Tactile Systems Technology Inc (TCMD) 2021 Q4 法說會逐字稿

Good evening, ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2021 Earnings Conference Call for Tactile Medical. (Operator Instructions) 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 to be filed 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 Reuvers, Tactile Medical's President and Chief Executive Officer. Please go ahead, sir.

Thanks, operator, and welcome, everyone, to our fourth quarter and fiscal year 2021 earnings call. I'm joined online by Brent Moen, our Chief Financial Officer. I'll begin today's remarks with an overview of our fourth quarter sales performance, along with a discussion of the drivers, trends and operational highlights we saw during the quarter. Brent will discuss our financial results for the fourth quarter and full year in greater detail and review our 2022 financial guidance, which we introduced in our earnings release this afternoon. Then I'll share some additional thoughts on our outlook in key areas of focus heading into 2022 before we open the line for questions. So with that, let's get started.

In the fourth quarter of 2021, we reported total revenue growth of 4% year-over-year to $61.7 million. Our total revenue growth was driven by sales of our recently acquired AffloVest product line, which contributed approximately 7 percentage points to our revenue in the fourth quarter. This more than offset a 3% decrease in sales of rentals -- in rentals of our lymphedema products with our revenue from Flexitouch and Entre systems decreasing 3% and 2% year-over-year, respectively. Our fourth quarter sales performance enabled us to achieve total revenue growth of 11% for the full year of 2021, exceeding our latest revenue guidance range, which called for total revenue growth of 9% to 10% year-over-year.

The higher-than-anticipated results relative to our expectations was driven by slightly better sales of our Flexitouch systems during the fourth quarter. Broadly speaking, our Flexitouch and Entre system sales performance continued to be moderated by 2 primary factors that we outlined on our last earnings call in November; the headwinds related to the extended recovery from COVID and the sales force staffing gaps that emerged during the second half of 2021. Let me take a moment to cover each of those aspects in a bit more detail.

Beginning with the impact of COVID, the spike in cases driven by the Delta variant during the second half of 2021, led to the reemergence of many of the headwinds that we'd seen during similar periods in the pandemic, namely, increased patient absenteeism, constraints on patient throughput and restrictions on rep access to both patients and clinicians at the healthcare facilities that we serve.

These headwinds ultimately limited our team's ability to engage with new clinicians and patient customers. The persistence of these headwinds throughout the fourth quarter was largely consistent with our expectations. With respect to the sales force staffing, our performance in the fourth quarter was impacted by the challenging labor market, which in combination with some reluctance around our vaccination policy, among both existing representatives and potential new hires, impacted recruiting and retention.

Keep in mind, our field teams regularly engage with patients directly, both in the clinic and in their home, thus, our cautious stance. In addition, with nearly 30% of our sales team unvaccinated as we entered the fourth quarter, we sought to reconcile our vaccination testing requirements to balance retention with patient safety. During the fourth quarter, we focused on enhancing our sales rep retention efforts, bolstering our internal recruiting resources and increasing our hiring incentives, especially for territories that have been more difficult to staff. We also instituted a vaccine policy aimed at restoring access to clinicians and patients, addressing our obligations as both a federal contractor as well as ensuring the safety of both our employees and the customers that we serve.

I'm pleased to share that we navigated the implementation of this vaccine policy during the fourth quarter while minimizing additional departures. As of December 31, our field commercial team, which is focused on increasing clinician awareness of our lymphedema solutions consists of approximately 220 field sales representatives, 30 field managers and 94 field support specialists.

The AffloVest device is sold through our DME providers throughout the United States and is supported by a team of 11 Tactile sales representatives. To help mitigate the effects of COVID-related headwinds on our business, our team's been focused in recent quarters on leveraging virtual solutions to interact with patients and customers, and these efforts continued during the fourth quarter as well.

Most notably, we continue to educate the medical community through our clinician education events. We hosted a total of 65 education programs during the quarter, which saw participation from approximately 1,600 clinician attendees. In total, more than 5,500 clinician attendees participated in our educational programming throughout the course of 2021. This was more than double pre-COVID attendance. Given this enhanced engagement with the medical community, we've continued to see expansion in the awareness and effective treatment of lymphedema as evidenced by our growing base of clinician prescribers.

