Good afternoon, ladies and gentlemen, and welcome to the First Quarter of 2018 Earnings Conference Call for Tactile Medical. [Operator Instructions] 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 our 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..

Thank you, Rob. Good afternoon and welcome, everyone to our first quarter 2018 earnings call. I'm joined on the call today by Chief Financial Officer, Lynn Blake. Let's get started with a brief agenda for today's call.

I'll begin our prepared remarks with an overview of our financial performance for the first quarter of 2018, along with a discussion of the primary drivers that contributed to our performance during the period.

Following these remarks, I'll share an update on the commercialization of our new products, both Flexitouch Plus and Flexitouch head and neck. Lynn will then provide you with a detailed review of our first quarter financial results and our financial guidance for 2018, which we updated in our earnings press release this afternoon.

I'll then conclude with some additional thoughts on our outlook for 2018 before opening the call for questions. For the first quarter of 2018, we reported total revenue of $26.8 million, representing a 35% year-over-year growth.

Our total revenue growth was driven by sales of our Flexitouch System, which grew 40% year-over-year to $24.5 million in the first quarter.

Our performance in that quarter represented a strong start to the year, and was largely due to the primary growth drivers supporting our full year 2018 guidance that we outlined on our fourth quarter earnings call.

Specifically, our Flexitouch sales growth during the first quarter benefited from; the expansion of our field sales organization in recent years, our efforts to focus our sales team on targeting high-diagnosing clinicians and our expanded in-network coverage with commercial insurers.

These key drivers each contributed to the strong top line growth we have reported over the past two years, and remain the primary strategic focus areas for our organization as we pursue the $4 billion-plus addressable market opportunity in the United States lymphedema market.

Let me take a minute to expand on each of these key growth drivers and their contribution to our performance in the first quarter. First, in order to position our organization to capitalize on our large addressable market opportunity, we've extended our field sales organization to increase our geographic coverage of the U.S. market.

As part of this effort, we grew our direct sales force from over 91 sales representatives at the end of 2015 to over 160 at the end of 2017. This expansion in our sales organization was an important driver for our growth in Q1.

Second, we continue to benefit from our efforts to maximize the productivity of our sales reps by focusing their selling activity on the highest-diagnosing clinicians in the lymphedema market, which we've identified through an analysis of medical claims data.

In our analysis of these data, which was based on claims from the 12 months ending June 30 2017, we found that there are approximately 10,000 high-diagnosing clinicians across more than 4,500 clinics in the U.S.

As of the end of 2017, we believe that Tactile Medical has done business with at least one clinician at just over 40%% of these 4,500 high volume facilities, which leaves plenty of opportunity for our sales force to increase our coverage of the remaining high-volume facilities, while also going deeper within existing high-volume facilities by adding new clinician customers that are also practicing there.

And third, our contracts with commercial insurers as an in-network provider continues to facilitate our selling effectiveness by lowering the potential out-of-pocket expense for patients covered under commercial insurance plans.

In addition to these important long-term drivers of growth, our Flexitouch sales growth in the first quarter also benefited from strong sales into the Veterans Administration hospital system.

As discussed on prior calls, the VA represents an important focus area for our sales organization during the first quarter of each calendar year, because our veteran patients do not have copayment obligations.

As a result, their purchasing activity tends to be less seasonal than for our patients covered by commercial insurers with the annual deductibles. The success we're seeing in the VA hospital system is also a result of the enhanced sales strategy we implemented throughout the course of last year.

Specifically, we added a number of dedicated VA specialists who help our reps to more effectively market and sell within the VA hospital network. We remain very pleased with the success of this initiative.

Our financial highlights from the quarter also included stronger gross margin performance, which was 73% in Q1 compared to 72% in the first quarter of last year and improved profitability with adjusted EBITDA of $100,000 compared to an EBITDA loss of $1.7 million in the first quarter of last year.

