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spk07: Good evening, ladies and gentlemen, and welcome to the first quarter of 2021 Earnings Conference Call for Tactile Medical. 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. Before we begin, I would like to remind everyone that our remarks and responses Your questions today may contain forward-looking statements that are based on the current expectations of management and involve inherent risks and uncertainties that 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, filed today with the Securities and Exchange Commission. Such factors may be updated from time to time in our filings with the SEC. which are available on our website. We undertake no obligation to publicly update or revise our forward-looking statements as a result of new information, future events, or otherwise. This call will also include references to certain financial measures that are not calculated in accordance with generally accepted accounting principles, or GAAP. We generally refer to these as non-GAAP financial measures. Reconciliations of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor relations portion of our website. I would now like to turn the call over to Mr. Dan Revers, Tactile Medical's President and Chief Executive Officer. Please go ahead, sir.
spk02: Dan Revers Thank you, operator, and welcome everyone to our first quarter of 2021 earnings call. Joining me on this evening's call is Brent Moen, our Chief Financial Officer. Let me provide you with a brief outline of what we intend to cover this evening. I'll start by discussing our first quarter sales performance and business trends, followed by a discussion of our recent operational highlights. Brent will review our financial results in detail, as well as our 2021 financial guidance, which we reaffirmed in our earnings release this afternoon. I'll close with some additional thoughts on our assumptions, outlook, and key areas of focus for 21 before we open the call for questions. With that, let's get started. We were pleased to deliver sales performance that modestly exceeded our expectations for the first quarter of 2021. Specifically, we saw first quarter total revenue decrease by 2% year-over-year to $42.8 million compared to the mid-single-digit year-over-year decline we had anticipated at the time of our earnings call in February. The 2% decrease in total revenue was driven by sales and rentals of our FlexiTouch systems, which decreased 3% year over year, partially offset by sales and rentals of our Entrez systems, which grew 5% year over year. Turning to a more detailed discussion of the first quarter, we continued to face a series of COVID-related headwinds throughout the quarter. These headwinds and their impact were consistent with our expectations and largely represented a continuation of the dynamics we saw in Q4. In early January, we conducted a survey of our top accounts, which found that only a quarter were operating without restrictions, which was consistent with the results of our survey in October. A follow-up survey in early April of this year found that this ratio had slightly improved to just under 30 percent of surveyed accounts operating without restrictions. These health and safety protocols continued to impact our performance in two primary ways. First, the treatment capacity of many of the clinics that we serve remained constrained due to lower patient throughput as clinics continued to operate with fewer exam rooms, dedicate more time to cleaning, and room turnover, leading to longer gaps between patient consultations. Specifically, our surveys in January and April found that two-thirds of our top accounts reported they were still operating at less than 80% of normal levels. And second, many clinics continued to restrict sales rep access to their patients, which limited our ability to conduct in-person patient demos at the clinic, an important part of the patient engagement. During the first half of the quarter, we also continued to see impacts from the spike in COVID cases around the winter holidays and its effect on facilities, clinicians, patients, and our own field teams. Specifically, our accounts continued to experience an uptick in COVID-related patient cancellations and employee absenteeism in the first two months of the year. We also saw absenteeism in our own sales force due to quarantining in compliance with our corporate safety policies. As COVID cases declined from the highs of December and January, We were pleased to see conditions begin to moderate, and we ultimately achieved sales performance in March that showed evidence of recovery. In terms of the trends across our customer base, throughout the first quarter, privately owned practices based in the outpatient settings continued to demonstrate higher resiliency and faster recovery trends. Vascular clinics specifically remained a key contributor to our performance. Our focus on targeting vascular clinics has been an important contributor to the strong growth in Entrez system sales. With our expanding universe of Entrez patients, we're also well-positioned to serve those that may ultimately require an advanced therapeutic device like our FlexiTouch Plus. Meanwhile, sales to practices based within hospitals and health systems continued to lag, as these practices remained more constrained by COVID-related restrictions. The VA in particular remained especially challenged by these restrictions, and during the first quarter, we continued to see lymphedema patients redirected from the 170 VA hospital centers to the more than 700 community-based outpatient clinics. VA sales tend to be an important contributor to our total revenue in the first quarter of each year. due to the typical seasonality we experience related to the resetting of annual deductibles for patients covered under