And lastly, we continue to make steady progress with the integration of our AffloVest product during the fourth quarter. From a sales perspective, we were pleased to see solid engagement among our channel partners. We're seeing affirmation that our DME partners are finding well-qualified patients among their oxygen, nebulizer and noninvasive ventilation customers. As a reminder, we believe that this partnership with DME representatives focused on respiratory products in the home care setting is an advantageous sales and distribution strategy. These reps are well positioned to offer a complementary portfolio of respiratory solutions and benefit from the evolving needs of their existing customers.

From a margin perspective, AffloVest helped contribute to our strong overall gross margin performance during the quarter, resulting in nearly 73% for the fourth quarter. Stepping back, while the second half of 2021 proved to be more challenging than we had anticipated when the year began, we made solid operational progress that was consistent with our expectations during the fourth quarter. By continuing to successfully navigate these issues, we remain on track for a recovery and subsequent inflection as we work our way through 2022.

Now let me turn it over to Brent, who will share a more detailed discussion of our quarterly financial results along with our guidance for 2022. Brent?

Thanks, Dan. Total revenue in the fourth quarter increased 4% year-over-year to $61.7 million compared to $59.2 million in the fourth quarter of 2020. By product category, sales of our recently acquired AffloVest system contributed $4.3 million for the quarter. Sales and rentals of our Flexitouch systems decreased 3% year-over-year to $49.7 million in the quarter.

And sales and rentals of our Entre systems decreased 2% year-over-year to $7.8 million. Total revenue by channel was 68% commercial, 16% Medicare, 9% VA and 7% durable medical equipment distributors. The latter is a new channel comprised of revenue from our recent acquisition of AffloVest, which closed on September 8, 2021. These figures compare to our total revenue channel in the fourth quarter of 2020, in which the commercial, Medicare and VA channels represented 71%, 18% and 11% of total revenue, respectively.

Continuing down the P&L. Unless noted, all references to fourth quarter results are on a year-over-year basis. Gross margin was 72.6% of sales compared to 70.6% last year, an increase of 200 basis points year-over-year. Non-GAAP gross margin was 73.3% of sales compared to 70.7% in the prior year. Non-GAAP gross margin excludes noncash intangible amortization in both periods and noncash purchase price adjustments related to our acquisition of AffloVest in the current year period. The increase in gross margin resulted from sales and rental mix by payer. As a reminder, we have provided reconciliations of certain GAAP to non-GAAP measures in our earnings press release.

Fourth quarter operating expenses were $41 million, an increase of $6.2 million or 18%. The increase in operating expenses was driven primarily by a $5 million or 26% increase in sales and marketing expenses, largely due to increases in personnel-related compensation expense, including the addition of the AffloVest sales team and travel-related expenses as we return to hosting in-person regional sales meetings. The increase in operating expenses was also driven by $340,000 increase in reimbursement, general and administrative expenses, a $400,000 increase in research and development expenses and a $400,000 increase in cash or noncash intangible amortization and noncash earnout expense.

The increase in intangible amortization and noncash earnout expense was primarily attributable to the increase in intangible assets associated with the AffloVest acquisition, offset by $200,000 decrease in the estimated fair value of our earn-out liability related to the acquisition of AffloVest, which represented a reduction in our GAAP operating expenses in the fourth quarter of 2021.

Operating income was $3.8 million compared to $7 million last year. Non-GAAP operating income was $6.4 million compared to $7.8 million last year. Income tax expense was $10.9 million compared to income tax benefit of $3.9 million last year. The current year tax expense was driven by the recording of a full valuation allowance against our deferred tax assets. Net loss was $7.5 million or $0.38 per diluted share compared to net income of $12.1 million or $0.61 per diluted share last year. Non-GAAP net loss was $5.5 million compared to non-GAAP net income of $11.8 million last year. Weighted average shares used to compute GAAP diluted net income and loss per share were 19.8 million shares for the fourth quarters of both 2021 and 2020. Adjusted EBITDA was $9.5 million compared to $10.8 million last year.