During the first quarter, we also made progress on the commercialization of our new products. Most importantly, we successfully completed the limited market release of our latest-generation system, the Flexitouch Plus.

Flexitouch Plus is an important addition to our product portfolio as it represents a significant upgrade, impacting both the Flexitouch controller and garments to incorporate some of the most commonly suggested features and improvements from customer feedback.

As we progress through the final months of our limited market release, we were encouraged by the consistently positive commentary that patients, physicians and therapists have shared.

This commentary continues to affirm that the primary enhancements that we incorporated into the design of the Flexitouch Plus will resonate well across all constituents as we commercialize this product in the broader U.S. lymphedema market.

Specifically, feedback from clinicians, in-home trainers and patients consistently highlighted the fit, comfort and coverage of our new redesigned Flexitouch Plus garments. Patients have found the garments easier to put on and take off, which we view as an important component to ensure patient satisfaction and compliance.

Our trainer shared that they found the redesigned Flexitouch Plus controller more intuitive and easier to train patients on. We also confirm the trainers and clinicians like the ability to control the amount of pressure delivered in specific chambers, which is helpful for patients with sensitive areas and wounds.

And last but not least, the Flexitouch Plus system continue to receive high marks for its ability to treat two legs simultaneously, reducing treatment times for patients that require bilateral therapy. Building on the success of our limited market release, we launched the Flexitouch Plus system on April 9.

Our sales force is currently introducing Flexitouch Plus to customers in our existing call points, with the expect exception of the VA, where the product is awaiting addition to the federal supply schedule.

While we expect Flexitouch Plus to be a significant contributor to our performance in 2018, we do anticipate the initial months following the launch to impact our overall selling productivity for two main reasons.

Early in our commercialization, our sales reps will need to allocate additional time to engage with our existing base of clinicians in person, demonstrating the Flexitouch Plus and educating them on the enhancements that have been made to the system.

Our reps are also tasked with providing in-person training and certification to our network of over 470 independent in-home trainers before those trainers can train our patients on the Flexitouch Plus. Turning to an update on our other new product, Flexitouch head and neck.

We continue to drive increased account penetration in lymphedema clinics and the VA during the first quarter. Since launching Flexitouch head and neck in May of last year, we've concentrated our initial commercialization efforts on our existing call points in lymphedema clinics and the VA to limit the potential for sales force distraction.

In 2018, we're focused on adding new clinical research and sales expertise in order to advance our commercialization of Flexitouch head and neck to the next stage of growth.

Specifically, we're actively recruiting our first dedicated sales resource to assist in the development and implementation of our long-term commercial strategy for our Flexitouch head and neck system, including the optimal approach to address the many potential customer accounts outside of our existing call points.

As a reminder, we believe a significant number of patients with lymphedema of the head and neck are cared for in areas of healthcare system outside of our traditional focus areas. In addition, we continue to execute against our goal of expanding the portfolio of clinical research on Flexitouch head and neck.

In 2018, we aim to follow our first Flexitouch head and neck study, which we announced in December of last year, with the completion of additional clinical research throughout the course of the year. I'll share some additional thoughts on our outlook for the remainder of the year later on the call.

But first, Lynn will review our first quarter financial results in greater detail.

Lynn?.

Thanks, Jerry. Revenues for the first quarter increased $7 million, or 35% year-over-year to $26.8 million in the quarter. Our revenue performance was driven by Flexitouch System sales, which increased $7 million or 40% year-over-year to $24.5 million.

The increase in Flexitouch System sales was due to the expansion of our sales force, growth in the Veterans Administration channel, increased physician and patient awareness of the treatment options for lymphedema and increased contractual coverage with national and regional insurance payers.

Flexitouch sales accounted for 91% of our revenue in the first quarter of 2018, compared to 88% of revenue in the first quarter of 2017. Entre and ACTitouch System sales were $2.3 million in the quarter, approximately flat year-over-year. Gross profit increased $5.3 million or 37% year-over-year to $19.5 million in the first quarter.

