based on what we know today are adjusted EVA.guidance, also includes a $1 million cost of good sold impact related to tariff.
Elaine Birkemeyer: We are actively monitoring global trade policies and assessing the potential impact of tariffs on our business, which remains a very dynamic and fluid situation. Based on current information, we expect a total tariff impact on cost of goods sold in 2025 of less than $5 million.
Elaine Birkemeyer: We are actively pursuing a range of viable mitigation activities to reduce our projected tariff impacts. These include options for reshoring manufacturing, contract compliance for supplier tariff absorption, tariff exemption policies, and other cost of goods sold reduction strategies.
Elaine Birkemeyer: With that, I'll throw the call back to Sheri for some closing remarks. Sheri.
Sheri: Share best practices and fine-tune the execution details of our 2025 Commercial Action Plan.
Sheri: My confidence in our team and our business remains high. Our sales leadership and field teams are committed to driving productivity with the implementation of the CRM system and executing on our 2025 commercial action plan.
Sheri: Our mid-to-long-term success requires strategic investments in human capital and technology, which are reflected in our 2025 plan. Every investment is scrutinized to ensure alignment with our three growth strategies and confident in our ability to deliver value to 2025 and beyond.
Sheri: With that operator, we will 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 the question, please press star 1 on your telephone key bag. A confirmation tone will indicate a line is in the question queue. You may press star 2 to remove yourself from the queue.
Sheri: For participants using speaker equipment, it may be necessary to pick up the handset before pressing these star keys. One moment, while we pull four questions.
Thank you.
Speaker Change: Our first question comes in line of Margaret Cagzor with Andrew. I'm sorry Margaret Cagzor Andrew with William Blair. Please proceed with your question.
Hey, good afternoon.
Speaker Change: Everyone, thanks for taking the question. I wanted to start out with and just push a little bit on the revenue guidance for the year. What assumptions get you to the high and low end of the range and what are you considering, especially as you go into Q4 for sales productivity metrics, because it does seem to imply that you're kind of exiting the year at a maybe maintained growth rate.
Thank you.
Speaker Change: Hi, Margaret. This is Sheri. I'll actually have a lane start answering that question relative how we got to our guidance assumption and I'll wrap up in the other points.
Speaker Change: Yeah, so I think a couple of things that were taken into account as we thought about high and low. One of them is a focal point of our discussion, which is around the speed of hiring.
The Plant Dells Rolls
Speaker Change: that's an important driver as well as the sales rep proficiency in the new tool and guinea sales rep productivity. I think the other thing that we're encouraged by is the success we've seen with our parachute rollout and as we extend that deflexi touch, we think that we'll start to see traction as well there. We also are continuing with our back office efficiency with some of the AI tools that Sheri mentioned that we think will provide momentum in the back half.
Speaker Change: And then you'll lastly, you know, we are excited about what we've been seeing with Atholvess and Nimble, and you'll really, that you know, continued strong adoption and momentum of both products there, you've also been taken into account. And obviously, you know, they're varying assumptions on kind of both ends as we thought about the high and low there.
the hope
Speaker Change: Okay, that's helpful, and you know, as a follow-up, follow-up on that point and then maybe extend it into 2026. So, you know, one, you know, as we look at the reps that you guys are hiring, you know, it makes six, 12 months to reach full productivity.
Speaker Change: I guess as you point to 2026, I'll start there first. Is that one gross? I'd really start to continue to accelerate. If I do some easy math and just assume 300 reps next year to start next year versus the 264 that you guys were at at the end of Q1.
Speaker Change: I think that's 13-14% growth, just on head count, plus all the other activities that you're referencing. So, I guess...
Speaker Change: Long question, but does that imply closer to that mid-teens revenue growth as we move to 2026?
Speaker Change: and then as the fall up to the guidance range, does the low end then assume that there are more delays maybe to the hiring versus more accelerated, you know, hiring trends, I'm just trying to get a sense of how much risk and reward there is within that range.
Thank you guys [inaudible]
Speaker Change: Yeah, so I think in terms of 2026, I don't think we're prepared yet to comment, we will be able to provide more information as we move further into the year and make some more progress, accessory runner strategic initiatives, but we will be X in the year with more momentum than we have here in the first half of the year. And then yes to your question around a high in the low end, those factors that I mentioned, really it's really the speed of hiring, so we have one set of assumptions that takes us a little bit more modest in terms of speed. We're. And then yes to your question around a high in the low end, so we have one set of assumptions that takes us a little bit more modest in terms of speed.