Turning to a brief review of our results for the full year of 2021. Total revenue increased $20.9 million or 11% to $208.1 million. The increase in total revenue was driven by an increase of $12.3 million or 8% in sales of Flexitouch, $5.1 million in sales related to the AffloVest and an increase of $3.5 million or 15% in sales of Entre. 2021 revenue, by payer, was 68% commercial, 17% Medicare, 12% VA and 3% DME compared to 71%, 16%, 13% and 0%, respectively, last year. GAAP net loss for 2021 was $11.8 million or $0.60 per diluted share compared to a loss of $620,000 or $0.03 per diluted share for the full year 2020.

Non-GAAP net loss for 2021 was $6.5 million compared to non-GAAP net income of $3.3 million for the full year of 2020. Adjusted EBITDA for 2021 was $17.7 million or 9% of sales compared to $16 million or 9% of sales for the full year 2020. As of December 31, 2021, we had $28.2 million of cash and cash equivalents and $55 million of outstanding borrowings compared to $47.9 million in cash and cash equivalents and no outstanding borrowings as of December 31, 2020. This also compares to $22.4 million in cash and cash equivalents at the end of the third quarter of 2021.

Turning to a review of our 2022 outlook, which we introduced in our earnings press release this afternoon. We expect full year 2022 total revenue in the range of $235 million to $240 million, representing growth of approximately 13% to 15% year-over-year. Our 2022 total revenue guidance range assumes sales of our products that serve patients suffering from lymphedema and CVI, specifically, our Flexitouch and Entre systems, increased approximately 6% to 8% year-over-year. And sales of products that serve patients suffering from bronchiectasis and chronic respiratory conditions, specifically, AffloVest product line in the range of $19.5 million to $20.5 million for the full year of 2022. This compares to the $5.1 million of AffloVest sales following our acquisition on September 8, 2021.

On a pro forma basis, assuming the asset had been acquired on January 1, 2021, sales of our AffloVest are expected to increase in the range of approximately 18% to 24% year-over-year for the 12 months ending December 31, 2022. For modeling purposes, for the full year of 2022, we expect our GAAP gross margin to be in the low 70% range, our GAAP operating expenses to increase 18% to 20% year-over-year with roughly 1/5 of the expected year-over-year increase coming from noncash intangible amortization and noncash changes in contingent consideration.

The remaining increase in our GAAP operating expenses is driven primarily by incremental expenses from the acquisition of AffloVest for the 12-month period in fiscal 2022 as compared to the partial period for fiscal 2021 and our continued investment in research and development, including new product introductions we expect to introduce in 2022, which is expected to increase by $4 million.

Interest expense of approximately $2 million, a tax rate of 25% and fully diluted weighted average share count of approximately 19.8 million shares. We also expect to generate adjusted EBITDA of approximately $14 million to $16 million in 2022. Our adjusted EBITDA expectation assumes approximately $2 million of legal expenses and certain noncash items, including stock compensation expense of approximately $12 million, intangible amortization and changes in contingent consideration of approximately $8.5 million and depreciation expense of approximately $2.4 million.

Lastly, given the continued COVID related headwinds we are seeing in the first quarter of 2022, we expect our total revenue for the first quarter to increase in the mid-single digits year-over-year. This will be driven by a decline in sales of our lymphedema products in the low single digits year-over-year, offset by contributions from sales of AffloVest which, by a way of reminder, did not impact our sales results in the first quarter of 2021.

With that, I'll turn the call back to Dan for some closing remarks. Dan?

Thanks, Brent. Let me share a bit more color on some of the primary assumptions underpinning our 2022 revenue guidance. First, our guidance assumes that the primary COVID headwinds related to the Omicron variant will persist throughout the first quarter and then begin to subside thereafter. These headwinds have been similar to those experienced during recent periods of high COVID case volumes with reduced patient throughput at the facilities we serve, limitations on rep access and higher rates of absenteeism at the patient, provider and sales force levels.