Our gross margin rate increased 110 basis points year-over-year to 72.8% compared to a prior year gross margin rate of 71.7%. The gross margin rate improvement reflected favorable product mix with sales of Flexitouch representing a larger share of total sales this year.

Operating expenses increased by $4.2 million or 25% year-over-year to $21.4 million. The increase in operating expenses was primarily driven by increased sales and marketing expense as compared to the prior year as well as higher reimbursement and G&A expenses.

Sales and marketing expense increased $2.4 million or 24% year-over-year, due to continued investment in the expansion of our field sales team, as well as increased marketing efforts.

Reimbursement, general and administrative expenses increased approximately $1.5 million or 26% year-over-year, largely due to increased personnel cost, including stock based compensation related to higher headcount as well as increased consulting and professional fees.

R&D expense increased approximately $300,000 or 29% year-over-year reflecting increased clinical study and engineering expenses associated with our new product launches.

Our first quarter operating loss decreased by $1.1 million an improvement of 38% year-over-year to a loss of $1.8 million compared to an operating loss of $2.9 million in the first quarter of last year.

We recorded an income tax benefit of $1.7 million for the first quarter of 2018, compared to income tax benefit of approximately $1.4 million for the first quarter of 2017.

The increased tax benefit in the first quarter of this year was due to increased tax-deductible stock-based compensation activity as well as the reduction in federal tax rate due to Tax Reform.

Adjusted EBITDA for the quarter increased $1.8 million year-over-year to $100,000 compared to an adjusted EBITDA loss of $1.7 million in the first quarter of 2017 demonstrating solid year-over-year operating leverage. As a reminder, we've provided a reconciliation of GAAP net loss to adjusted EBITDA in our earnings press release.

Net loss for the first quarter of 2018 decreased approximately $1.5 million to a loss of $50,000 or $0.00 per share compared to a net loss of $1.5 million or $0.09 per share for the first quarter of 2017. Weighted average shares used to compute earnings per share were 18 million and 16.9 million for the first quarters of 2018 and 2017, respectively.

At March 31, 2018, our cash, cash equivalents and investments were $41.2 million compared to $43.9 million at December 31, 2017. The company had no debt at March 31, 2018. Let me now turn to a review of our 2018 revenue guidance, which we updated in our earnings release this afternoon.

For the year ended December 31, 2018, we now expect revenue in the range of $132 million to $134 million, which represents growth of 21% to 23% year-over-year compared to revenue of $109.3 million in 2017. This revised outlooks compares to our prior revenue guidance range of $131 million to $133 million.

We also expect sales of our Flexitouch product to increase approximately 23% to 24% year-over-year in 2018 compared to prior expectation of 22% to 23% growth and sales growth of our Entre and ACTitouch products to be flat to low single-digits.

Additionally, for the full year, we expect our gross margin rate to be in the low 70s, adjusted EBITDA margin to be approximately 10%, which includes non-cash stock compensation expense of approximately $7 million, a GAAP tax rate in the range of 20%, and for the purposes of calculating earnings per share, we expect our fully diluted weighted average share count for the year to be approximately 20 million shares.

With that, I'll now turn the call back to Jerry for some closing comments.

Jerry?.

Thank you, Lynn. In conclusion, we're increasing our 2018 revenue guidance based on the strong sales performance that we achieved in the first quarter. We expect to continue leveraging our 2018 revenue performance and to improve profitability this year.

Our conviction in our 2018, outlook stems from our belief that we're pursuing an effective growth strategy and it's supported by our strong Q1 performance.

In 2018, we expect that our revenue growth will be driven by the expansion of our direct sales force targeting a 20% increase year-over-year, focusing our sales organization on the high- volume facilities and the launch of our key new product, the Flexitouch Plus.

In addition to these important growth drivers, we remain uniquely positioned within the market with a highly differentiated treatment solution, which has been clinically proven to improve patient outcomes and quality of life while reducing cost of care.

