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spk05: Good evening ladies and gentlemen and welcome to the second 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 to 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.
spk01: Thank you, operator, and welcome everyone to our second quarter of 2021 earnings call. I'm joined on the line by Brent Moen, our Chief Financial Officer. In terms of what we intend to cover this afternoon, I'll begin with an overview of our second quarter sales performance, along with the discussion of the drivers, trends, and operational highlights we saw during the quarter. Then, Brent will discuss our financial results in greater detail and review our financial guidance for 2021, which we updated in our earnings release this afternoon. I'll conclude by sharing some additional thoughts on our outlook and key focus areas for the second half of 2021 before we open up the line for questions. Now let's get started with a review of our sales performance. In the second quarter of 2021, we were excited to achieve sales results that reflected easing of some of the pandemic-related headwinds and thus exceeded our expectations. Total revenue for the second quarter increased 45% year over year to $51.1 million, exceeding the 40% to 43% year-over-year increase that we expected and shared on our first quarter earnings call. Our total revenue growth was largely driven by sales and rentals of our FlexiTouch systems, which increased 45% year-over-year, and contributions from sales and rentals of our Entrez systems, which increased 49% year-over-year. Given that the second quarter of 2020 was notably impacted by the disruption caused by the COVID-19 pandemic, we were particularly pleased to see that our total revenue in the second quarter of 2021 increased 13% on a reported basis and 17% on an operational basis compared to the pre-pandemic sales in Q2 of 2019. Our sales performance in the second quarter was driven by a combination of strong execution by our team and progressive improvements in the broader healthcare environment. Looking at our second quarter trends a bit more closely, during the first half of the quarter, our business remained substantially impacted by the COVID-related health and safety protocols adopted by many of the clinics that we serve. These protocols continue to impact our business in two primary ways. First, they restricted clinics' treatment capacity as clinics continued to operate with fewer exam rooms and dedicated additional time to turning over these rooms, reducing their patient throughput. Some of the surveys of our top accounts in April found that two-thirds were still operating at less than 80% of normal levels, consistent with our surveys earlier in the year. Second, clinics continued to restrict in-clinic access to patients limiting the ability of our sales reps to conduct patient demos in person. While we continue to face these COVID-related headwinds throughout Q2, we were pleased to see both clinic throughput and in-clinic patient access improve in the second half of the quarter, as a larger portion of the population received vaccinations and government restrictions were relaxed. Looking at our recovery trends by site of care, outpatients based privately owned practices, most notably vascular clinics, continued to exhibit the fastest pace of recovery. With this trend as a backdrop, our team's focus on targeting and engaging with vascular specialists was again an important contributor to the strong growth that we saw during the quarter, especially the growth in the sales of our Entrez systems. While sales to practices based in hospitals and health systems remained slower, we were pleased to see incremental evidence of recovery in some of the facilities that we serve, with a portion enabling our sales reps to resume in-person patient demos. The VA hospital system, on the other hand, remained more challenging as restrictions persisted through the quarter, with many VA hospitals continuing to redirect lymphedema patients away from specialist settings to their network of approximately 700 community-based outpatient clinics. VA sales increased 69% year over year in the second quarter. However, given the slower pace of recovery in the VA and related persistent challenges, our VA revenue in the second quarter of 2021 was still 11% lower than what we reported in the second quarter of 2019. That said, we were pleased to see that the VA business improved modestly as the broader operating environment improved during the second quarter. In fact, our VA revenue increased 25% sequentially in comparison to the first quarter of 2021, which speaks to our team's progress in navigating the VA's shift in site of care. We look forward to a broader recovery within the VA, but we've also accounted for them maintaining their current posture in our second half of 2021 outlook. While we expect a continued recovery of our VA business into next year, it's worth noting that our non-VA revenue growth increased 23% in the second quarter of 2021 on an operational basis compared to the second quarter of 2019. From an execution standpoint, during the second quarter, our team did a nice job of using virtual solutions to train patients, raise awareness, and expand adoption among both new and existing prescribers. ultimately moderating the COVID related access issues that we faced. Specifically, we leveraged our expanded menu of patient training options to meet the needs and preferences of our customers, roughly half of whom were trained via our virtual or out of