And second, with respect to sales force hiring, we made progress in the fourth quarter and remain committed to the goal expressed on our third quarter earnings call of achieving our target for field sales representatives by the end of the first quarter of 2022. Our guidance, therefore, assumes increasing contributions from our new and recently promoted associates in the second half of 2022 after they're onboarded, trained and ramped productivity during the first half of the year. Third, our adjusted EBITDA guidance reflects our proactive investments to support our future growth, including a step-up in R&D spend in 2022, fueled by a few important areas, I'll share more color on in just a moment.

In summary, we expect relatively flat results in our lymphedema business for the first half, giving way to more normalized conditions and a return to double-digit growth in the back half of the year. Our primary objective is to position Tactile Medical to return to double-digit revenue growth on an organic basis during the second half of 2022, with the contributions from AffloVest enhancing our total revenue growth in the second half to mid-to high teens. Longer term, we expect to return to delivering strong, sustained organic revenue growth and expanding adjusted EBITDA margins in 2023 and beyond.

With this objective in mind, we're focused on driving operational progress in the following 4 key areas: First, enhancing our sales force hiring, retention and training to fill key sales roles and improve their overall productivity; next, expanding and leveraging the new base of clinician prescribers in our lymphedema business, by increasing the penetration of these new accounts through ongoing professional education, training of their clinical teams and providing efficient support for their referrals; third, introducing new and improved solutions for our customers beginning this summer with new Flexitouch compatible garments that improve the patient's experience.

We also intend to introduce a mobile app designed to engage with patients earlier in their diagnosis and treatment journey, leading to better qualified patients seeking care, meeting more of the eligibility requirements at their consult. It will also give us an opportunity to educate, update and train patients more effectively. We expect to introduce fresh evidence as well, including more active podium presence at the key society meetings.

And finally, supporting our AffloVest channel partners recognizing most of these patients are complex and thus, integrating airway clearance as a more focused complement to the menu of solutions patients and prescribers already depend on them for, such as oxygen, nebulizers and noninvasive ventilation.

An expanded and productive field team, strong network of referring customers, increasing evidence to support education and payer policy and an enhanced product and service offering will position us for a strong recovery as the near-term headwinds subside. Longer term, we continue to see significant runway ahead of us. We shipped approximately 65,000 Flexitouch Plus and Entre systems during the course of 2021, which represented less than 5% of the 1.4 million diagnosed lymphedema patients seeking care during this period according to our latest analysis of U.S. medical claims data.

While this is a compelling statistic, we believe that a far greater portion of our patient population remains undiagnosed and untreated and expect this opportunity to come into view as the awareness of lymphedema and its treatment continues to grow. And lastly, we remain excited about the addition of AffloVest to our portfolio. AffloVest further expands our runway with an incremental $5 billion annual market opportunity while enabling us to remain true to our core focus as an organization, providing clinically proven at-home treatments to patients with underserved chronic conditions.

Before we open the call for your questions, I wanted to comment on the press release we issued on Friday, which announced the Qui Tam lawsuit filed by a competitor had been dropped and dismissed by a federal judge in Texas. On February 13, 2019, Tactile was named in a lawsuit filed by a competitor in Texas. This suit challenged our business practices, which are consistent with other industry leaders.

Now 3 full years later, the case was dismissed, with prejudice, by a federal judge with the plaintiff agreeing to waive the right to appeal pursuant to a settlement agreement. Tactile will not pay any damages, attorney's fees or any settlement to the plaintiff. We believe that the case was without merit from the beginning, and I'm proud of how steadfastly we held our ground, choosing to defend our people, our partners and our practices.

The dismissal closes the matter entirely and removes any uncertainty regarding the outcome of this case. With dismissal by the plaintiff, Tactile has decided to voluntarily dismiss its countersuit against the plaintiff to bring the entire matter to conclusion and continue to focus on our business. We look forward to continuing our long-standing medical education practice, partnering with health care professionals, selecting the most effective training methods and serving patients with dignity and care.

I'd like to conclude today's remarks by thanking our employees for their dedication, despite challenging circumstances this past year, which enabled us to bring an identity to those seeking care, providing relief to over 65,000 patients with lymphedema, bronchiectasis and other chronic conditions. 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.