commercial insurance plans. With these challenges as a backdrop, our VA revenue declined 17% year over year to $5.8 million, adding a particular drag on the quarter, yielding just 14% of our total revenue compared to 16% in the first quarter of last year. Given this performance in the VA, and the continued challenges related to COVID, the fact that we only saw a 2% year-over-year decrease in our total revenue for the quarter speaks to the dedicated efforts of our team and the tailwinds from our expanded base of prescribers, which helped to offset some of the most notable impacts of the pandemic. In terms of our patient-focused activities, our sales reps continue to conduct a portion of patient demos virtually where appropriate due to clinic restrictions. we also continue to enhance our virtual out-of-the-box alternatives to in-person patient training. These expanded options are earning high patient satisfaction scores, with patients equally likely to recommend our system regardless of which training option they utilize. Approximately 40% of our new patients were trained in-person during the first quarter, and while it remains to be seen where the mix of in-person trainings will shake out longer term, we're poised to provide a menu of well-structured options. In terms of our medical education efforts, our teams continue to organize events virtually, which were developed to engage and inform a variety of target audiences. We hosted 31 events during the first quarter in collaboration with many KOLs in the treatment of lymphedema and related conditions. And these events were attended by approximately 1,200 clinicians and staff. Most notably, we co-sponsored and presented at the Power Lymphatic Symposium, which was held virtually and attended by over 650 therapists. We also participated in the virtually hosted American Venus Forum's annual congress. In addition to their primary purpose of helping us raise awareness and educate the market on the diagnosis and treatment of lymphedema, these events continued to serve as a valuable resource for our sales reps to build relationships with potential new prescribers. As a result, given the strong interest that we've seen in our virtual events over the last 12 months, we continue to see success in our efforts to expand our prescriber base during the quarter. In summary, while the COVID-related headwinds remained largely consistent with our expectations, we were pleased by the resourcefulness of our team and their efforts to lay the foundation for our future growth by expanding our prescriber base. As Brent will discuss further, I'm also pleased we were able to maintain our 70-plus percent gross margins, along with the modest year-over-year improvements in our operating income and adjusted EBITDA, despite experiencing a slight decline in total revenue. And lastly, we complemented our financial performance with some important operational highlights, which I'd like to briefly recap. First, we continued to invest or to expand the productivity of our commercial team. Consistent with our stated strategy, we expanded sales territories by promoting a portion of our existing associate product specialists. We also grew our commercial field team of both sales and support personnel to over 295 members, including field support specialists, to help our product specialists dedicate more of their time to engaging new physicians. And second, we continued to strengthen our leadership, by adding top talent to help lead our continued market development efforts as we scale into the future. In addition to expanding our board of directors with the appointment of Sherry Dodd and Deepti Jain, whom we discussed on our fourth quarter call, we added three important new members to our senior leadership team. In January, we appointed Mickey Brown as our new vice president of payer relations and market access, following the retirement of Maggie Thompson. In March, we appointed Christy Burns as our new Senior Vice President of Marketing and Clinical Affairs following the promotion of Darren Wenin. And earlier this month, we appointed Eric Pauls as our new Senior Vice President of Sales following the retirement of Brian Reich. Mickey, Christy, and Eric each bring over 20 years of experience in the healthcare industry. Mickey was previously the Vice President of Reimbursement at Wright Medical, And his career highlights include five years at Cochlear, where he served as vice president of health economics, nine years at Medtronic, where he was the director of health policy and reimbursement for their spinal and biologics business, and experience from the payer side, including Blue Cross Blue Shield. Christy and Eric's backgrounds both include significant experience commercializing wearable medical technologies for the treatment of chronic conditions at home Christy joins us from a prior career at Cala Health, where she led the U.S. commercial introduction of its lead product, a wearable neuromodulation device for the treatment of essential tremor. She also spent 13 years at ResMed, where she helped develop the market within the obstructive sleep apnea space. And Eric spent the past 19 years at Philips, where he most recently led a 500-person commercial team within their sleep and respiratory segments. While there, Eric also managed the integration and operations of Respitech, a Philips acquisition with a similar business model to our own that markets a wearable garment to treat chronic respiratory conditions in the home. Mickey, Christy, and Eric possess the leadership skills and vision to help us develop the lymphedema market, scale our business, and ultimately deliver healthy long-term growth, and I'm excited to have them on our team. With that, let me turn it over to Brent to discuss our quarterly financial results in greater detail and review our guidance for 2021. Brent?
