Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q4 2019 Earnings Conference Call - Final Transcript

Feb 26, 2020 • 05:00 pm ET

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Tactile Systems Technology, Inc. (NASDAQ:TCMD) Q4 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
Gerald R. Mattys

which Brent will discuss in detail during his remarks.

Excluding the impact of ASC 842, our revenue increased 28% year-over-year on an operational basis in 2019. Our revenue growth in 2019 benefited from several important drivers that we have shared with you on prior earnings calls. First and foremost, the expansion of our sales team was a strong contributor to our success in 2019. By year-end, we managed to exceed our hiring goal for the year ending 2019 with more than 240 reps, compared to more than 200 reps at the end of 2018. Pace of hiring in 2019 is evident of the improvements we've made in our process for recruiting, hiring and onboarding new talent, and we expect these additions will continue to fuel our growth moving forward.

Second, the strong market adoption of our Flexitouch Plus system, which we launched in the second quarter of 2018. We continue to receive feedback from prescribers and customers that our third generation Flexitouch system with its improved garments and controller and strong clinical evidence is the best pneumatic compression device on the market. Its ability to treat two legs simultaneously has led to increased adoption from new clinicians, as well as existing clinical customers who were previously prescribing competing devices for bilateral therapy.

Third, our targeting strategy to focus our sales reps on the highest diagnosing accounts in our market. During 2019, we were successful in expanding our penetration of these target accounts, and we continue to see a lot of greenfield opportunity with respect to this targeting strategy as I will discuss later in my remarks.

And lastly, our broad in-network coverage with commercial payers. We began 2019 as an in-network provider for over 275 million US lives or approximately 90% of the insured population, allowing us to provide our systems to patients covered under commercial insurance plan at a lower out-of-pocket cost. We complemented our strong 2019 sales performance with gross margins of 71%, consistent with our 2019 target of gross margin in the low 70s and improvements in our profitability profile, including a 210 basis point improvement in adjusted operating margins year-over-year and adjusted EBITDA of $25.3 million, up 46% year-over-year.

Turning to an overview of our operational performance in 2019. In addition to our Flexitouch Plus system, during 2019, we continue to experience demand for Flexitouch Head and Neck from customers in lymphedema clinics and the VA where our sales team is focused on selling this product. Sales of Flexitouch Head and Neck increased nicely and remain in the low-to-mid single-digits as a percentage of our total revenue in 2019, consistent with our expectations. At the same time, we focused on building our portfolio of clinical evidence with the goal of completing and submitting three clinical publications in 2019 in order to support our pursuit of expanded reimbursement coverage and widespread adoption of Flexitouch Head and Neck. We published a clinical study of Flexitouch Head and Neck in the Journal, Otolaryngology-Head and Neck Surgery, and completed manuscripts