Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q4 2023 Earnings Call Transcript

Page 4 of 4

Suraj Kalia: Pardon the background noise. Dan, let me stick with some SRP questions, okay, short range. Specifically, you mentioned sales rep productivity is up 14% year-over-year, but the number of in-home trainings is up 30% or exited at 30%, and lymphedema sales are up 6% year-over-year. Maybe Dan, help dissect this – I know it’s not a linear correlation, but how much incremental rep productivity is there in the existing sales force, and how is the decision made to add more heads versus squeeze extra productivity going into ’24, maybe ’25?

Daniel Reuvers: Yes, good question. Look, we still believe, as we said, Suraj, that there is additional productivity by expanding the demos being reassigned. I think that said, we still fashion ourselves as a growth company, and we want to make sure that we’re continuing to invest in growth, and I don’t think that it’s binary. It’s not continue to expand productivity and abandon the expansion of the sales force headcount, I think it’s a combination of the two that we intend to continue, and I think trying to find the right balance in those is what we’re certainly striving for. Having been able to deliver double-digit growth on a relatively flat headcount last year, I think demonstrated the productivity gains were real, but knowing that still only roughly a third of those in-home demos have been taken off the plate of the sales force, that means that there’s more opportunity.

You know, kind of how we thought about it, Suraj, is for 2024, it’s probably half the growth comes from increased productivity as we continue to make some of the improvements that we’ve talked about, and then the other half ultimately probably comes from adding headcount, but that’s more a second half contribution . We know we don’t hire between December and the first half of this year and just flip a switch and they become productive, so we would expect them to be contributing more in the back half, like our historical lead time has looked like, and that should certainly, as I’ve mentioned in a previous question, put us in a much better position as we enter 2025 as well with another step up in sales force for the most part having all achieved their productivity targets, and an increased number at that.

Suraj Kalia: Got it. Elaine, I’ll send one question your way. Elaine, how should we think about same store, new store growth in the quarter, and also moving forward, should we think about more about opex leverage rather than the typical mantra of top line growth at all costs? Thank you for taking my questions.

Elaine Birkemeyer: Yes, I think Suraj, to your first question there around the new store, same store, there is still good opportunity for us to continue to both acquire and work with new prescribers, as well as to increase volume from existing prescribers. We’re pursuing both angles as we look at both our vascular and oncology and lymphatic therapist spaces. As far as opex, could you repeat that part of the question one more time?

Suraj Kalia: Elaine, what I was just trying to understand is should we expect opex leverage–I mean, you generated pretty good opex leverage in the quarter, is that what we should keep expecting moving forward, and is that coming at a cost of investing for top line growth at any cost? Thank you.

Elaine Birkemeyer: I think for this year, we are still achieving opex leverage, but we’re also making investments, and I think we’re doing both, which is why the opex leverage is not larger. As you look at last year, we drove opex leverage to a great extent. This year, we still have opportunity to do so, but it will be muted by continued investment. As I just mentioned, when you think about 2025, those investments then will be largely done and behind us and now at scale, where we can generate more efficiencies, and so we would expect to see more operating margin expansion in 2025 as well.

Suraj Kalia: Thank you.

Operator: Thank you. We are currently seeing no remaining questions at this time. That does conclude our conference for today. Thank you for your participation.

Follow Tactile Systems Technology Inc (NASDAQ:TCMD)

Page 4 of 4