Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q1 2024 Earnings Call Transcript

Elaine Birkemeyer: Hi. Thanks for the question. We outlined several drivers of growth, and we were pleased that we made good progress and all of them will be drivers that will build sales over time. It’s not an overnight large increase, but again, just to reiterate them, our sales reps, we did add some. Actually, in Q4, we started our hiring larger chunk in Q1. We will plan to add a little bit more and have to with the plan of those coming to maybe hit their full stride and have to. As the year progresses, we are making continued progress in transitioning our in-home demos to our trainers and that is giving additional bandwidth to our sales reps. Our technology roadmap is well underway. As Dan talked about, we’re – we’ve piloted an e-prescribing tool.

We will be launching a CRM later in the year. All things that again will start to help build momentum as the year progresses. And then I know you want to mainly focus on lymphedema, but also AffloVest, as we’ve been talking about weeks, the recovery in that business in the back half of the year as well.

Margaret Kaczor: And I’m going to push a second time on the question, and again, maybe it’s more simplistic mindset. But if you’re growing your sales reps 9%, and realistically I would assume revenue growth should grow at least 9%, especially as you highlight these time efficiencies and other efficiencies within the system to try to accelerate that more. So am I understanding that correctly and that’s kind of how you bridge to that double-digit growth more sustainable?

Dan Reuvers: Yes. I think that’s right, Margaret. I mean, when you think about the fact that, yes, we’re adding reps, but we know that typically it takes a couple quarters for their productivity to kick in once they get fully trained. So that’s really a back half kind of contribution item. And then the productivity piece that we really benefited from last year, which was starting to get the patient trainers to take some of these in-home demos, our goal is to actually continue to expand that in the back half, which should give us some additional productivity gains on top of a bigger headcount. And I think we know we had the toughest comp in Q1. So, yes, I think if you look at the guidance that we reaffirmed, clearly, we’re going to have to do better in the back half. So all of those assumptions are embedded in that.

Margaret Kaczor: Okay. That’s helpful and thanks for chiming in. Best of luck in retirement. I think we’re all jealous on the call here for your future. Maybe just last one. As we look at the adjusted EBITDA guide that remained unchanged despite what seemed like a great quarter, you’ve increased your guidance a little bit in gross margin. You clearly outlined a variety of drivers to see margin expansion. So I’m just trying to get a sense, is that conservatism? Are you spending some of that upside, other OpEx items, as you think about guidance throughout the year? Thank you.

Elaine Birkemeyer: Yes. So, firstly, I think it’s still early in the year, so kind of the rationale for not changing the adjusted EBITDA guidance. But I think also, as we think back to our last call, we talked a lot about this being an investment year, and that continues to prove true, and we do continue to expect to see leverage and productivity. But we will be reinvesting some of that savings to help fund our technology roadmap as well as the additional hires that we made in this first half.

Margaret Kaczor: Appreciate it.

Operator: Thank you. Our next question comes from the line of Suraj Kalia with Oppenheimer & Company. Please proceed with your question.

Suraj Kalia: Dan, Elaine can you hear me, all right?

Elaine Birkemeyer: We can.

Suraj Kalia: Perfect. First and foremost, Dan, it’s been a pleasure working with you all these years. Wish you a very healthy and enjoyable retirement. Hey, Dan, just following up on the head and neck line of questioning. So, if memory serves me right, in the pilot study, patients are required twice a day to use a pneumatic compression. I guess, is the protocol the same in the pivotal study? And also, if I could follow up on a subpart of this question, there are different measures for inflammation and swelling. I believe its CT, digital photography, grading and endoscopy and whatnot. Can you help us understand that? How do you reconcile a difference between readings for the same patient using two different methodologies?

Dan Reuvers: Yes, I think that. So, first of all, it’s not the exact same protocols as the pilot study, but what we saw in the pilot study was encouraging enough that we thought that this was a responsible investment and one that the market needed, which is a bigger end on some of the evidence available in using pneumatic compression to treat this part of the body. Quality of life characteristics are certainly part of that. There’s also some changes in skin swelling, et cetera, but all of those would be part of some of the outcome metrics that the study is evaluating.

Suraj Kalia: Got it. Okay. In terms of the next-gen Flexitouch, Dan, can you give us a sneak peek in terms of the upgrades, is it more just in terms of form factor? Or are you thinking about changing the algorithm per se, i.e., the time duration for a pneumatic compression, maybe higher pressure, just kind of what the next-gen? How should we think about the next-gen system later this year and going into next year?

Dan Reuvers: Yes, sure Suraj. First, it’s not necessarily a next-gen Flexitouch. What we said is a next-gen pneumatic compression device. And the attributes that we’ve been focused on are trying to make this a much more patient friendly experience. We know this is a lifestyle that the patient has to follow. They’re using and depending on this therapy literally daily for the most part for life. And we want to make sure that it integrates more seamlessly. So there’s what I would call a host of consumer friendly attributes. We’re being a little bit cautious about some of the details until the product is closer to launch, but yes, I think that the components that we’ve assembled we’re quite enthusiastic about what kind of reception we can get from our customers.

Suraj Kalia: Fair enough. And then final question from my side. In terms of, I think so, I heard in the prepared remarks the home training gone from 30% to 35% by the trainers, leaving the sales guys more bandwidth. Obviously VA and commercial saw pretty nice growth. What kind of a correlation should we think about quantitatively between bandwidth being freed up over time for the existing 250 or so sales reps in the lymphedema part of the business? Thank you for taking my questions.