spk01: Thanks, Dan. Total revenue in the first quarter decreased 2% year-over-year to $42.8 million compared to $43.7 million in the first quarter of 2020. Sales and rentals of our FlexiTouch systems accounted for 88% of our total revenue in the first quarter of 2021 consistent with the prior year period. First quarter 2021 revenue by payer was approximately 66% commercial, 20% Medicare, and 14% VA compared to approximately 69% commercial, 15% Medicare, and 16% VA respectively in the first quarter of 2020. Continuing down the P&L, first quarter gross profit decreased $843,000, or 3%, to $30.2 million. Gross margin was 71% of sales in the first quarter of 2021, consistent with the same period last year. First quarter operating expenses decreased $1.2 million, or 3%, to $34.3 million. The reduction in operating expenses was driven by lower sales and marketing expenses, which decreased $4.2 million, or 18%, to $18.8 million, and to a lesser extent by lower research and development expense, which decreased $400,000 to $1.3 million. The decrease in sales and marketing expenses was driven by virtual sales meetings, along with lower patient training costs, and reduced T&E. The year-over-year decrease in sales and marketing and R&D expenses more than offset higher reimbursement general and administrative expenses, which increased $3.4 million, or 31 percent, to $14.3 million, driven primarily by increased occupancy costs, depreciation, legal fees, and personnel-related expenses. Operating loss in the first quarter of 2021 decreased $367,000 or 8% to $4.1 million compared to a loss of $4.5 million in the first quarter of 2020. Income tax benefit in the first quarter of 2021 was $1.8 million compared to $2.9 million in the first quarter of 2020. The year-over-year decrease in income tax benefit was primarily due to the net operating loss carryback claim recognized in the first quarter of last year, which did not impact the tax benefit in the first quarter of 2021. Net loss was $2.3 million, or 12 cents per diluted share, for the first quarter of 2021, compared to a net loss of $1.3 million, or 7 cents per diluted share, for the first quarter of 2020. Weighted average shares used to compute diluted net income per share were $19.5 million and $19.2 million for the first quarters of 2021 and 2020 respectively. Adjusted EBITDA loss for the first quarter was $7,000 compared to the loss of $470,000 in the first quarter of 2020. As a reminder, we have provided a reconciliation of certain gap measures to non-gap measures in our earnings press release. As of March 31st, 2021, we had cash and cash equivalents of $46.9 million compared to $47.9 million at December 31st, 2020. We had no outstanding borrowings on our $10 million revolving credit facility at quarter end. On April 30th, We'd entered into a restated credit agreement with Wells Fargo Bank to expand the size of our revolving credit facility, providing us with increased financial flexibility to pursue our growth strategies. The restated credit agreement provides for a $25 million revolving credit facility and a three-year maturity that includes a $30 million accordion feature, which could allow the company to expand the total aggregate principal up to $55 million. Turning to a review of our 2021 outlook, which we have reaffirmed in our earnings release this afternoon, for 2021, we expect total revenue in the range of $215.3 million to $224.5 million, which represents growth of 15 percent to 20 percent year over year. compared to revenue of $187.1 million in 2020. Byproduct, our 2021 total revenue guidance range assumes sales of our FlexiTouch systems increase approximately 13.5 percent to 18 percent year-over-year, and sales of our Entrez systems increase approximately 26 percent to 33.5 percent year-over-year. For the full year 2021, we also expect our gross margin to be in the low 70% range, our adjusted EBITDA margin to be in the range of 12% to 13%. Please note that this adjusted EBITDA range assumes depreciation and amortization expense of approximately $3 million, stock-based compensation expense of approximately $12 million, and legal expenses related to litigation defense costs of approximately $2.5 million. We expect our fully diluted weighted average share count in 2021 to be approximately 20 million shares. Lastly, we continue to expect total revenue growth in the mid to high teens over the first half of 2021, which for the avoidance of doubt implies year-over-year growth in the second quarter of approximately 40 percent to 43%. With that, I'll turn the call back to Dan for some closing remarks. Dan?