the box alternatives during the second quarter. From a medical education standpoint, our team kept up the momentum we saw over the last year and a half in using virtual programming to engage and educate a variety of potential new prescribers on the diagnosis, care, and management of lymphedema. We hosted a total of 39 medical education programs over the course of the quarter, 27 of which were held virtually and the rest conducted in person. These events were attended by nearly 1,600 clinicians bringing the total to approximately 2,800 in the first half of the year. And we've continued to see our overall base of prescribers expand as a consequence, which served as an important tailwind for our business during this challenging period. And lastly, we continued to lay the foundation for future improvements in the overall productivity of our field commercial team by bringing on field support specialists to help our sales reps focus on engaging with new physicians. We expanded the size of our team to slightly over 300 members by quarter end. Feedback from our sales meetings just last month continued to reaffirm our sales reps appreciation for the new field support specialist role. And we look forward to leveraging the potential of our recently hired FSS team members going forward. Our top-line results enabled us to deliver solid gross margins and a return to net income and adjusted EBITDA profitability. With that, let me turn it over to Brent to provide you with a more detailed review of our quarterly financial results, along with our updated guidance for 2021. Brent?
spk00: Thanks, Dan. Total revenue in the second quarter increased 45% year-over-year to $51.1 million this compared to $35.1 million in the second quarter of 2020. Our revenue in the second quarter benefited from the initial stages of recovery from the COVID-19 pandemic, with a portion of healthcare facilities and clinics relaxing restrictions and increasing patient throughput. Additionally, the year-over-year increase in second quarter revenue was driven by improvements in the productivity of our sales force, as well as the expansion of our prescriber base. due in part to our effective virtual clinician education activities. By product, sales and rentals of our FlexiTouch systems increased 45% year over year to $45.1 million in the quarter, and sales and rentals of our Entrez systems increased 49% year over year to $6 million. FlexiTouch revenue accounted for 88% of our total revenue in the second quarter of 2021. compared to 89% in the prior year period. By payer, second quarter revenue was approximately 70% commercial, 16% Medicare, and 14% VA, compared to 73% commercial, 15% Medicare, and 12% VA respectively in the second quarter of 2020. Continuing down the P&L, gross margin was 71% of sales in the second quarter of 2021, unchanged compared to the same period last year. Second quarter operating expenses came in at $36.3 million, an increase of $3.4 million, or 10%. The increase in operating expenses was driven by higher sales and marketing expenses, which increased $3.5 million to $20.9 million, and to a lesser extent, by higher research and development expense, which increased $100,000 to $1.2 million. Second quarter reimbursement general and administrative expenses decreased by approximately $200,000 to $14.1 million and included approximately $900,000 of litigation defense costs in the period. Excluding litigation expenses in the second quarter of 2021 and the impairment charge in the second quarter of 2020, our reimbursement and G&A expenses increased approximately 25% year over year. Second quarter operating loss was $76,000 compared to operating loss of $8 million in the second quarter of 2020. Income tax benefit in the second quarter of 2021 was $1.4 million compared to an income tax expense of $5.9 million in the second quarter of 2020. The year over year change was primarily due to a tax credit for a research and development study recognized in the second quarter of 2021. Net income was $1.3 million or seven cents per diluted share for the second quarter of 2021 compared to a net loss of $13.9 million or 72 cents per diluted share for the second quarter of 2020. Weighted average shares used to compute diluted net income per share were 20 million and 19.3 million shares for the second quarters of 2021 and 2020 respectively. Adjusted EBITDA for the second quarter was $4.1 million compared to adjusted EBITDA loss of approximately $700,000 in the second quarter of 2020. As a reminder, we have provided a reconciliation of certain gap to non-gap measures in our earnings press release. As of June 30th, 2021, we had cash and cash equivalents of $49 million, a high watermark for the company, compared to $47.9 million at the December 31st, 2020 period. We had no outstanding borrowings at quarter end. On April 30th, we entered into a restated credit agreement with Wells Fargo Bank, which increases our borrowing capacity up to $55 million. Turning in review of our 2021 outlook, we updated our earnings press release this afternoon. We are raising the full year guidance range to account for our stronger than expected performance in the second quarter. as our conviction in our ability to deliver strong sales performance during the second half of 2021. For 2021, we now expect total revenue in the range of 216.3 to $224.5 million, which represents growth of approximately 16% to 20% year over year, compared to revenue of $187.1 million in 2020. This revised outlook compares to our prior revenue guidance range of $215.3 to $224.5 