Speaker Change: and others were able to hire up faster. So as you remember, our Q4s are our largest quarter. So us having our hires done earlier in the year will benefit us versus taking longer. So those kind of things are kind of what helps us put that high and low in addition to that productivity that we mentioned as far as the gaining competency of our sales team and the new CRM and the speed in which they start to grow comfortable with the new tools.
Speaker Change: It's a piece of information that we would typically share right on the quarter basis, but because our plans are mapping to having that number by the end of Q2, and as said, we'll be at 300 by the end of the year, which will be the most reps that we've ever had, we're very committed to making sure that we get those reps hired and again, located in the right. [inaudible]
Speaker Change: Part of the country and the right type of rep. You mentioned the onboarding and productivity at rep. That ramp time is typically actually between about six and nine months. Our TAM, our territory managers tend to be a little bit longer and those product specialists is typically shorter.
Speaker Change: So, also, with these reps coming in, they don't have to learn an old tool and then convert to a new tool. They'll be starting right off the bat with the Salesforce CRM tool. I know many of these reps coming in will have already had exposure to CRM. So we're anticipating even some improvement in that time to productivity, if you will, for those new hires. [inaudible]
Okay, great. Thank you.
Thank you.
Unidentified Moderator: Thank you. Our next question comes from the line of Adam Maeder with Piper Sandler. Please proceed with your question.
Unidentified Moderator: This is Kyle and for Adam. Thanks for taking the questions.
Speaker Change: Maybe just to dig in a little bit more on the guidance in particular between the lymphedema business versus the afloat of us business and the growth rates there.
Unidentified Moderator: I believe the fire guidance was about 8-10% for lymphedema, and about 6-9% for Aflovest.
Unidentified Moderator: So just kind of curious how that changes now with the new guidance, you know, with all the different puts and takes that you've discussed tonight. Just yeah, I would appreciate any specifics you can give there.
Unidentified Moderator: Yeah, so as shared in our call, we've revised the lymphedema product line growth rate 2, 4 to 5% and then airway clearance is 20 to 23%. So that hasn't been updated since our last guidance.
Speaker Change: Okay, great, thanks. And then I guess to follow up, can you just give us any update on Limbo? Could you kind of just walk us through how you envision the commercial launch progress, what's kind of the feedback been like so far? And any of these sort of restrictions around many facts?
Speaker Change: Dear inventory levels, just any color you could give there.
Sure, that'd be too uh...
Speaker Change: To share more, I mean, we're really pleased with the launch of Nimble being able to have both the upper extremity which we launched in November and then the lower extremity we launched on time in February .
Speaker Change: And as shared on the call, we're seeing about a quarter of all of the orders on Nimble coming through Parachute as well. So we have a product that's easy to use.
Speaker Change: It's growing fast. We believe that growth is coming both from market share gains as well as just expanding and opening up the market.
in general because of that ease of use, lightness.
Portability is really a great feature benefit profile for Nimbalt.
Speaker Change: So Nimble coupled with Parachute is really making a streamlined experience for both the patient and the provider. We don't have challenges in our manufacturing. We've been able to meet all product demand and are in really good shape in that way.
Did I miss an aspect of your question?
For Nimble? No. No, that's okay. That's great. That's all very helpful. Thanks
Speaker Change: Yeah, you bet it's going short. It's really an exceptional product. We're so glad to have it available to our patients.
Unidentified Moderator: Thank you. Our next question comes to the line of Ryan Zimmerman with BTIG. Please proceed with your question.
Ryan Zimmerman: Good afternoon. Thanks for taking the questions, Sharon. I want to start with the exit right to the march, particularly in the limp of the aim of business, just given...
Ryan Zimmerman: Some of the commercial changes that you're doing, you know, maybe you could talk a little bit about the end market.
Speaker Change: and I think Sheri made a comment about how nimble is outperforming the lymphedema market. I'm trying to reconcile that with just kind of the guidance and some of those changes and how you can point to that specifically relative to the guidance changes.
Speaker Change: Sure, so Elaine, why don't you talk about how we would you mind kind of sharing what we can about informing the guidance as it relates to both product and payer, because there's a bit of at that.
Speaker Change: You know, because the nimble product especially when we launch lower extremity, that is a product that's like, especially because it's a basic pump, is likely going to be in vascular.
Speaker Change: Ryan, and so those vascular practices have a lot of these patients. It's a larger part of our business than the oncology sexy touch type of business. The lane, why don't I have you kind of walk through that end market and the guidance input and then I'll weigh in as well if there's more color.
Yeah, so I think in terms of-
Lane: You know, the end mark is so we're we're not seeing any change in where patients are coming through in terms of point of call or any changes in demand.