(Operator Instructions) And our first question will come from Adam Maeder with Piper Sandler.

This is Simran on for Adam. I guess I wanted to start with guidance. So 15% to 20% growth for 2022. And obviously, it's a very fluid environment right now, but any additional color that you can provide on what you're seeing in the procedural landscape thus far into Q1? And is there anything meaningful outside of COVID that has been contemplated in the guide? And then, I guess, to round it out, when can we expect growth to return to that normalized 20% base in the core lymphedema business?

Yes. So good questions. Let me take a shot at a couple of those, and then Brent may have some things he wants to weigh in on as well. Let me start a little bit with the first quarter and kind of how we're seeing things unfolding. First of all, we were really delighted that our progress in December was slightly better than we had expected. We saw a little bit of COVID subsiding, frankly, in early December which allowed us to over perform against our latest guidance.

But as we got into January, we certainly saw a much more severe spike from the Omicron variant. And that was particularly strong in January and into early February. We saw a much higher absenteeism from our clinics, the healthcare practitioners along with patients. And frankly, our own team, we had over 50 salespeople tested positive in the month of January for COVID due to the Omicron variant.

So that's what kind of underscored some of the way that our guidance unfolded for the full year, starting off a little slower start. But -- the backdrop of expectations is that the Omicron variant will it ramped quickly, we're still expecting it to continue to ramp back down rather rapidly as well and more normalized conditions starting to set in. We expect that as we get into the back half of the year, the conditions start to look much more normalized, that we've grown much healthier as it relates to staffing our targeted sales headcount in the field throughout Q1. Q2 is going to be a function of continuing to make sure that we get folks, especially the newest members trained and productive.

And then as we get to the back half, the expectation is we'll not only have improving productivity within the sales force, some improving backdrop of general market conditions as it relates to COVID. And also, the introduction of some new products that I think can both reinvigorate both our sales force as well as our customer base. So those are kind of the -- some of the macro assumptions that went into this.

And then as far as the ongoing growth, yes, we still believe that the growth profile for this business is really unchanged. As you contemplate the size of this market and the opportunity that's in front of us, 2022 is clearly going to be a year where we demonstrate recovery somewhat back -- certainly back half weighted, but I think we have an opportunity to exit the year looking a lot more like ourselves.

Simran, it's Brent. Let me just provide a little bit of context about the year as well. So the way I look at it, it's really the tale of 2 halves. So I think if you heard my commentary, we're looking for first quarter to be a little bit softer than what we historically have seen with all of the things that Dan just mentioned, and I'll kind of lay it out in terms of what we expect. But a total revenue increase in the mid-single digits year-over-year.

And then -- but our lymphedema business is probably going to be down in the low single digits for the first quarter, offset by contributions from AffloVest. So you'll see AffloVest because it doesn't have a comparable to the prior year, drive increase in Q1. But what we've experienced and what Dan was talking about will be a challenge in Q1. And then as we progress through the year, expecting continual improvement throughout the quarter, Q2 being a productivity focus and then Q3 and Q4 getting back to our double-digit revenue growth on an organic basis.

Got it. Perfect. That was very helpful. A quick follow-up on the sales force update. How quickly do you think you can get back to full strength sales organization? And I guess, to put a finer point on it, how long does it take these reps to get fully productive? And is there an average run rate revenue per rep that we should be looking out for to be considered productive rep?

Yes. Simran, it's Brent again. I'll give you a little bit of perspective on sales force. So I think it's important to appreciate where we were at the end of the third quarter and then what we've disclosed in the transcript headed out coming out of Q4 and what we expect as we look forward. So if you recall, when we exited Q3, we were down 20 selling heads, give or take. And where we finished at the end of December, we broke it into 3 broad categories: One is our field sales reps, and we had 220 field sales reps. We have 30 field managers and 94 field support specialists.