spk02: Thanks, Brent. Given our performance in the first quarter and the trends we've seen to date this year, our assumptions and expectations for 2021 remain unchanged. We remain confident in our ability to deliver strong performance in 2021 as the recovery continues to progress. We expect that the primary COVID-related headwinds persist through the first half of 2021, followed by progressive improvements in the second half of the year as vaccine inoculation becomes more widespread and its effects on the overall healthcare landscape continue to gain traction. We continue to anticipate growth in the high teens, approaching 20% in the second half of the year, as we focus on expanding our position in the U.S. lymphedema market by increasing the size of our commercial field team and driving improved productivity, primarily through strategic investment in our field support specialist initiative, expanding our base of prescribing clinicians through targeting and education, and continuing to leverage our unique position in the market with products that are clinically proven to improve outcomes and reduce cost. Longer term, we look forward to returning to our multi-year track record of 20-plus percent annual revenue growth by continuing to develop the greater than $5 billion market for lymphedema and related chronic conditions. I'd like to close by thanking our team for the commitment they've demonstrated to our success in the first quarter, despite a challenging environment, as well as their continued dedication to serving the needs of our customers while ensuring their own safety, as well as that of our patients. I'd also like to thank our investors and those on today's call for their interest and support in Tactile Medical, and our mission. Operator, we'll now open the call for questions.
spk07: Thank you. If you'd like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star 1. Our first question will come from Matt O'Brien with Piper Sandler. Please proceed with your question.
spk03: Hi guys. Good afternoon. This is Drew on for Matt and thank you for taking the questions. I do want to start off on the guidance. Obviously good to hear that you guys are comfortable with the previous range set out there, but I did want to see if maybe you could speak to some of the factors that have kind of given you that confidence. Obviously with a pretty big second half ramp implied. So maybe if you could comment, what type of growth rate did you see in March and then into April? And then in your press release, you mentioned that you expect to return to growth approaching 20% in the second half. You've historically talked about yourselves as 20% plus growers. So maybe you could kind of help us understand what you're assuming from a COVID perspective in the back half of the year.
spk01: Sure thing. Hey, Drew, it's Brent. Thanks for the question. I'll just give you a little bit of a color relative to guidance. And then I'll turn it over to Dan for a couple of closing remarks. But just in terms of what we saw during the course of the first quarter, we were certainly pleased with March results. They were actually modestly better than what we had expected following a very challenging first half of Q1. We reaffirmed guidance today, certainly at 15% to 20% growth year over year. which equates to about 215 to 225 million. And we continue to expect mid-teens, mid-to-high teens over the first half of 2021, which implies growth of 40% to 43% year-over-year for Q2. And then certainly starting to rebound nicely in the second half of 2020 in the high teens and approaching 20%.
spk02: Yeah, I think just to add, Drew, you know, we were pleased to see some of the momentum we were able to start to develop in March, certainly a different view than we saw in January and February. We saw some of that same progress continuing into April, so that certainly felt good. I think the fact that we hosted, again, so many clinicians in some of our physician education events continues to help us bring more new prescribers on board, which I think is going to be an important part of our ongoing recipe. And the sales support roles that we've been sponsoring, we're seeing early indications that that also can help some of our productivity. So in spite of the fact that clinics are still not at the pre-COVID levels as far as the number of patients that they're seeing, we feel like a number of the other things that we're doing around that is both offsetting it and then as we continue to see some of the, what I would call, emergence from the COVID environment continue to progress over the course of the year, we think that we'll move in tandem with that.
spk03: Okay, that's very helpful. And then second question, you know, people are obviously taking a look at some of the claims data for 2020, which I believe you referenced on your previous call. And then, you know, comparing the growth of tactile to the growth of overall lymphedema diagnosis. So just wondering if you would comment on that and then any changes from a competitive perspective that you're seeing out there right now, whether that's from simple pumps or some of the more advanced competitors you have out there. Thank you.