million, or 15 to 20% year-over-year growth. By product, our updated 2021 total revenue guidance range assumes sales of our FlexiTouch systems increase approximately 14% to 18% year-over-year growth. and sales of our entrée systems increased 26% to 34%. For modeling purposes, for the full year, we expect our gross margin to be in the low 70% range, our adjusted EBITDA margin to be in the range of 12% to 13%. And please note, this adjusted EBITDA range assumes depreciation and amortization expense of approximately $3 million, stock-based compensation expense of approximately $11 million, and litigation-related defense costs and other non-recurring expenses of approximately $4 million to $4.5 million. We expect our fully diluted weighted average share count to be approximately 20 million shares. With that, I'll turn the call back to Dan for some closing remarks. Dan?
spk01: Thanks, Brent. The performance and trends that we observe to date are largely consistent with our expectations, and it gives us incremental confidence in our full-year outlook. We expect to see continued relief from the primary COVID-related headwinds outlined earlier during the remaining months of 2021. Although the Delta variant has served as a bit of a caution flag, we anticipate these headwinds will continue to subside as widespread vaccine inoculation drives a progressive return to normalcy in the healthcare environment. As conditions continue to improve, we remain committed to delivering strong performance as we increase the size and productivity of our commercial field team, expand our base of prescribing clinicians by continuing our targeting, outreach, and education events, and leverage our leadership position in the lymphedema space with clinically proven products that enjoy broad in-network reimbursement coverage. By focusing on these objectives, we remain confident in our ability to expand our share of the $5 billion U.S. market for lymphedema and related chronic conditions and deliver growth approaching 20% in the second half of 2021, continuing along the path to resume our long-term revenue and margin trajectory. I'd like to close by thanking the entire tactile medical team for their efforts in continuing to navigate this challenging environment, which has enabled us to continue serving our customers and patients safely and return to growth. 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.
spk05: 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. And our first question will come from Chris Pasquale with Guggenheim. Please state your question. Thanks.
spk07: Dan, I'd like to start by just getting an updated baseline on where you guys are in terms of the COVID impact on the business. So starting outside of the VA, what limitations, if any, are you still facing there today? And then for the VA segment, do you have any visibility on what the trigger would be to bring those patients back from the outpatient clinics or if that's even likely to occur? It sounded like guidance is not really assuming any progress there.
spk01: Yeah, thanks for the questions, Chris. Let me start with kind of what we're seeing on the COVID front. I think one of the things that led to a really strong quarter for us was the continued normalization trends that we're seeing. You know, back when we were surveying our customers, top prescribers back in early April, we were still hearing that they were well below 80% of normal throughput. We've seen that continue to approach the 80% value as we got later into the quarter, and that certainly helped. We don't expect that we'll get back to 100%, or rather that the clinics will get back to 100% throughput by the end of the year. Some of the sanitation procedures they're doing to continue to turn over rooms, some of the new office policies about limiting the number of patients either in exam rooms or in the waiting rooms, we continue to expect those to persist, however, not at the same levels. So we've kind of had the expectation that we will continue to see progressive improvements. I don't know that we'll get back to what was truly the old normal by the end of the year, but I think conditions we certainly expect will continue to get better. On the vascular side, that's been the most responsive under the circumstances, and it continued to be so in Q2. So vascular clinics, were probably the place we saw the biggest rebound or continued growth. We've seen a good amount of increase in new prescribers in that environment and simply access just is better. Most of those tend to be private or smaller clinics as opposed to big university settings where we find more of our oncology afflicted patients. And those conditions I'd say are still a little slower moving. They're getting better but not at the pace of vascular. On the VA side, it's hard to say. We've seen a few very, very episodic examples where some patients were allowed to be seen back by the specialists in the VA centers. But on a wholesale basis, the majority of them have continued to stay with the community-based outpatient centers. And since it's hard for us to predict when they might reverse their posture to the pre-COVID environment, we've kind of modeled the assumption that this CBOC or community outpatient center will be the prevailing place where these patients will continue to be seen through the year. I think on the flip side, our teams have done a really good job of navigating that environment. They've gotten better at finding the right people in the outpatient centers. And as a result, we certainly saw some recovery in the VA.
