Good afternoon. Ladies and gentlemen, welcome to the Third Quarter 2017 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 that the recording 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 most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, as well as our most recent 10-Q filing.

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. Jerry Mattys, Tactile Medical's Chief Executive Officer. Please go ahead, sir..

Thanks operator. Hello, and welcome everyone to our earnings call for the third quarter of 2017. I'm joined on today's call by our Chief Financial Officer, Lynn Blake. First let me apologize for the inconvenience caused by our earnings press release being posted late to the wires.

The release is out there as is our filed Form 8-K which is available on sec.gov. First let me provide you with a quick outline of the subjects we intend to cover on the call this evening.

I'll begin by summarizing our strong financial performance for the third quarter and first nine months of 2017 and by reviewing the primary growth drivers of our revenue performance in each of these periods.

I'll then highlight some of our recent operational achievements during the third quarter and update you on the progress we have made with respect to our new products, our Flexitouch Head and Neck and Flexitouch Plus Systems.

Lynn will than discuss our third quarter financial results in detail and review our financial guidance for 2017 which we updated in our earnings press release this evening. Lastly I will conclude by sharing some additional comments on our expectations for the remainder of the year, before opening the call to your questions.

Now let's get started with the review of our third quarter results. I am pleased to report that we continued to achieve strong revenue performance in 2017, culminating in 33% year-over-year growth during the first nine months of the year.

For the third quarter of 2017 specifically, we reported revenue of $28.3 million, representing 25% growth year-over-year. Our third quarter revenue growth was driven by strong sales of our Flexitouch Systems, which increased by 35% year-over-year to $26.2 million.

The impressive performance that we saw in our Flexitouch business during the third quarter continued to benefit from the long-term growth drivers we shared with you in prior quarters which I'll now take a moment to discuss.

For over a decade, our organization has been focused on improving awareness of lymphedema in the marketplace, while facilitating patient access to our advanced Flexitouch therapy. Our efforts in pursuit of this strategic focus in recent years has resulted in three primary drivers, that have fueled the growth of our Flexitouch business in 2017.

First, we have invested in the rapid expansion of our direct sales and reimbursement teams over the last several years. Our direct sales approach is one of the primary competitive advantages of our organization in the homecare products market.

It has allowed us to rapidly expand our customer base by forging relationships directly with clinicians and patients.

Second, in 2016 we introduced a new strategy to improve the productivity of our direct sales force by using reimbursement claims data to identify and target clinicians that diagnose the highest number of lymphedema patients in the United States.

This target subset of clinicians continues to represent an enormous opportunity for our organization and our sales reps remain focused on engaging with them. Third, our payer relations group has been successful in expanding our contracted coverage with commercial payers as an in-network provider.

Our in network coverage has grown to include more than 270 million lives as of the beginning of 2017 and improving patient access to our products and further enhancing the potential productivity of our sales and reimbursement teams.

Along with the collective impact of these three primary tailwinds, our third quarter Flexitouch growth was also driven by very strong sales into the Veterans' Administration segment of the lymphedema market.

Our performance in the VA in 2017 has benefited from the addition of several specialized resources that are focused on penetrating this important market segment.

Turning to sales of our Entre and Actitouch Systems in the third quarter, recall that we instituted changes to our sales force compensation plan at the beginning of the second quarter of 2017. We also continue to see increasing market demand for our Flexitouch.

Together these dynamics help further focus our sales reps on driving Flexitouch System sales, which influence our sales of Entre and Actitouch.

We were pleased to see the increased focus from our sales force drive strong growth in our Flexitouch System sales in the third quarter, more than offsetting sales of Entre and Actitouch Systems, which decreased by 36% year-over-year to $2.1 million.

As we communicated on our second quarter call, we expect this dynamic to continue to impact our Entre and Actitouch sales performance over the balance of the year. Lastly, in addition to our strong total revenue growth in the third quarter, we saw year-over-year improvement in our gross margins, which increased approximately to 73%.

We also grew our adjusted EBITDA 30% year-over-year to $2.5 million. Turning to an update on our operational progress, we had a number of notable accomplishments during the third quarter. On the new product front, recall that we announced the commercial launch of our Flexitouch Head and Neck product in mid-May.

The commercialization of Flexitouch Head and Neck is progressing as anticipated and we continue to receive positive feedback from our patient customers as well as from our field sales team.

As a reminder we are focused on selling Flexitouch Head and Neck into lymphedema clinics and the VA, two of our established call points, to limit the potential for sales force distraction.