Lane: and a really our mix in terms of our channel, as well as seeing strength and nimble more so even than in Flexi Touch, really had to do more so with where our reps spend the majority of their time. And so with the excitement of nimble, nimble on lower extremities specifically.
Lane: You'll we see patients require lower extremity basic pump more often in vascular and those patients tend to be also older which is why we also saw that increase in medicare and so really you have those that that point of call focus with the product really also then drove you know not only that the product growth as well as that channel growth. You'll we'll we'll we'll we'll we'll we'll
Lane: then, you know, consequently as well, because of the vacancy we had, we were not able to spend as much time in the oncology and DA points of call. And in those, as you were probably have this, I think we've mentioned this in the past, we typically see more commercial patients.
Lane: in oncology, as well as a higher mix of our fluxy touch products, because they tend to have limited extent to their chest and trunk based on their treatment. And then in VA as well, we exclusively distribute.
Lane: or our Foxy Touch product in that channel. So that gives a little bit of just sort of the market hasn't changed. Really sort of the channel mix and why we saw a bit of a different growth rate between our products, I'm more so to do with where our sales rep spends their time.
Lane: And then in terms of, I think your question was, what do we contemplate as we were exiting Q1? I will tell you, we not only contemplated.
Lane: Q1, but we also really focused on April results as well. While we can't share obviously any specifics, we did take into account as Sheri in her comments mentioned what we're seeing in terms of our hiring and ability to staff up fairly quickly, as well as that growing proficiency with our sales team. And so that in combination with our Q1 has really resulted in both our Q2 guide as well as our four-year guide.
Okay.
Speaker Change: Hopeful. The other question I have just around the PNL, Elaine, is given the increases and spend that we're doing this year.
Speaker Change: with the Salesforce and kind of where we expect growth to be next year, you know, from a top-line perspective. I guess, you know, would you expect improving leverage in 26 as you get back to...
Speaker Change: You know, let's say you've made all those hires, you're 300 reps of give or take. I mean, when do we start to see leverage again in your model on the P&O? Thanks for taking the questions.
Speaker Change: Yeah, absolutely. So I think you know, two drivers here. So one as you mentioned is staffing up and that leverage will come as those resources.
Speaker Change: continue to increase at the rate that they had been in the past there. So I think once we get past, you know, this bowl of stuff and our strategic work that we're doing here, we should start to see operating expense leverage once again.
Okay. Thank you. Thanks, Ryan.
Thank you. Thank you.
Unidentified Moderator: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer. Please proceed with your question.
Unidentified Moderator: Hi, Sheri Unilane. This is Shaym Hassan for Suraj. Thank you for taking our questions.
Speaker Change: Just to start, in air reclurancy, you guys have some really nice acceleration there, I guess
Unidentified Moderator: Can you give us a little bit more as to, you know, the causes of steps change and growth, how sustainable that is going forward, and you know, kind of anything you might want to call out there that led to this or, you know, we could watch to make sure kind of this is consistent.
Speaker Change: Yeah, we're really pleased with the airway clearance business and I think this is an absolute story of
Speaker Change: What it looks like when you are focused on strategic accounts and when you develop those strategic relationships
Speaker Change: and then starting a calendar year, where you have alignment with that strategic partner. So as shared, we have some priority placement of our product agreements with some of these DMEs, i.e., they have a preference for Afovest.
Speaker Change: in the portfolio and the reps then are are are are incentive and and it's part of the portfolio that they're prioritizing for those reps to be using. Last year we had some of those agreements in place but we what we did not have in place was alignment from the financial and the PNL standpoint.
Speaker Change: For example, that may have been a mid-year strategic alignment, but for that specific DME may not have allocated the appropriate amount of capital.
Speaker Change: for the purchase of Afloves, because again, it's a cap rental, so it sits on their books right until it turns over into ownership.
Speaker Change: So, as we started off this year, not only do we have alignment on what that capital allocation is going to be in commitments from those DMEs, but then we also have the strategic partnership and preferred product placement, so we have alignment with the reps
Speaker Change: and I think that these are the factors that...
Speaker Change: When everything starts to align, this is then how it takes off [inaudible]
Speaker Change: On top of that, we have a really great product and our product is very competitive in the marketplace. We're in a very strong number two position and gaining. And so we have patient preference. We've got physician preference and appropriate placement with our DME reps and I expect that to continue to manifest throughout this year and beyond.
Speaker Change: Got it. I appreciate that. And then next kind of, I guess by my math, and you guys probably have a better idea than I do, but you know, wreck productivity seem, you know, flat to slightly up here over here. So I guess maybe, can you break down, you know, within lymphedema, like, whoa.