spk01: Sure, Drew, I'll give you a little perspective on overall size of the market. And certainly, you know, COVID has, you know, challenged everything in terms of comparability out there. But certainly, over the course of 2020, even in a COVID year, we saw the total number of diagnosed patients grow up to 1.4 million patients in 2020. So I think that's certainly indicative of the growing awareness and market development that we've had, that we've been able to influence both in terms of the educational events that we've hosted on top of the fact that we've continued to invest in our commercial organization. Both of those things are starting to pay dividends. We expect that as we progress through 2021, we'll be able to take advantage of that growing diagnosed population and certainly convert that back into our overall expectation of long-term 20% growth in terms of the revenue line.
spk02: And then maybe just a comment on the competition, Drew. I don't know that we've seen anything dramatically new in the last couple of months. Certainly, we're aware of a few that are expressing interest in our space. on the surface, it sort of validates the TAM, suggesting that this is a market that's drawing some additional interest. As we've said in the past, I think the body of evidence that we've built up that so heavily reads on our devices, our direct distribution as opposed to DME, and then all the payer contracts that have to be put in place, we feel like we've got a pretty good protected position for the time being, but we certainly don't look to take that for granted. It's one of the things I've said several times is that we want to continue to invest and make sure that we've got a good, vibrant portfolio going forward, and we certainly intend to do that as well. Thank you.
spk07: Thank you. Our next question comes from Margaret Cazor with William Blair. Please proceed with your question.
spk00: Hey, guys. Thanks for taking the question. I'd love to follow up on guidance a little bit. And so just on that 40% to 43% number that you gave, I know you didn't really give a ton of detail between Plexi and Entrez, so maybe that's part of it. But To us, sequentially, as you look back between Q1 and Q2, FlexiTouch should probably be up 20% plus. And that's, you know, despite what seemed like a pretty good Q1, you've kind of kept guidance unchanged. So as things get better sequentially, I know things are still shut down, but things are getting better sequentially. Why not assume that in guidance to at least have something similar to what we've seen in the past? And then if you can give us some input to what gets you to the high and low end of the range, that would be helpful.
spk01: Sure. Margaret, hi, it's Brent. Thanks for the question. I think as we progress through the first quarter, certainly we are encouraged by David McGoldrick, M.D.: : Momentum that we're starting to see coming out of March it's obviously early, though, in terms of being able to kind of really forecast full recovery. David McGoldrick, M.D.: : Certainly within our guidance range, we have a few a few things in terms of recovery built in specifically in the second half, where it's starting to return to to normal vaccination traction is. has taken place and we're focused on being able to kind of get back to business in terms of normal. On your question relative to FlexiTouch and Entrez, certainly both of those will be contributors to our overall growth. Right now you're seeing Entrez just on a lower base deliver a slightly higher growth number, but certainly FlexiTouch is expected to continue to provide its fair share of growth as we move forward, too. And then just in terms of expectations and what's giving us a little bit of confidence as we head into the back half, provided there's no resurgence or change in variance expectations in terms of the vaccinations, we expect that with our expanding sales force, the ever large TAM that we've got in front of us that we should be able to certainly hit our guidance expectations for 2021.
spk00: Okay, so let's kind of maybe walk through the tailwinds more specifically, because it sounds like you've got reps, you've got a new strategy, you've got a new team, all of which is getting put in. You've got new accounts that you guys are adding very, very quickly. So how do we think about that? And maybe the question is better for 22. I mean, this seems like it's really developing together to be a really nice business. So what are the key inputs to those three or four things? Why shouldn't they happen faster, I guess?