I am happy to report that we again saw minimal distraction from our usual call pattern during the third quarter and Flexitouch Head and Neck remains on track to become a meaningful contributor to our long-term growth profile. Likewise, we still expect to launch our next product in our pipeline, our Flexitouch Plus during the first quarter of 2018.

Flexitouch Plus is the third generation of our Flexitouch system and we announced FDA 510(k) clearance of this product in June. Flexitouch Plus features a number of important enhancements over our current system, which were inspired by the collective feedback of our patient customers.

These enhancements include an interactive color display that allows for the creation of customized preset therapy programs, redesigned garments that are easier to put on and take off, and a modified controller that allows patients to treat two limbs at the same time.

Collectively, we expect that these features will improve the system's ease of use and reduce treatment times and enhance the overall user experience for our patients.

In addition to the product development and commercial progress that we have achieved with respect to our new products, we also made a number of important additions to our team during the third quarter. As I discussed in detail on our second quarter call, in July we appointed Dr. Thomas O'Donnell, Jr. to the position of Chief Medical Officer.

As the former Chair of our Scientific Advisory Board, Dr. Thomas O'Donnell has been a source of valuable insight for years. We are excited to welcome him to our senior leadership team where he will become an even more integral contributor to the future progress of our organization.

We also strengthened our Board of Directors with the appointment of two highly qualified individuals, whose background and expertise will benefit our strategic direction. In August we announced the appointment of Dr. Cheryl Pegus. Dr. Pegus joins our Board with an impressive background in both commercial and academic segments of the medical industry.

Among her many career highlights, she served as the Chief Medical Officer for Wallgreens, and for Johnson & Johnson startup company called SymCare Personalized Health Solutions. Prior to these roles, she was a National Medical Director in Clinical Product Lead for Aetna. A cardiologist by training with a Masters in public health, Dr.

Pegus currently a Clinical Professor of Medicine and Population Health at NYU Langone Medical Center. We also appointed Ray Huggenberger to our Board in September, who many on today's call may already be familiar with. Until his recent retirement, Mr. Huggenberger served for almost a decade as the President and Chief Executive Officer of Inogen, a U.S.

listed Medical device company, which manufactures and sells durable medical equipment designed for use within the homecare setting. Their commercial strategy is to sell directly to the patient, circumventing the DME distributor channel.

Obviously, Ray's experience growing a company with a similar business strategy to ours, will be incredibly valuable to Tactile Medical in the years to come. Prior to his time at Inogen, Mr. Huggenberger was President and COO for Sunrise Medical, another DME manufacturer and distributor. We look forward to leveraging Mr.

Huggenberger's nearly 30 years of leadership experience in the medical device industry and his unique and applicable insight in to commercializing products within the DME channel. Lastly, on September 13, we announced the successful pricing of our first follow-on offering.

This offering was book run by William Blair, Piper Jaffray and Guggenheim Securities and co-managed by Cannacord Genuity and consisted entirely of secondary shares. We would like to thank the investors who participated in the offering for their support of Tactile Medical and welcome all of our new shareholders.

With that, I'll turn the call over to Lynn Blake, who will review the third quarter financial results in greater detail.

Lynn?.

Thanks Jerry. Tactile Medical's total revenue for the third quarter increased $5.7 million or 25% year-over-year to $28.3 million. Our revenue performance was driven by sales of Flexitouch Systems, which increased $6.8 million or 35% year-over-year to $26.2 million.

The Flexitouch sales growth was primarily driven by the drivers Jerry described earlier, the expansion of our sales force, along with increased physician and patient awareness of the lymphedema condition and the treatment options as well as increased contractual coverage of national and regional insurance payers.

While Tactile Medical does have a significant presence in the Houston and Gulf Coast region, the disruption associated with the hurricanes did not materially impact our year-over-year growth in the third quarter. Flexitouch sales accounted for 93% of our revenue in the third quarter of 2017 compared to 86% of revenue in the third quarter of 2016.

The Flexitouch revenue growth in the quarter was partially offset by sales of our Entre and Actitouch Systems, which decreased $1.2 million or 36% year-over-year to $2.1 million. Gross profit increased $4.4 million or 27% year-over-year to $20.8 million in the third quarter of 2017.

Our gross margin rate increased 114 basis points year-over-year to 73.4% of revenue. The third quarter gross margin performance was primarily due to favorable product mix, as sales of Flexitouch represented a larger share of total sales this year compared to the third quarter of 2016.