A large, experienced and focused selling reimbursement and payer relations organization and broad-based access to patients, for whom our Flexitouch System is offered as part of their in-network insurance benefits.

Together, we believe this combination positions Tactile Medical to pursue the estimated $4 billion-plus lymphedema market opportunity by growing the market's awareness of Flexitouch as a solution to some of the most important challenges facing lymphedema patients.

We remain excited about the long-term prospects for our organization, and hope that you too share that enthusiasm. Thanks for joining today's call and for your interest in Tactile Medical. That concludes our prepared remarks. Operator, we will now open the call for questions..

[Operator Instructions] And our first question will come from the line of JP McKim from Piper Jaffray. Your line is open..

Hi, good afternoon, thanks for taking the question and congrats on the strong quarter to start here. I wanted to first dive into Flexitouch Plus, if we could. I know there's initial talk about some doctors may feel more comfortable ordering, you know, prescribing this system to more patients that – now that it is easier to use.

So I'd like to see if I can get any feedback on that metric? And then, Lynn, maybe if you could talk about the impact that you talked about on the sales force? Is it going to be more pronounced in Q2 and then it should lessen throughout the year? And is there anything we should think about from gross margins as you ramp Flexitouch Plus?.

Good JP. Thanks for the questions. I'll take the first one. Flexitouch Plus, as you know, is our third-generation product and a very important addition to the portfolio.

We've had some very strong feedback during our limited market release, which is what we completed in the first quarter, from patients talking about the way the product fits and the ease to which they're able to put on and take off the product, from our in-home trainers who say it's easier to train the patients with the new controller as compared to the old, and from clinicians who have not only told us they like the ability to customize the pressure in select chambers for their patients, but also that because of the ease of use and some of the features that we've added to the Flexitouch Plus, they'd be more likely to prescribe it over time.

We've even had anecdotal reports where physicians who previously used a second vendor for their patients with bilateral disease are now switching to using the Flexitouch Plus for those patients because of our ability to treat both legs simultaneously, a feature of the Plus, which was not available on the Flexitouch classic.

So that's on the Flexitouch Plus side.

Lynn, a little on the margin?.

Sure. So I think you had two other questions, JP. First, the impact of the launch on sales force productivity and our expectation around that. I would say, our Q1 sales force productivity was positive and exceeded our expectations. It was obviously not impacted by the launch.

We will experience some impact in Q2 due to a number of factors associated with the launch including increased demonstration and training time both of clinicians and our trainers in the field. And we would expect that to mitigate in Q3, both things are contemplated in our guidance update.

As of the impact to gross margin, which as we've talked about before, in Q2, in particular and as well a bit into Q3, as we get our supply chain fully ramped and to scale, we expect it to be a bit of a headwind to gross margin. However, again, that's still contemplated in our full year guidance to be the low 70s for gross margin rate..

Okay, that's helpful. And then on guidance, just – you beat by more than what you raised for the full year.

So I just want to get a better understanding of, is that – just taking into the impacts of Flexitouch Plus might have, is there a concern around the VA that they don't have the Plus and maybe patients who want to wait around until it gets added to the VA distribution? Or when, I guess, when do you expect the VA to get access to the Plus?.

So a couple of questions in there. The last one first, we are not expecting the Flexitouch Plus to be on the federal supply schedule until toward the end of 2018. So it's our plan to run parallel production, if you will, of the Flexitouch classic and the Flexitouch Plus with the classic serving the VA population and the Plus available to all others.

That was the last question. First question was $3 million beat but only a $1 million raise, if I heard it correctly. Certainly, Q1 was stronger than we expected by that $3 million and we did increase our guidance by $1 million. The other $2 million though were upside from drivers, which we think, are unique to Q1.

You'll probably remember that our VA performance in the first quarter of each year is the best that we experience, because those veterans don't have copayment obligations.