spk07: That's helpful. Thanks. I'm curious whether maybe the vascular clinics are a good leading indicator of this. But lymphedema is a chronic condition. it's not going to go away if these patients are not treated. Many of them maybe have not been getting the kind of treatment that they would have otherwise now for 18 months. In the settings where things have normalized fastest, have you seen a bolus of pent-up demand as access returns in those sites, or is that not something you expect to materialize in your business?
spk01: I don't know that I'd say I've seen a bolus of pent-up demand simply because of the governor on the amount of patients that are being seen in these clinics, but I would say that there's certainly been no shortage of a steady diet of patients wanting to fill those rooms. It's been more the, I think, the control or the capacity, rather, of the clinics themselves. They're seeing what they can with this new normal and some of the precautionary models that they put in place. But I think the good news for patients is that access to these clinics has started to recover. They're allowing more patients in the throughput environment. I've heard there were clinics that You know, back in, you know, early Q1, it was you had to wait down in your car and you'd be summoned one at a time when an exam room was ready. Now, instead of having as many patients as can sit in the waiting room, they may have a limit on four. But there is a queue of patients in the waiting room now that has helped with some of the throughput. And I think those are the things that are the difference between sub-70 and starting to get closer to 80% or better on the throughput, especially of our bigger prescribers.
spk05: Thanks. Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. Please go ahead.
spk06: Hey, guys. It's Adam on for Matt. Thanks for taking the questions, and congrats on the solid print. To start, I wanted to ask about the guidance. You know, the guide implies a nice ramp in the back half of the year. Maybe just talk about your level of confidence in achieving the updated guide that you've laid out and kind of how you built up the guidance range, and why not take up the upper end as well? And then the second part of the question is just around quarterly cadence. I think the street shows Q3 revenue of about 58 million. Are you comfortable with that figure? Just any thoughts on quarterly progression would be great. Thank you so much.
spk01: Yeah. Thanks for the question, Adam. Let me give you a little bit at the kind of high level on the guidance and then I'll let Brent kind of back clean up on this one. You know, we, we really don't think anything's changed, I guess, in the, in how we saw the market, how we saw the recovery and, even a few months ago. So our outlook at this point really hasn't changed, hence our reaffirming of the guidance for the most part. Some of the assumptions that are built into that is, as I mentioned, some ongoing improvements in the COVID environment or progressive improvements as the year continues to unfold. We don't think that the throughput of patients will get back to 100%, but we do expect that we'll get certainly north of 80 and approaching 90 by the time we exit the year. We do expect new prescribers to continue to contribute to our results as they have in the last couple of quarters. We don't expect any material change in the VA posture, as I mentioned a moment ago. And we've modeled in a modest increase in sales headcount increase in the back half. So that's kind of how we've thought about it. But frankly, those are the same assumptions that we really had a few months ago. As far as kind of the guidance change, because we still see the outlook very much the same, I think things are playing out very much like we expected. But we had the good fortune of having a really solid Q2, and I think that gave us the confidence to bring up the lower end as a result of what we had achieved in the first half. You know, there's still a fair amount of wood to chop in the second half. There's still some uncertainty in the marketplace. We like to think that we've tried to account for those. And I think it's provided us with a pretty good balance in how we've tried to lay out the back half of the year.