Operating expenses increased by $4.2 million or 27% year-over-year to $19.6 million. The increase in operating expense was primarily driven by increased reimbursement general and administrative expenses as well as increased sales and marketing expenses.

Reimbursement general and administrative expenses increased $2.5 million or 48% year-over-year largely as a result of increased public company costs, expenses associated with the September 2017 secondary offering, increased personnel costs on hired headcount and accruals related to current and prior period sales and use [ph] tax exposure.

Sales and marketing expenses increased by $1.9 million or 22% year-over-year due to continued investment in the expansion of our field sales team, increased variable selling expense, including sales commissions and increased marketing expenses.

Operating income increased by $200,000 or 20% year-over-year, to $1.2 million for the third quarter of 2017. We recorded an income tax benefit of approximately $84,000 in the third quarter compared to an income tax expense of $500,000 in the prior year.

The tax benefit in the third quarter of 2017 reflects the impact of discrete items associated with a significant level of tax deductible stock based compensation expense resulting from equity award related activity in the quarter. Third quarter adjusted EBITDA increased by $600,000 or 30% year-over-year to $2.5 million.

As a reminder we've provided a reconciliation of GAAP net income to our adjusted EBITDA in today's earnings press release. Net income for the third quarter increased $900,000 or 173% year-over-year to $1.3 million.

Net income attributable to common shareholders was $1.3 million or $0.07 per diluted share compared to net income of $200,000 or $0.01 per diluted share last year.

Net income attributable to common stockholders in the prior year period included the accrual of convertible preferred dividend of $200,000 as well as the allocation of undistributed earnings to preferred stockholders of $100,000.

Both of these items were related to our private company capital structure last year and neither impacted net income in the current year period. Weighted average shares used to compute diluted earnings per share were 19.1 million and 14 million for the third quarters of 2017 and 2016 respectively.

Let me now turn to a discussion of our 2017 revenue guidance, which we updated in our earnings release this afternoon. For the fiscal year ending December 31, 2017 we now expect revenue in the range of $106 million to $108 million, which represents a growth of 25% to 28% year-over-year, compared to revenue of $84.5 million in 2016.

This revised outlook compares to our prior revenue guidance range of $105 million to $107 million. Our guidance update does contemplate fourth quarter revenue impact associated with the August and September hurricanes. While still difficult to estimate we expect the fourth quarter revenue impact to be in the range of $500,000 to $1 million.

Lastly, for full year 2017 we also expect Flexitouch revenue growth of 33% to 35% year-over-year. Gross margin rate to remain in the low-70s and adjusted EBITDA margin in the high single digits which includes stock compensation expense of approximately $4 million for the year.

We also expect our weighted average share count for the full year 2017 to approximate 19 [ph] million shares. With that, I'll turn the call back to Gerry for some additional closing remarks.

Gerry?.

Thank you, Lynn. As Lynn stated, we are increasing our revenue guidance again this year to account for the performance that we've achieved to-date. As Lynn mentioned, our guidance for the remainder of 2017 does anticipate a $500,000 to $1 million impact from the recent hurricanes.

I'd like to take a minute to provide some additional color on how our business is affected by the hurricanes and the resulting implications for the fourth quarter.

While we experienced strong sales of our Flexitouch Systems during the third quarter, Clinics, practitioners and potential patients in Houston and the Gulf Coast region were all impacted by the disruption caused by the hurricanes.

As a result of this disruption, our sales reps in these impacted regions of the country were less successful in reaching new patients to replenish their pipeline of opportunities for the fourth quarter.

With clinics still coming back online, and potential patients focused on repairing damaged property and restoring order to their daily lives, this remains a relatively fluid situation.

Hence the estimates that we provided today represent the range of possible outcomes, as we continue to assess the full impact of the hurricanes on our fourth quarter performance. I'd like to conclude my remarks today by emphasizing that I'm proud of the performance of our organization over the first nine months of 2017.

More specifically, I'm pleased with our team's ability to overcome any potential distractions and remained focused on driving awareness and adoption of our products in the marketplace.

The consistent progress that we've made over the first nine months on this front has generated rapid sales growth for our organization and demonstrated the extent to which our clinically validated Flexitouch System is resonating with patients', providers and payers.

As we enter Q4, which as a reminder, typically represents our largest quarter of the year from a revenue standpoint, we will continue to capitalize on the multiple long-term tailwinds that have contributed to our performance in 2017 to bring the year to a strong close.