spk02: Yeah, I think there's just the one thing that we all have caution for, I think, is just this still transient kind of COVID year. So, you know, we're coming off a quarter where we were below prior year. And we see Q2 as kind of the transition quarter. And then when we get into the back half of the year, we think we'll start to see the kind of growth that we've been more indicative of and kind of will put us on good footing as we enter 22. A little early for us to give 22 guidance at this point, but to your question about tailwinds, there are a host of them. And, you know, we're going to depend on those to move from kind of a cold start after February and still deliver that 15 to 20 percent for the year. But, you know, you alluded to it. It's certainly new prescribers. We've continued to spend a good amount of energy educating our sales force as well. We've got a number of them that have achieved vascular certification, which is an internal program that we've developed, and it takes a number of hours of study, and they basically have to pass a series of tests. and other barriers to make sure that they achieve that. So we're really trying to continue to raise the competency level of the team. I think as they continue to engage with new customers, being able to have good solid clinical discussions is bearing fruit. And as we continue to see, you know, some of the recovery and the throughput, that's been the biggest barrier, I think, for us to recover. And we certainly expect we'll continue to see improvements on that as vaccine traction continues to take root. And then on the oncology side, that's also an area of focus. We've deployed a small handful of key account managers. These are historically previous clinicians that really understand how to navigate the oncology market. And because there's so many different stakeholders treating patients with cancer, it's important to help navigate that process. And I think these key account managers are certainly helping to raise the competency level of our sales force when they're calling on that audience as well. So lots of good things going on. And then a number of things on the evidence generation side still on the horizon. So I think a number of good reasons for us to have the confidence that we're going to be able to deliver the year that we've got in mind. But just to remind again, the growth is going to have to come in nine months, not 12.
spk00: Okay. And then just last question for me, I wanted to talk a little bit about these privately owned practices that are recovering faster and then the hospital-based practices, because there seems to be a little bit of a disconnect there, which makes sense. But can you give us a little bit of color in terms of what those two categories grew at And then does your guidance as you get towards the end of the year, do you assume the hospital comes back to normal or do you think it'll take a little longer than that?
spk01: Thanks, guys. Just in terms of the breakout between the private-owned practices and the hospital systems, which I think also would be also indicative of where the VA was, although they're the most conservative. Those private-owned practices are primarily the vascular businesses that we call on, and certainly there's a parallel going on between growth in the vascular and then also growth in our Medicare business. So you're starting to see Medicare business grow pretty dramatically, which, as you might expect, a lot of the patients that end up in the vascular space come in with lower extremity that kind of moves directly into our product offering our entree product offering so a little bit of growth there and so it just happens to be those private-owned practices are a little more progressive and how they they're willing to move patients through their system versus the more institutionalized hospital systems out there that have a much higher standard of kind of protocol that they need to follow getting patients through their systems too. So it goes to expect as you're dealing with a larger institution that some of those administrative requirements to gain access to clinicians, gain access to patients, fall a little bit slower than what the privately owned practices are.
spk02: Yeah, and I would just, I agree, and I would just add, Margaret, that we do expect an ongoing normalization to occur in the back half even in the institutional side. The VA is a little less certain. We're a little more cautious on what our expectations are there. But I think as we think about bigger health systems, university-based systems, we do expect more normalizing of that environment as we progress through the second half.
spk01: Thanks, guys. Thanks, Margaret.
spk07: Thank you. Our next question comes from Ryan Zimmerman with BTIG. Please proceed with your question.
spk06: All right. Good afternoon. Thanks for taking the questions. Maybe I could follow up on a couple questions. Margaret is asking, you know, the Medicare business was up about 35% this quarter. And, you know, I just want to get your impression of, you know, with patients coming back into the clinics, you know, whether that's a bolus, whether there's some, you know, backlog dynamics there. And then, you know, the second part of that question is just, you know, with the VA, with patients kind of being kept out of the hospitals, you know, what your expectation is for when those VA dynamics improve if you have a line of sight on that. And I have a follow-up.
spk02: Yeah, I'll take a shot and see if Brent wants to add anything. I think on the Medicare side, one of the things that we do see is that a lot of the patients coming through the vascular path tend to have a higher Medicare mix. We also see, as a result, a higher Entrez mix. And we think that as we continue to expand our prescriber base, even those patients that come through the gate as an Entrez patient, if that's their entry level, it allows us to kind of get our arms around a bigger pool of patients. While some will certainly be treated effectively with an entry-level pump, some may have more advanced disease progression and ultimately may lead to a flexi-touch, which, as I think we've covered, is kind of the more advanced treatment option that's available from us. So, you know, one, it's an increase in the total number of patients that we're seeing that have Medicare And then there's also an opportunity where some of those patients will continue to progress. So as the universe of Entrez patients gets bigger, inevitably, we will continue to see growth in FlexiTouch we expect as well. On the VA side, we're a little more cautious there, as I mentioned a moment ago. But if we can see the VA vaccination efforts, which they've put their energies behind for both their clinicians as well as patients, continue to advance we're hopeful that they'll start to invite those patients back more regularly to the VA centers where they're much easier for us to access. But we've been a little bit cautious just because without any certainty of that, you know, we haven't been able to pinpoint when that might occur in 2021. Okay.
