Release Date: November 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue in the third quarter grew 5% year over year to $73.1 million, indicating steady growth.
- Gross margin increased by 410 basis points year-over-year, driven by lower material costs and warranty expenses.
- Adjusted EBITDA grew 39.3% year over year, marking the 10th consecutive quarter of improvement.
- Cash and cash equivalents increased by $8.5 million sequentially, reflecting strong cash generation.
- The company is optimistic about the upcoming change in Medicare coverage policy, which is expected to benefit both patients and business operations.
Negative Points
- Revenue results were below expectations due to increased documentation requirements impacting sales rep productivity.
- The lymphoedema business growth was slightly lower than expected due to Medicare documentation challenges.
- Airway clearance revenue was affected by uneven buying patterns from DME customers.
- Operating expenses increased by 16% year over year, driven by strategic technology investments.
- The company had to revise its full-year revenue guidance downward due to ongoing challenges.
Q & A Highlights
Q: The Medicare documentation impact didn't play out as expected this quarter. Can you explain why that was a surprise and provide more visibility on Medicare sales improving going forward?
A: Sheri Dodd, CEO: The Medicare max did not become stricter, which is good news. However, with a full quarter under our belt, we better understood the documentation requirements and the support needed for sales reps. This impacted not just Medicare but also VA and commercial businesses. Despite this, we saw double-digit growth in VA and commercial channels, indicating strong market fundamentals. The delay in documentation collection affected order processing, but we are confident in our strategies moving forward.
Q: You lowered guidance by less than the miss. What gives you confidence in Q4, and are you expecting any contribution from Nimble?
A: Sheri Dodd, CEO: We expect minimal impact from Nimble as it was just launched. The change from LCD to NCD will only be effective from November 14th, so it won't impact Q4 significantly. Our confidence comes from having a full quarter's experience with Medicare requirements and the successful deployment of tools and processes. We expect these initiatives to stabilize Medicare sales and leverage our strong market presence in commercial and VA channels.
Q: Are you seeing any benefits from the Lymphedema Treatment Act enacted in January?
A: Sheri Dodd, CEO: We are starting to see patients taking advantage of the Lymphedema Treatment Act, though it requires a diagnosis and prescription process. While not yet material to our business, we expect it to gain momentum as awareness increases. We are ready to support patients transitioning from conservative therapy to pump therapy.
Q: Do you see the opportunity for headwinds to subside in 2025 with the national rollout of the e-prescribing tool?
A: Sheri Dodd, CEO: We are optimistic that the change to a single NCD policy will reduce turbulence and create a new normal. Our experience with both policies and the mitigations we've put in place, such as e-prescribing and CRM tools, position us well. We anticipate being in a good position with the NCD and are prepared for any policy changes.
Q: How would you rank the factors contributing to expanding margins despite top-line growth challenges?
A: Sheri Dodd, CEO: Product improvements have reduced warranty costs, and manufacturing efficiencies have improved gross margins. Elaine Birkemeyer, CFO, added that these improvements allow for continued investments in technology and initiatives to mitigate Medicare administrative changes.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