I'd like to thank all of our employees for their dedication and commitment to our organization and its mission, and everyone on tonight's call for their time and interest in Tactile Medical. That concludes our prepared remarks for this evening. Operator, we'll now open the call for questions..

Thank you. [Operator Instructions] First question will come from Matthew O'Brien from Piper Jaffray. Your line is open..

Great, thank you so much and good afternoon.

Just for starters, Gerry, just you talked about a number of potential factors that led to this strong performance that we saw on Flexitouch during Q3, can you just maybe focus in a little bit more on kind of the bigger drivers there, was it new surgeons at existing centers that were -- some of these claims data that's driving more patients in? I think that will be helpful, just for starters..

Sure. Thanks Matt, and welcome to the call. I would say that the third quarter was really driven primarily by field execution.

So our ability to follow up on some of the leads that were generated from our last data pool, where we identified the high diagnosing clinicians, has really helped us greatly in the quarter, and we expect to be a primary driver for our long-term growth as well.

I think the second big driver has been their success in the Veterans Administration channel. Sales to the VA were up very dramatically in Q3. It's a continuation of a trend we certainly saw throughout 2017, I mean, VA sales are up over 60% for that period of nine months.

Remember, we added some specialized resources beginning in the second half of last year, and were able to continue to add to that group, that dedicated team that's focused on the VA is certainly improving our productivity in this important call point. And I think the last piece is we're fully deployed in our sales organization right now.

So, we reached our objective of adding 20% more reps to the field this year, and now have over 150 reps calling on clinicians and patients every day..

That's very helpful, thank you.

And then the next one is on 2018, not necessarily on guidance, but you've a couple of new products that you're going be rolling out in a much bigger way next year, and -- plus the Flexitouch Plus, how do we think about the contribution of those products next year and then Lynn the gross margin in the quarter was quite strong.

Will Flexitouch Plus or Head and Neck have any kind of impact on that metric, as we head in 2018?.

So I'll start with 2018 commentary, Matt. We're currently in the midst of our annual planning process. So we're not really giving any form of growth guidance today. We reserve that for our fourth quarter call. I think it's right for you to continue to think of us as a 20% plus grower.

We continue to invest and plan to continue investing in our sales and reimbursement teams, and that supports the growth of the company in the future. So in terms of the specific impact, I think, the Head and Neck is going as well as we could expect at this point in time.

And we certainly think it will be a contributor next year, but again, we're going to reserve our formal commentary for the fourth quarter call..

I was just going to address your question on gross margin and you are correct that the Head and Neck product is a bit of headwind on the gross margin, given we don't yet have reimbursement for those garments and we won't in 2018. However, for next year, we're still looking at a gross margin target of 70% plus on the organic business..

Okay.

And just real quick, Gerry, just to be clear, you think about yourself as a 20% grower in next year, that's even with a very difficult comp that you're going to have here in 2017?.

It is..

Great, thank you..

Our next question comes from Margaret Kaczor from William Blair. Your line is open..

Hey, good afternoon guys, thanks for taking the question. The first question for me surrounds sales reps comp and structure, and you talked a little bit about the changes you have seen this year. You talked about the high diagnosing physicians that you guys are targeting.

Can you give us any more color on that as it relates to how many -- what's the focus of the reps on these docs in '16, '17 and I don't know if you want to give us any commentary on '18? And so just if I could, is it five docs per rep in 2015 -- or 2016 and then that became 10, some clarity or guidance would be helpful?.

So we -- as you may remember, we did an initial data pool at the end of 2015 that identified the list of high diagnosing clinicians that our sales force started calling on last year, and -- in the second quarter of last year actually, and really have picked that up throughout 2017 thus far. We repeated that data pool in the midpoint of 2017.

The great news about that data pool was it revealed that the awareness of lymphedema and diagnosis of lymphedema is increasing pretty dramatically up 23% over that period in terms of the number of diagnosed cases, over a million patients now were diagnosed in that one year period.

But it also gave us an update on that list of high diagnosing clinicians. In that list two things happened, number one, we saw a number of new clinicians that we did not know on the list, and secondly we saw a number that had moved up the list into those high diagnosing deciles; so at least the top three deciles of high diagnosing clinicians.

So we added about 3,500 new clinicians that don't know us and we did not know them at the end of that July data pool.

So we have got work to do yet in reaching them but as I have mentioned on past calls when we are able to get one of this accounts converted and flipped to being a prescriber as well as a diagnose, they tend to prescribe two to three times the number of product that we typically see out of our accounts. So a very lucrative call point for us..