If you recall, our fourth quarter goal was 225 field sales reps. So we made nice progress in the fourth quarter, but we didn't get all the way back to what our goal was as we exited Q4. As we look forward to Q1 of 2022, our objective is to, on the field sales reps get closer to 230 coming out of Q1 and then progressing from that point with the focus at year-end of growing up to about 240 by the end of the third quarter.

Yes. From a productivity perspective, the history would tell us because we were always in a build mode versus a buy mode. So building up our sales reps from an associate product specialists all the way up through a product specialist. We expected an APS to ramp to maturity between 6 and 12 months and then a product specialist taking somewhere in that 12-month period, given some of the focus that we've put on our sales team over the course of the last 4 or 5 months, we feel that we can ramp that productivity faster such that our objective by being healthy at the end of the first quarter will translate into double-digit organic growth in the second half of the year.

Our next question is from Ryan Zimmerman with BTIG.

This is Phil on for Ryan. Can you guys hear me okay?

Coming through Phil.

Great. In terms of the lawsuit, getting that behind you, what do you expect from a revenue perspective in the Texas region where you were impacted?

Yes. I think it's a little early to say, but we'll certainly have a fresh opportunity to go back and revisit those accounts that demonstrated pause just based on kind of the reputational overhang that this created for us. So we're certainly looking forward to getting back and more engaged with a number of those accounts, particularly within the VA system. I don't know that we put a finer point on it beyond that, but we think it's a ready place for us to certainly go lean back into.

Sure. Sounds great. In terms of the VA, what you just mentioned, I understand that your earlier comments about FY '22 being a tail of 2 halves. But in terms of that recovery in the VA, as it relates to lymphedema patients, how do you kind of see that playing out as we move through the year here? Are there still regulations that your sales force is kind of encountering or how do you see that going?

Yes. So one of the things about the VA is they seem to be growing increasingly entrenched in their posture. I think when COVID surfaced, it seemed a little uncertain about whether or not their pivot was temporary or if it was a precursor to something more permanent. Recall that we used to find most of our patients at the VA centers, of which there were about 170 when the COVID surfaced, most of those patients were redirected out to the community-based outpatient centers. As we've continued to monitor this one, I think that the CBOC or the outpatient centers and even virtual patient encounters seem like it's here to stay.

So I think that there's a good chance that this is the new model that we've seen, but I think we've also demonstrated that we've been able to pivot along with it. The outpatient centers have become a regular call point for us. So we're certainly engaging there. And I think longer term, I've suggested that I expect that low double-digit is a more likely percentage is a function of mix for us on a projectable basis with the VA. If you look at just the size of the market relative to the overall market. So we think that the VA posture is probably going to be enduring at least for the foreseeable future. And I think we've adapted to be able to engage with patients in that model.

Our next question is from Margaret Kaczor with William Blair.

This is Maggie on for Margaret today. I just wanted to ask within the 2022 guide, what are you assuming in rep productivity growth from your existing reps than in the new reps that you plan on hiring throughout the year?

Yes. Maybe I can give you a little perspective on that. So recall that our general expectation for product specialists, and this is on average, is the product specialist generates roughly about $1 million of revenue in a given year. And depending on the size of the territory and how much demand there is in the territory, they might actually be granted an associate product specialist.

And if that territory can support both the product specialists and an associate product specialist, you can think about that territory generating roughly about $1.5 million with the out of that EPS. Then, of course, we've talked about the field support specialists. If we can have a field support specialist in that territory, we start to see nice productivity gains on a comparable basis. So fully staffed territory with a product specialist APS and an FSS, think about that FSS adding roughly somewhere between 20% and 30% relative to that territory. So that just gives you an idea of how the build works from a productivity perspective by the reps.

I think one thing to add too is that we have -- and Brent alluded to it earlier about build versus buy. We've historically had one path to staffing product specialists, and that was to hire in an associate, develop that person and typically, the germination process takes a fair amount of time. What we're also doing now in an attempt to make sure that we staff all of the field territories that we have in mind, but to also accelerate our productivity curve is we're introducing a blend. Some associate product specialists continuing to promote up when they're ready, but we're also competing now externally within the med tech marketplace. And we're adding a blend of both promoted from within as well as experienced med tech salespeople externally. And I think that as we do that, there may be an opportunity for us to condense some of the productivity curve for incoming product specialists.