spk06: Maybe just follow up for me. I mean, you did make a number of changes to the field sales force in terms of you know, tweaking the roles as of the last quarter. You know, Dan, from your perspective, what have you seen from a productivity standpoint for your more quota-carrying reps, if you want to call them that? And, you know, if not now in the first quarter, when do you expect the impact of those changes to be seen in the productivity metrics for the field force? Thank you.
spk02: Yeah, I think it's a good question. So just to remind folks, we said we were going to look to add somewhere in the neighborhood of 15% more heads in the field in calendar 2021, or roughly 45 plus more people. What we've been doing is promoting some of our associate product specialists into full product specialist territories. And things like vascular certification are the kinds of things that continue to equip them to be a full-fledged rep. we see that shift continuing to mix, or mix continuing to shift. So we're seeing an increase in product specialists as they mature from the associate. So we have actually added some territories. But I think to your other point, our field support specialists that we've been continuing to expand are intended to backfill the associate product specialists and continue to give new product specialists the support that they need for some of the administrative efforts. What we've seen so far, Ryan, is that Where we have deployed FSSs, it certainly liberated the reps from a number of the administrative tasks that they were otherwise having to put energy into. In some of those territories, we are starting to see some productivity gains. We continue to believe as the FSSs get fully oriented, introduced, have developed relationships with some of the high prescribing clinics, that'll continue to expand. So we feel good about the progress that we're seeing there. We're up about 10 heads so far at the end of the first quarter. So this plus 45 or so for the year, we're pretty well on track about a quarter of the way in. But ultimately, I think we're seeing encouraging signs that this can bear fruit. We certainly will continue to look at the productivity and make sure that it's a good return on investment. But right now, we feel good about that.
spk06: Thank you for taking the question.
spk07: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Chris Pasquale with Guggenheim. Please proceed with your question. Thanks.
spk05: I had one on this path back to normal and then one on the VA. On the recovery question, What do you see as the most important trigger for normalization as it relates to your business? Is it primarily a patient demand issue and so vaccines are the key or are state restrictions really keeping these clinics below capacity and those need to be lifted? Just trying to get a better sense for what needs to happen to get from here to there.
spk02: Yeah, good question, Chris. I think the primary one is, you know, there's a component of behavior that will start to emerge as people's vaccinations continue to gain numbers across the broader population. As we've said, the key point that continues, I think, to be a governor for our growth has been this sub-100% throughput. Clinics and hospitals that are saying they're seeing 80% or less of the same amount of patients they'd see in a given day or week Clearly, with growth goals that we've declared even in Q2, we've got to continue to find ways to grow faster simply because the existing accounts that we were calling on are running at lower volumes. We think that the handful of things that have impacted those reduced throughputs, social distancing may not change as rapidly throughout the year, but certainly patient cancellations as they get their vaccines. I think those things go down. Clinic throughput just because of having people not calling out sick because they've either been exposed or they're sick, et cetera. A lot of the different variable headwinds associated with COVID should continue to lift as we start to see ourselves emerge over the back half of the year. Frankly, if we had clinics back up at 100%, along with the ongoing expansion of prescriber base, we'd feel really bullish about what the future looks like. And that's probably the biggest governor for us. But we've seen just the comparison of March and April to January and February is kind of giving us the indication that change is coming. So we've got Q2 expectations that this is kind of the pivot point. We start to see growth emerge again. And with this continued momentum, we certainly expect that, you know, we'll be more closer to hitting stride in the back half.
spk05: Thanks. And then on the VA, so it sounds like you're sort of waiting for these patients to come back to the hospitals, but what happens if they decide that shifting these patients to an outpatient setting is actually the way that things should be even post COVID? You know, we certainly see a push, to alternative sites of care in other areas of healthcare. So do you have a plan in place to address that population if in six, nine, 12 months, those are still the sites where you have to go to access them?