But is that -- as we look out has that become a larger piece of the sales rep comp and focus, '16 going into '17, are you -- were you trailing it a little bit and so now you are rolling it out more broadly as well?.

I think once the representatives sees the benefit of higher numbers of devices coming from these high diagnosing clinicians they tend to migrate toward these accounts themselves. We certainly have focused our field management team on going after that group. I would say that in 2017 they have been a major focus but so has VA sales channel.

And that VA sales, those numbers are up pretty dramatically. I think sales in the third quarter to the VA are up 87% year-over-year. So just a dramatic improvement in our productivity in those specific call points. So between the two of them they are the ones driving most of our success in 2017 and we think will continue well into 2018..

Got it, helpful.

And then on the head and neck side, in the past you talk about may be that impacting sales rep productivity, were you are seeing that this quarter at all and how should we assume that is incorporated in guidance in Q4?.

Yes that's a really good point. So let me just kind of step back and refresh everyone. We launched this product commercially in mid-May. So that was our full commercial launch. So it's progressing well, it's early.

We have been able to focus the field organization on our two current call points where these patients end up, which are lymphedema clinics and the VA. And that has limited the potential distraction or disruption that we expected and kind of forewarned might happen in Q3. In Q3 it was not meaningful at all.

So there was little distraction in Q3, and we don't -- we expect that we'll see continuing potential for distraction but frankly in Q4 our sales organization is so busy, they are not going to have time to wander off the path and start calling on other call points. So we feel very optimistic that we have built it into the guidance we just gave..

Great, thanks guys..

Your next question comes from the line of Jason Mill. Your line is open..

Hi, this is actually Cecilia Furlong on for Jason.

And I was just wondering, could you provide some more color on the dynamics around the Flexitouch first launch coming up and just the potential sales impact on your current Flexitouch from ahead of the full market launch and do you expect to see some hold out in prescribing Flexitouch in the near term?.

Really good question, Cecilia, hi. So our original plan is still on track, which is to launch the Flexitouch Plus in the first quarter. We're going to teach our sales organization at our national sales meeting about its attributes and launch it shortly thereafter.

We don't anticipate seeing a big uptick in sales from the launch of the product, because it's really a replacement for the current Flexitouch platform and we frankly have backed away a bit on the limited market release, because we didn't want to have too many of the products in the field early before we were ready to actually launch it.

So we don't anticipate we are going to see much of a wait and see attitude out of our customer base, and we are still on track to launch this in the first quarter..

Okay, great.

And then just for my second question, could you just at a high level talk about how sales rep productivity has trended since you began your focused physician targeting initiative, and just what type of impact the head and neck launch has had in this as well as the limited Flexitouch Plus launch?.

So I would say from a productivity perspective, we continue to see Flexitouch unit growth which is pretty dramatic compared to our expectations coming into this year. So through the nine month period a 42% increase in revenue compared to the same nine months of last year for Flexitouch.

The VA has been the big -- fastest grower in that particular category. Commercial Flexitouch sales have been very strong. We have actually seen our Flexitouch drop in the Medicare population because of that LCV that came out at the end of 2015. So I would say overall Flexitouch productivity has gone up pretty dramatically.

We have seen some offset to that with the other products, the Entre Actitouch.

We have certainly had that be less of a focus for the field organization to allow them to capitalize on the strong demand in the marketplace for our Flexitouch system and I would say the Head and Neck hasn't really had a big impact so far in 2017, in terms of a negative impact of productivity because we are just calling on the two primary call points that we're already in, we are seeing uptick of the product without a loss of productivity.

So overall I think we are very pleased with the fact that we are fully deployed now over a 150 sales reps in the field and set up very nicely for Q4 and 2018..

Great, thank you and congrats on another strong quarter..

Thank you..

[Operator Instructions] Our next question comes from the line of Chris Pasquale from Guggenheim. Your line is open..

Thanks, congrats on a nice quarter.

Gerry you mentioned the significant sales force expansion you guys have undertaken, how long does it typically take for a rep to climb a productivity curve to a level that you would consider a mature territory?.

Our field organization is kind of bifurcated into two levels, a more senior position, we call a product specialist, and a more junior position we call an associate. Of the 150 reps that are now in the field, it's about a 50-50 mix between those two categories.

For the associate, who tends to be a more junior sales person maybe a couple years of sales experienced working for a product specialist is how they report, or how we combined the sales organization. They take about a year to come up to full productivity, so about twelve months.