Okay, great. You guys talked about having a heavier podium presence this year. So what type of data are you aiming for? And then what, if any, benefits are included within the guide, whether that be assistance with utilization or new accounts or just growing market access?

Yes. Great question. So I think we had certainly shared last year that we had started sponsoring randomized clinical trial on head and neck cancer survivors. And that one will continue to proceed. So that's one of the places that we're certainly investing in ongoing evidence. We're convinced that while that's a multiyear study that it will have the kind of girth and level of evidence that will actually influence payer policy. So that's an important one. It won't bear fruit in 2022.

But I think a really good example of some of the evidence we're doing. Coming up later on this week is the American Venous Foundation Congress down in Orlando, and we'll have a couple of opportunities with various speakers and presenters presenting some updated information as it relates to identifying patients and I think further exposing the market opportunity and how to identify suitable candidates for treatment.

There's also in June, the Society for Interventional Vascular Radiology, we expect to be represented on the podium there. I think there's going to be a really nice opportunity for us with another new constituent to further the opportunity to talk about the scope of lymphedema and how to better identify suitable candidates. And then we've got some earlier stage work starting as it relates to AffloVest that we'll be able to demonstrate, we believe, some of the efficacy that the therapy that we've got can produce. So evidence continues to be a really important part of our journey about revealing more of these underserved and underrecognized patients and helping clinicians identify the right markers so they can both diagnose and ultimately prescribe the right therapies to bring relief to these patients.

(Operator Instructions) Our next question is from Suraj Kalia with Oppenheimer.

So Dan, first 2-part question. In Q4, what percent of your organic revs were contributed by the 30% unvaccinated reps? And the second part of that question is, in Q1, the 50 reps that contracted COVID, on average, how long were they decommissioned and how recoverable is this business?

So Suraj, I just want to make sure I answer the first one. There were a couple of percentages mixed in there. So your question was related to the 30% that were unvaccinated, I just want to make sure the nature of -- the part of that.

Yes. Just trying to understand what percent of the organic business is contributed by these 30% of the unvaccinated reps?

Yes. I don't know that we have the detail on that. And just to remind you, we said we had about 30% of our sales force remained unvaccinated going into the fourth quarter. Over the course of the quarter, a number of them either got vaccinated or we had -- our policy was going into effect basically the first of the year. And anyone that remained unvaccinated would have gotten a waiver, an agreement that they were going to be tested a couple of times a week. So the entire sales force is either vaccinated by the end of the quarter or meeting that testing requirement. So we wanted to make sure that we could be bringing people into patients' homes and interfacing with them in clinics in a safe environment. So that 30% certainly continued to go down as far as how many were unvaccinated, but ultimately, all of them followed our policy as it related to vaccination.

And then I think the second question, how many days -- yes, how many days. It's probably a reasonable assumption to say not less than 5. If you test positive, most protocols would certainly suggest that you're out for a week and some of them could have been more. So I think it was -- that's kind of a pretty typical rule of thumb.

But is this business recoverable Dan?

When you say is it recoverable, I mean the sales rep wouldn't have been available to engage with patients in, in clinic. That's more about the ability to support new prescriptions. If we had prescribers that were prescribing for patients, we were still, of course, able to support them. We were able to have trainers meet with them. So I think that, that business continued.

But you can imagine if you've got absenteeism, it's the same as having an open territory. So if you pull a handful of salespeople out that are not productive in a clinic, either growing the business or continuing to support their customer, there's certainly an impact. And that's what led us to kind of some of the guidance general direction that we were voicing as far as Q1.

Got it. And final question, Dan, what was the percent use of virtual training in the quarter?

I don't have the percentage at the -- at my fingertips, Suraj, but it was relatively modest. It's a place where I think we can continue to grow, particularly as we introduce this mobile app in the back half of the year. I think engaging with patients with a digital footprint, increased training content via video in the palm of their hand on their phone, certainly will continue to help us move in that direction. But at this point, I think it was relatively modest in Q4.

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