spk00: Yeah. Adam, it's Brent. I would just echo everything that Dan said, too. You know, just the raising the low end of our guidance range just to reflect the better than expected Q2 results. But as we progress through the second half of the year, all those things were kind of built into our expectations. In terms of the sequencing for Q3 and Q4, you know, I feel confident that, you know, we'll be able to hit that target. approaching 20% mark as we exit 2021. And quarterly sequencing looks pretty consistent.
spk06: Got it, guys. Thanks so much. And if I can just sneak in one more, would be curious if there's any update just on the top prescriber cohort as it relates to their performance in Q2. I think you talked about this group being down roughly 20% in Q1. So, Just curious, you know, if you saw some recovery there and just trying to get a sense for what that trajectory could look like going forward. Thanks again.
spk00: Yes. Yeah, Adam, it's Brent again. And I would tell you that we saw progressive improvement in terms of just access throughput and then patient from a prescriber perspective kind of met expectations for the second quarter, I think what, you know, we've always, we've talked about at least for the past two quarters, just, you know, having a limited access relative to pre-COVID. But I think where we're seeing a bit of the offset is in the new prescribers. And we don't quantify what those new prescribers are, but certainly we're seeing an add to clinicians out there that are interested in the are the byproduct of the virtual education events that we've done. So continuing to see progress as we expected.
spk06: That's helpful. Thank you.
spk05: Our next question comes from Ryan Zimmerman with BTIG. Please state your question.
spk02: Hi, this is Carolyn. I'm for Ryan. Thanks for taking my questions. On the commercial organization, can you share where you're at in terms of adding the 45 field support specialists over the course of the year? You know, is 45 still a goal? You mentioned expectations for a modest increase to the balance of the year here. And then, you know, you noted over 300 on that team or over the entire commercial team exiting the quarter versus over 295 last quarter. So, you know, is that 500? you know, net added through the quarter. So, again, just where are you in terms of that 45 field sports specialist additions for the year? Thank you. And then I have one follow-up.
spk01: Okay. Thanks for the question, Carolyn. First, as we put in the press release, you know, I think one of the important things on the sales team also is that we brought in this new leader in Eric Paul as our new senior vice president with a long story experience from Phillips University. And I think he's done a really nice job of engaging with this team. He's kind of gotten his arms around it probably quicker than I expected. We finished the quarter at just over 300, to your point. Well, we had about 45 targeted for new heads in the field. We're about a third of the way there at the end of Q2. And we've got about two thirds of the way to go in the back half. And that's still the plan, is that we would continue to add those heads in the back half. And then ultimately, you know, we continue to hear good things about those field support reps that we've positioned so far. We hosted some sales meetings in July and just the feedback that we got from some of our senior product specialists who had the good fortune of being paired with a field support specialist had reiterated the fact that it did liberate them from a lot of the patient demos and that is an important part of the selling process, but not necessarily we want our product specialists. And it's allowing them to spend more time not only with their higher quartile prescribers, but also to spend more time with the new prescribers, these new physicians that either participated or attended one of our education events, where some of the information that we've been able to equip them has resonated, and now we're working to continue to develop them as more active prescribers as they recognize the right patients. So I'd say overall good progress being made in the continued expansion of the field team and good progress between the Harmony, I think, between these support reps and our product sales specialists.
spk02: Great. Thank you. And then just one more on the Ketan trial. So previously we had thought the case might go to trial sometime in the early fall. We saw the cases recently delayed until December. So just appreciating there's only so much you can share. Can you provide any color around the reasoning for the new timeline? Thank you so much for taking my questions.
spk00: Hi Carolyn, it's Brent. I'd be happy to share a little bit of color on the Ketam lawsuit. Just in terms of overall updates, things are progressing. We are essentially through discovery and the deposition process, so those are virtually complete. We're working through the exchange of briefs and motions between now and later this fall. You're absolutely correct. The trial date has been pushed back until the beginning of December. A lot of that has to do with preparation on the relator side, more so than it is on our side. And so continuing to navigate their request to push the trial out and our quest to actually finalize the trial and put this behind us. But as you might expect, Caroline, We continue to believe that the case is without merit and we'll continue to vigorously defend ourselves on these claims, but that's generally the storyline as of now.