So we really don't see that deductible getting in the way of patients purchasing the product or veterans saying, I'll take the product so had just a huge performance in the VA in the first quarter. It was 23% of sales in Q1. We had guided to something around the 16% to 18% average. In fact, in Q1 of last year, the VA made up 18% of our revenue.

So a very, very strong VA quarter, which we don't expect to continue at that strength because of the fact that our field team is going to be focusing on the Flexitouch Plus, which is not available to those VA patients. So we certainly think we will have continuing success in the VA this year but not to the level that we had in Q1.

And then Lynn touched on the impact we expect out of Flexitouch Plus launch, which did not happen in Q1, which is what we had planned. We do expect to have some disruption from the time that our reps are going to have to spend in servicing the new product with all of our accounts.

And their time spent away from selling by training all of the trainers we have in the field who have to be certified before they can go train on our Flexitouch Plus..

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

Hi, good afternoon, guys. Thanks for taking the question. First one is a follow-up for me from JP's question and your answer, which was that you're gaining share already in some accounts for patients with bilateral disease, where previously, a different competitor, for example, might have had that product.

Can you give us any sense of how large that bilateral market is today specific to compression devices? And in those accounts, are you gaining all the share versus expanding the market? And then just in the same line of question, are you seeing any patients that were previously turned down maybe for Flexitouch or didn't get a Flexitouch now coming back in? And maybe getting that Flexitouch Plus now that it's available?.

Hello, Margaret. Thanks for the question. We don't have specific break outs of the bilateral patient population because the claims data we looked at does not – or the claims data we have access to does not break out where the lymphedema is present. In our experience, most patients with lower extremity lymphedema have bilateral disease.

That's our own experience, that's not the market experience. Keep in mind that in the first quarter, we were only in our limited market release and only had a select number of our top sales people with access to the product.

So the number of accounts that actually saw the device and were able to make the decision, I want to start using Tactile only as my supplier, are – it's a very small number at this point in time.

So I think it's a very, very positive trend but I wouldn't want to – other than what's contemplated in our guidance, I wouldn't want to indicate that it's – the magnitude of that success quite yet..

Okay. Understood. And then some of the – you grew your sales force last year in the high 20s as a percent. Your Flexitouch revenue guidance for this year is a little bit lower than that.

So maybe, can you talk about the new reps that were hired on last year? How are they coming up the productivity curve? Have they had an impact on results yet? Or are you trying to task them to focus on that 60% of high volume facilities that you don't have? Or you're having completed sales in to date?.

So let's – let me just start by saying that we're targeting, for 2018, Flexitouch growth in our guidance between 23% and 24% based on the new numbers we put out this afternoon. Previously, they had been 22% to 23%. And we're still very confident in our targeting of 20% increase in our field sales organization this year.

So we do expect to add more to the field organization. It's been a primary driver of our success, and we are continuing to do that hiring and bring on those new recruits..

Yes, in terms of the sales force productivity, as I mentioned, Margaret, in Q1, we were pleased with the result across the aggregate sales force on our productivity and the way we measure it, it was very positive. As far as new reps added last year, as you know, it's about a 12 to 18-month ramp.

So depending on when they came onboard, they certainly are contributing at different levels. And we'll – all of which will contribute this year. Last year, we had a higher than expected hiring in the fourth quarter. So those reps are still very new and they would be focused more on existing accounts.

And making sure those accounts are well taken care of while our more senior product specialists are able to go after the new accounts that we're not in yet..

And your next question comes from the line of Chris Pasquale from Guggenheim. Your line is open..

Thanks and congrats on a great start of the year, guys. Jerry, I wanted to follow-up on the headwind from the Plus launch in 2Q. On the last call, you actually gave sales guidance for 1Q, but you decided not to do that this time.

Given the fact that we have some unusual items impacting the current quarter, I think it would be helpful to understand where you think sales are likely to come in and how much of a headwind that contemplates for the Plus launch? Can you provide us any color there?.