And that productivity we expect about 0.5 million in revenue from the associate. Now the product specialist typically comes to us with a lot more experience, of five to six years typically of MedTech sales experience. They take a little longer to come to full productivity but their full productivity is twice that of an associate.

So 12 to 18 months to reach full productivity at about a $1 million of expectation per product specialist..

That's helpful.

And how do you think about the pace of further investment in additional headcount from here maybe over the next year versus driving more operating leverage?.

So we've certainly talked about the company as being a pretty rapid growth company and see ourselves adding at this 20% pace going forward, we literally, Chris, we think we could double the size of our sales organization and still not reach all of the folks who are diagnosing these patients.

Remember, there is a million patients diagnosed out there with Lymphedema. And we've got a 150 sales. We've shown we can bring on about 20% more to this field organization without disrupting their productivity too much. So that's the pace we'd like to keep over the next few years and that's kind of how we think about it..

Thanks..

[Operator Instructions] Our next question comes from Suraj Kalia from Northland Securities. Your line is open..

Good afternoon everyone. Thank you for taking my questions. So Gerry and Lynn just toggling in-between calls and please forgive me if you all have mentioned some of this.

The 20% increase in sales raps, that you all are targeting for the next few years, that is driven primarily by the market constraints you all are witnessing or I understand you mentioned something about not to disrupt sales rep productivity. I would love to get some additional color there.

I guess what I'm trying to understand is it a one is to one correlation. A, I put in 20%, maybe I get 20 plus delta X growth on the top line.

I'm curious what would limit you and why would that limit you?.

So Suraj I think what we like to see in terms of an increase in the sales organization is the balance, the bringing on new people from disrupting the flocks that have to bring them up to speed.

Our typical way of adding to the sales organization over the past year has been the higher associates for product specialists as they've grown their territories to give them help in reaching all the potential patients that they can reach.

So that gives a little responsibility to the product specialist in terms of being supervisor of that person that that may not of had before and we found if we go -- if we try to go too quickly we can disrupt the productivity of the senior person by bringing on too many or too quickly if you will of those associates.

So we've demonstrated that we can bring on about 20% a year, we can recruit them, we can bring them up to speed, we can get them trained and we can have them reach their productivity within those expected timeframes at that pace. Could we go faster? Possibly, but we think that's the right pace for the company going forward..

And Lynn did you all mention the specific contribution in the quarter from VA Flexitouch and the Head and Neck portion?.

Not specifically, Suraj, but I can tell you the VA, as Gerry mentioned increased significantly year-over-year. The third quarter as a percentage of our total revenue VA was actually 20% of revenue which is a new high on a year-to-date basis. It's about 19% of our revenue year-to-date. So again very nice growth there.

Head and neck we haven't been as specific about that contribution. But full commercial launch as Jerry said was just towards the later part of second quarter. So it's the volume ramping but again we're metering the rollout as well to not disrupt the productivity of the sales force. So it's not a meaningful contributor yet to the overall top line..

Got it. And finally Jerry, of the three legs of the stool that you had mentioned a while ago in your prepared remarks, for growth, if I remember correctly, one of the things you all had said you will parse through claims data, you all have a target list of high referring lymphedema specialists.

I guess can you give us some additional color in terms of how you all see, okay, here is the target market let's say and I'm just picking out some numbers. We had a 1,000 clinicians here. Today we have targeted 220. These many are remaining, this is realistic.

Any way for us to parse there or any color you can provide there vis-à-vis your 20% expected increase in sales force. Just trying to balance these different aspects and see in terms of how should we model out for moving ahead. Thank you for taking my questions..

Sure. So from a historic perspective Suraj, we came into 2017 having had three quarters worth of activity going after this high diagnosing list of clinicians. And estimated at that time we had reached about 20% of that population.

As I mentioned we reran the data or re-did another data pool to look at the number of diagnosed patients and not only discovered rapid growth in the number of patients that are being diagnosed with lymphedema, but also uncovered that there were a host of new clinicians that weren't on last year's list as high diagnosing clinicians.

We'll update those penetration numbers annually. So I would expect to provide some additional color on our fourth quarter call about our expected penetration of that new list. But I don't expect it to go up at all. In fact it may even drop in terms of our penetration, which bodes well for future sales to that particular cadre of clinicians..

Thank you again..

Welcome..

There are no further questions in queue. This concludes Tactile's Q3 earnings call. Thank you for your participation..