spk02: Thank you.
spk00: You're welcome.
spk05: Our next question comes from Margaret Cashore with William Blair. Please state your question.
spk03: Hey, good afternoon, guys. Thanks for taking the questions. Yeah, I'll be number three or four with guidance here, but I'll kind of be more specific and see what I can get. If we back into the guidance for FlexiTouch, I know the total guidance gets you close to 20%, but it seems like FlexiTouch is maybe in the mid-teens for the second half. It seems a bit conservative, I guess, versus what we typically see sequentially more likely in Q4. Yeah, so I know there's uncertainty in the numbers, but I guess anything that would suggest that traditional seasonality isn't applicable here, especially since Q4 is probably more commercial versus VA and should see that uplift.
spk00: Hi, Margaret. It's Brent. Thanks for the question. I would say your analysis is pretty typical, and I think it's pacing with the recovery that we've seen in the first half of 2021. So just kind of lay down the expectations. With the VA recovering the slowest, you have to remember that the VA is almost exclusively FlexiTouch. So that's one component that's contributing to this. And if they don't recover like they historically have in terms of Q3 and Q4 performance, that puts a line of business. The other piece that we've talked about in Q1 and Q2 is vascular. We expect that that continues to recover at a faster pace than some of the other categories that are out there. And then just as the third payer Medicare, you know, they're predominantly entree as well and follow quite closely the pace of the vascular business. So, you know, the expectation is really predicated on where we're starting to see the opportunity as we progress through the year.
spk03: Yeah, fair enough. And I guess ultimately the question is, what does that imply for 22 growth? And so is that mid-teens to start improving from there? Or, you know, can we kind of get back to that 20%? Yeah, if you don't touch that, I guess the bigger question is, you know, from a broad strategic perspective, what's that catalyst? What's that growth driver outside of just COVID recovery that you guys are prepping for as you look at 22 and beyond? Thanks.
spk00: Yeah, I would tell you... Nothing's changed in our overall expectations for this marketplace. Once we get through the COVID environment, we do expect that we'll return to a 20% plus top line revenue grower. We haven't worked out our 22 expectations or guidance, but certainly there is nothing in our line of sight that would give us pause relative to the opportunity that's in front of us. You know, I would tell you that once we kind of traverse through that gate, things should look a bit more normal.
spk01: Yeah, I would just add, Margaret, you know, there's a lot of things for us to be enthusiastic about, I guess, as we look down a little further down the line. I mean, we're really anxious, like the rest of the world is, to get back to kind of pre-COVID normalcy. And I think it has stretched out a little longer than some of us might have expected if you asked us a year ago. But I still am of the mind that we'll get back to a more normal environment next year. I think some of the new prescribers that we continue to add haven't been prescribing yet at the full pace of recognition. As we've kind of described, I think, in the past, new prescribers typically start with one or two patients or a small group. They want to see how they do in spite of the fact they may have written their first prescription based on a much broader body of evidence. They still kind of want to see it with their own patients. We think about the VA, I think back to Chris's question about when are they going to recover. It's hard for us to predict, so we haven't modeled it into 2021. but I expect at some point the VA's posture will return to normal. And then when you think about the expanded organization we continue to invest in, and I think some of the other investments that we'll be making into 22 and beyond, we're certainly enthusiastic about what happens as we get past 2021. We won't be providing specific guidance for 2022 at this point, but it'll come. It'll come, but I think there's certainly a number of things that we're enthusiastic about as we start to contemplate it.
spk03: Great. Thanks, guys. Thanks, Margaret.
spk05: Thank you. And just a reminder, to ask a question at this time, press star 1 on your telephone keypad. Once again, press star 1 to queue up for a question. Thank you. Our next question comes from Suraj Kalia with Oppenheimer. Please state your question. Sir Raj Kalia, your line is open. Please unmute yourself.