So hey, Chris, thanks for jumping on, and appreciate the question. We in fact, don't really like to give out quarterly guidance and have been trying to guide only to our annual numbers.

I think what we were trying to get across in the prepared remarks was the fact that we had anticipated the launch of Flexitouch Plus to begin in Q1 and then continue into Q2.

And we made the decision to not have it launch as we got closer and closer to the end of the quarter so that we could keep the sales organization focused on driving home a big first quarter impact.

From a magnitude of revenue impact, we're thinking something around the $0.5 million mark in terms of the impact of our Flexitouch Plus that we had contemplated in our Q1 guidance but now will roll over into Q2, if that's helpful..

That’s helpful. Thanks. And I think – I mean, given that magnitude, as I look at your full year guidance here implying about 18% to 20% growth over the balance of the year, coming off of a much bigger number here in the first quarter. You got that $0.5 million, you've also got what you touched on before, which is the unusually strong VA contribution.

But that still feels like a pretty significant drop off.

Is there anything else you can tell us about kind of why you guys weren't uncomfortable forecasting something a little bit more aggressive for the balance of the year?.

I think the VA impact can't be minimized in terms of what we saw in Q1. Because we didn't launch the Plus, our reps were able to stay focused on their current accounts and VA is one of their big accounts in the first quarter.

So 23% of sales versus 18% last year for the first quarter is well over $1 million of impact that we hadn't really built in to that first quarter. And frankly, one we think is just a one-time event for the calendar year.

So we're very, very comfortable with the guidance we've put out today and feel very good that we're going to be able to achieve that in 2018..

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

Hi, thanks for taking the question, Jerry. Just starting with the VA versus non-VA for a second, it looked like back out the VA, the non-VA grew somewhere in the 16% range for the quarter. Clearly, VA grew – seemed to grow significantly faster than that to your point.

So as we think about the balance of the year, and while – whether you're getting the revenues from VA or non-VA, perhaps you could talk about whether you care where the revenue is coming from and why or why not.

And then more specific to the question, should we see the non-VA business growth grow from that Q1 level with a number of things happening, Flexitouch Plus launch in the back half of the year as well as perhaps the sales rep adds that you've had, which focus on non-VA accounts, having a greater impact perhaps as you get into the back half of the year?.

So for the first quarter, Jason, we did see the VA grow, it was 23% of the total. Commercial makes up the majority of our business, which was actually up 35% year-over-year. So it was not laggard by any means. That's what we saw overall as the business. So very, very strong – very strong contribution there, I would say the offset is Medicare.

Our Medicare volume went down in terms of a mix for the year – sorry, for Q1. So that's Q1. Back to rest of year. As we bring on new reps, they'll be trained on both the Flexitouch classic and the Flexitouch Plus because we'll be servicing both of those products for 2018.

Flexitouch classic in the VA, Flexitouch Plus everywhere else so we do expect the addition of the new sales members and the new product to be able to drive us to the success we talked about with our revised guidance..

Okay, thanks for that, Jerry. Helpful color. I guess it's hard for us on the outside, but can you tease out the commercial versus the Medicare.

Do you expect that, that trend line to hold the remainder of the year? Or do you feel – when you sort of ex out the VA business for a second and look at commercial relative to Medicare, that the growth for those two entities combined will be the same, better than, worse than what you posted here in the first quarter as you move forward?.

Hi, Jason, it's Lynn. If you look at the revised guidance and what that implies for Flexitouch growth, that growth rate of 22% to 24%, I would say, generally correlates with the growth rate we expect in our commercial business. The commercial this quarter was about 70% of our total revenue.

And it's going to move around a bit, but it's going to be in the two-thirds plus to low 70% of total revenue range for commercial, if that's helpful on a full year basis..

Your next question comes from the line of Suraj Kalia from Northland Securities. Your line is open..