Speaker Change: What maybe sure what difference may have been done due to attrition versus you know tool training in terms of productivity and then you know kind of going forward.
Speaker Change: You know, you guys are hiring up to 300 I believe sales rep by the end of the year. Where does the new CRM tool fit into that? Is that, you know, increasing just productivity? Is it stopping you from hiring additional sales reps? You know, any color there? Thank you. Yeah.
Several employees that are out in the field, engaging with patients
Speaker Change: And so when we did that rebalance or that optimization exercise we took a look at the entire United States and said where do we currently have people? Where is the revenue kind of per rep? I even where do you look at productivity per rep?
Speaker Change: And what is the ways that we can right size that? So we have more of an average versus some territories are really small and some are really big. This is a classic exercise.
Speaker Change: Businesses should do, they often don't want to do it because it creates a lot of disruption.
Speaker Change: and so you kind of continued to throw reps and you're a little bit out of balance. We took the hard right here and did the analysis and did the exercise to say, this is how many we need and where we need them and the type of rep that we need.
Speaker Change: and by doing that, we were able to say, okay, for us to get to the revenue growth that we need to have and want to have for 2025 and beyond, we want to end the year with 300.
Speaker Change: to get that amount of revenue as we go into 2026 and 2027, et cetera, is not going to take that same degree of sales for investment. I expect to get the productivity out of those reps.
Speaker Change: by having them in the right place with the right role, right in that right pod of the PECS plus the Product Specialist and the Account Managers.
Speaker Change: On top of that, then you have a CRM tool. In the CRM tool, its whole premise is to get to values. So how do you make it faster and more efficient and really direct the rep on where they need to go today?
Speaker Change: What do they need to do tomorrow? And so it helps them be really efficient, which helps overall productivity.
Speaker Change: So it's both having the right reps in the right place in the right role, as well as the CRM tool these come together to get to that rep productivity that we're making these big investments in 2025 and the result of that.
Speaker Change: will manifest in, you know, staying with essentially what our back half guidance was and delivering on that back half with that productivity as well as then when we get to a time of forecasting and looking at our 2026, you will see the impact of that productivity and leverage.
Thank you.
Speaker Change: Thank you, and as we might, if anyone has any questions you may press star one on your telephone to join the Q-the question and answer session.
Speaker Change: Our next question comes from the line of Anderson Shock, with Be Ryder Securities, please if we'll see you with your questions.
Hi, thank you for taking our questions.
Anderson shock: So first, how many clinicians did you raise through your education platform the first quarter? And I guess how are you tracking towards your goal of at least 12,000 this year?
Speaker Change: You know what? We didn't report this quarter on our lymphedema outreach, but according to our tracking, you know, from an internal one, we're tracking our goals objectives, we're right on target.
Speaker Change: As I shared in the prepared remarks, we were able to reach 800 clinicians on our bronchi practices business, which rolls into that total number. So we're right where we want to be for both our lymphedema and afloaf vest clinician outreach.
Speaker Change: Okay, got it. And then, what percentage of patients are actively using Kylie, and I guess how does therapy compliance differ between these patients and those who are not using Kylie?
You know what? We don't have the data.
Speaker Change: on patients that are not using Kylie, right? Because we have some data that's based on a survey outreach, we survey all of our patients at 90 days.
Speaker Change: to get some data on satisfaction in their utilization. But we don't have those type of metrics, which would be in a, you know, some sort of study you would have to have by enrolling them.
Speaker Change: So, what we know though is on the Kylie ones we're able to see what the check-ins look like.
Speaker Change: And again, when they do their therapy, how long their therapy is lasting as well as their own self-reporting of symptoms
Speaker Change: As I shared, we have over one million check-ins. Some patients are going to do it more regularly than others, just because they're not checking in, doesn't mean they're doing, not doing their therapy. So it is observational. The data that we're collecting and obviously patient-generated, but it does give us a lot of insights for us to start testing hypothesis and reaching out to patients to kind of understand what could help support compliance with therapy, or if the amount of therapy sessions that they're doing are [inaudible]
Speaker Change: and having an impact on symptom reduction, then that would be very good to collect as well. Every patient is going to be different, and everyone's condition and severity is different. So there's not one right answer for everybody. And that's why the value of this data I think are going to be very impactful as we learn more about this population during their care continuum, and particularly after they get their therapy. [inaudible]
Okay, got it. Thank you for taking our questions. Thank you.
Unidentified Moderator: Thank you. And we have reached the end of the questioning after session. And just also concludes his conference. You may disconnect your lives at this time. We do thank you for your participation.