spk04: Hello.
spk05: Yes, go ahead.
spk04: Oh, sorry, Dan. My phone was behaving goofy. So, Dan, a couple of questions. On the lower end of the guidance, how have you all factored in any potential impact from the Delta variant? And I'm particularly curious about Florida and Missouri and How do those specific geographic regions contribute to the overall performance and the outlook for the remainder of 21?
spk01: Well, I think it's a good question. And certainly paying attention to what's going on in Florida and some of the other states kept people's attention. But I think you've hit it exactly, Suraj. That's what would point to the lower end of the range. Talked a little bit about the assumptions. I think there's certainly an opportunity to find our way on the higher end of the range if we can see faster recovery, if we can get closer to 90 plus percent throughput from our big prescribers, unfettered access to patients for demos, things like that, and perhaps even a pivot in the VA's posture before the end of the year. I think on the low end, you know, the other end of the spectrum is if we see some resurgence or the Delta variant causes a bit more pause in certain markets, that's what would probably guide us there. And that's why we've got a bigger range than normal for the back half than I think we historically would have provided. We're trying to account for kind of that cone of variables. But those would certainly be the things that would kind of pull us down towards the lower end. But we feel like we've tried to balance the handicap. We certainly haven't modeled imperfection in our expectations. So We're certainly hopeful that we don't get a bigger surprise there.
spk04: Fair enough. And Dan, I'll just throw in a couple quickly. What was the independent contractor usage in the quarter? And if I could piggyback, I believe one of the other guys asked this question, I'll ask it slightly differently. When we look at average prescriptions per clinic, right, Does the Pareto rule still apply in terms of what you all are seeing, or is it more normally? I shouldn't say normally, but it's getting back to what historical patterns were. Any color would be greatly appreciated. Thank you for taking my questions.
spk01: Sure. So let me touch on the patient training first. On the patient training front, let me just put it in perspective for the broader group. is there's been pretty even balance in the second quarter between patients that were trained in the home by one of our representatives or done virtually or out of the box. It's been pretty evenly balanced between those two in the second quarter. Of patients that were trained in the home, the majority were done by an employee of tactile. We've continued to expand our field trainers who are full timers for the most part in those markets where we've got a good steady diet of prescriptions. Contractors represented actually a small portion, I think something less than a quarter of all in-home training in the second quarter, certainly by June was done by a contractor. And I wouldn't say that we won't use contractors, Suraj, but I think contractors are best suited for us in those markets where there's either big geographic ranges to be covered or simply less developed markets where we don't have enough of a steady diet to fulfill a full-time employee. So that gives you a little bit on kind of what the training piece looked like. I think what portion will be in-home and virtual over time, I think that pendulum is still swinging a bit. But in Q2, it was pretty even between in-home and virtual. And then as far as kind of prescribers per clinic, we've certainly seen in the second quarter solid increases in our more active prescribers and the amount of volume that we saw in prescriptions from those prescribers. And it's not a big surprise to us, I guess, for a couple of reasons. As their throughput has continued to recover, that in essence has led to an increase in recovery of prescriptions that we've seen from those clinics. So we've seen some compliments certainly from new prescribers, But as the throughput, which is why it's a variable that we have tracked quite closely, because we're convinced it's a close barometer to the kind of activity we're going to see from our existing customers, as throughput has continued to improve, we saw that in our existing clinic prescribers as well.
spk04: Thank you.
spk05: Thank you. We are currently seeing no remaining questions at this time. I'll turn it back to Mr. Revers for closing remarks.
spk01: Thanks, Operator, and thanks to everyone for your interest in Tactile Medical's journey. We remain focused on revealing and treating the underserved lymphedema segment, and we look forward to sharing updates of our progress in the second half. Hope everybody has a great summer in the meantime, and thanks again for joining our call.
spk05: Thank you. That does conclude our conference for today. Thank you for your participation.
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