Good afternoon, everyone. Congrats on a nice quarter. So Jerry, one question for you, one question for Lynn. So Jerry, you guys have created a strategy of having a database of high-volume centers and specifically targeting those centers.

On a more macro level, can you give us some color on your high-volume centers? Where are you all in terms of the penetration or utilization rates? More specifically on centers you're like initially targeting.

Conversely, can you give us an idea about, for this quarter, for commercial non-VA, the same-store sales versus new store sales? If I can phrase it that way..

Hi, Suraj, thanks for joining the call and thanks for the question. In terms of our targeting, you're correct. We have been analyzing these claims data now over the past five years looking for clinicians who are seeing the highest number of lymphedema patients.

There's about 10,000 of those clinicians in our last data pool, which ended– the one year period that ended in June of last year. So about 10,000 clinicians were in that high-diagnosing category, they represented or they practiced at 4,500 different facilities across the U.S.

So at the end of last year, we believe we had seen business from about 40% of those facilities with at least one clinician prescribing from that facility.

Now we know for sure, since the numbers are 10,000 to 4,500, that more than one clinician on average practices at these high-diagnosing facilities, and we aim to not only increase the number of facilities that are prescribing our product, but also, to your point about same-store sales, we aim to be able to get more clinicians that are practicing in the facilities we're already in to prescribe our product.

That is an area of focus for our field organization this year, and one that we've been working on executing in – so far in Q1..

Got it. And, Lynn, forgive me I'm drawing a blank here. Have you mentioned the contribution from VA? For – usually for Q2, Q3, Q4, how does the cadence of VA look like? I'm completely throwing a blank for last year. And maybe you all have given these numbers, if you could educate us again that would be greatly appreciated.

Folks, thank you for taking my question..

Sure. So Suraj, VA business as a percentage of revenue last year 2017 full year was 18% of revenue, it moved around quarter-to-quarter. Seasonally, it's typically strongest in the first quarter. Last year first quarter, VA sales were 18% of revenue. And then were pretty consistent over the next couple of quarters of touching Q3 actually.

And that was really reflecting added resources last year over the course of the year as we added VA specialists into the mix of our sales force. Then the VA sales were below that, I think it was 17% in Q4 as the – our commercial business really comes in strong heavily with the Q4 volume and seasonality there.

So we didn't give a specific guidance around VA for this year other than to say we expect – certainly expect continued growth and at a rate at least as high as the remainder of the – as our commercial business..

[Operator Instructions] Your next question comes from the line of Mitra Ramgopal from Sidoti. Your line is open..

Yes, hi, good afternoon. Just wanted to follow up a little more on the VA, I know you mentioned you had added a number of dedicated specialists last year, and as you continue to expand the sales force, I was wondering if you also feel that you need to add more specialists or you're pretty much set on that front right now..

Hello, Mitra. Thanks for joining the call and thanks for the question.

We did beef up significantly last year the VA specialists role within the company, we are actively looking for additional VA specialists this year as well not at the same rate or pace as we did last year, but we see this as a very productive and very fruitful investment that we've made in the field organization, and want to continue to do that in 2018.

So part of the 20% increase that we're looking to achieve this year includes some additional VA specialists..

Okay, thanks. And then just quickly on the Flexitouch Plus.

I knew you've said you've gotten a lot of positive commentary, and I'm just curious if you got anything negative on the – from anyone in terms of – yes?.

I would certainly say – well, first of all, our patients that have seen the device are usually only exposed to the product they're going to get to. So in other words, if a patient was demonstrated the classic that's the product we will deliver, if the patient was – had exposure to the plus, that's the product that would be delivered.

The feedback has been really positive overall. Doesn't mean there hasn't been any feedback negative. We've certainly heard some early feedback that's – a few of our features could be a little easier to use, and we'll certainly take that into consideration as we continue to evolve the product.

But overall I don't think we could have come closer to hitting exactly our target than we have with this product. So we're very, very pleased with what it's going to do for us..

That does conclude our conference for today. Thank you for your participation..