spk02: Well, to some extent, we've kind of been running that play. We've been swimming upstream. We've started to have virtual education events for primary care physicians. We've tried to enroll or enlist students docs from some of the community-based outpatient centers to participate, raising the awareness and education about lymphedema among the primary care doctors. As a result, clearly our VA business hasn't gone to zero. We were at 14% of our total revenue this quarter versus 16 a year ago. So admittedly, not where we want to be and not where we've been. But I think that we can continue to incrementally get better, even if the environment, and the point of care doesn't change because we're already moving in that direction. I simply think it gets easier and these patients become much more concentrated when we're able to see them with a vascular specialist at the VA center than when we're trying to sift through all of the different patients seen in a primary care environment. Thanks.
spk07: Mm-hmm. Thank you. Our last question will come from Siraj Kalia with Oppenheimer. Please proceed with your question.
spk04: Hi, Dan. Brent, can you hear me all right? Coming through great. Perfect. So, Dan, can you give us an update on the structural dynamics on the commercial side? And I'm especially interested in the new contract signed, I believe, in late 2018 with United. Any update to be shared on that front?
spk01: Suraj, hi, it's Brent. I can give you a little bit of context on that. We haven't named that large payer. We refer to him as a large payer contract. That large payer, you know, I think if you recollect, one of the things that they did is We traded some ASP for broader expansion to their prescriber base, and it continues to perform very well for us. So it continues to grow as we expect it would.
spk04: Okay. So, Dan, I know a lot has been asked about the 80% capacity of pre-COVID levels. Maybe I can ask it. a little differently. Dan, would you mind providing any specific utilization metrics? And I was more curious in terms of number of accounts, average prescriptions per account per quarter, just trying to get a sense of, for example, how things are moving on the VA side versus commercial, more so in terms of these specifics.
spk02: Yeah, I don't know that we've broken it down to that level, Suraj, but... You know, one of the things that we've alluded to here is that new prescribers have certainly filled some of the gap among the existing top prescribers whose volumes are simply down. So, you know, we continue to maintain relationships with what have been our high prescribers, but the majority of them have just not met the same volumes that we were accustomed to with them as recent as, you know, 18 months ago. So we continue to focus on those But the one thing that we've determined is we can control our destiny more by continuing to expand the prescriber base. And that's one of the reasons we've been so focused on a number of these medical education events. They've been really effective ways for us to reach out, develop relationships with new clinicians, and continue the education process. So I think that's basically what we've seen. And when we say less than 80%, the spread is surprisingly large. Less than 80% is the number we use, but we've had some that have told us that they're still at 60% of their capacity. So it's still a little surprising even to me that the throughput has not recovered faster in some of these practices. But the other thing that we continue to ask is, what do you expect? And our confidence in their what I would call continued improvements in throughput, comes from their expectations as well.
spk04: Got it. Last question, Dan, from my side. And forgive me if I got these numbers wrong. I thought I heard you guys say 40% of your patients were trained virtually. Please correct me if I got it.
spk02: Yeah, it was just under 40% that were trained in person in Q2. In person?
spk04: Correct. So how should I think about the independent contractor use for the quarter, Dan? Thank you for taking my questions.
spk02: Yeah, so it's still a small portion that we're trained via independent contractors, and we still, frankly, had even some of our sales reps doing training in some markets in the first quarter. The addition of FSSs and also hiring some employee trainers, we think, we'll not only continue to make sure that we've got the right kind of patient experience and consistency, but also make sure that we don't draw our salespeople into any of the trainings either. So that mix of it was just under 40% that were done in person, I think we're going to continue to monitor that. We want to make sure that wherever it lands, it leads to a good patient experience. Fortunately so far, for all those that have been virtually trained, and we survey those patients equally, we're getting the same kinds of satisfaction scores as among those that have been trained in the home. But there's a number of variables that I think continue to dictate whether a virtual or home training is suitable, and we try to match it up with each patient. Thank you.
spk07: This concludes our conference for today. Thank you for your participation, and have a wonderful evening.
spk02: Thank you. We'll look forward to speaking with everyone again once we have the conclusion of our second quarter.
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