Welcome, ladies and gentlemen, to the Third Quarter of Fiscal Year 2022 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 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 Your questions today may contain forward looking statements that are based on the current expectations of management and involve inherent risks and uncertainties, which 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 ks, as well as our most recent 10 Q filing to be filed with the Securities and Exchange Commission.
Such factors may be updated from time to time in our filings with the TC, 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.
And I would now like to turn the call over to Mr. Dan Rivers, Tactile Medical's President and Chief Executive Officer. Thank you, sir. Please go ahead.
Thank you, operator, and welcome, everyone, to our Q3 earnings call. I'm joined on the line by Brent Moen, our Chief Financial Officer. I'll begin our remarks today with a high level review of our Q3 financial performance, followed by a discussion of the factors that drove our Q3 results and an update on some of the recent operational progress we've made. Brent will then cover our quarterly financial results in greater detail and review our 2022 financial guidance, which we updated today in our earnings press release. And finally, I'll provide some thoughts on our updated outlook and continued areas of focus for 2022 before we begin the Q and A session.
So let's get started with a review of our financial performance. We reported total revenue of $65,300,000 for the 3rd quarter, representing growth of 24% year over year. These results came in well above our expectation for 3rd quarter growth of 13% to 17% year over year, which we discussed on our Q2 earnings call. Sales of our airway clearance products were the largest contributor to our stronger than anticipated revenue, contributing approximately 19 percentage points to our total revenue growth year over year. We were also pleased to see revenue from our lymphedema products increase 5% year over year, which modestly exceeded the 1% to 3% growth range we'd anticipated.
In addition to our strong sales performance, we delivered significant year over year improvements in our profitability, increasing our gross, operating and adjusted EBITDA margins compared to the prior year, while also maintaining our solid cash balance. Turning to a discussion of the primary drivers that contributed to our lymphedema Our lymphedema business benefited from a combination of several factors. At a clinic level, We saw modest improvement in patient volumes compared to the Q2, although pockets of clinics with staffing related challenges do remain. At a company level, we saw a high level of engagement from our lymphedema sales reps following our training initiatives in the first half of the year and the launch of our 2 new products in July. In particular, the launch of our new Comfort Ease Garment has been a nice innovation for our reps to feature as they walk as they work to reengage targeted clinics and referral sources.
Additionally, We're pleased to see stabilization emerging in our field sales team, exiting the Q3 fully staffed, a consequence of improving retention and engagement. And lastly, at the clinician level, we were also pleased by the response we saw from both new and existing customers in the lymphedema channel following the launch of our new products. This was most notable in the vascular space where Comfort Ease garments added a fresh message. In addition to the strong sales of our lymphedema products, we enjoyed another very impressive quarter with our airway clearance products, namely the AfloVest, generating slightly over $11,000,000 in revenue. As a reminder, we acquired the Airway Clearance business and its product, the AfloVast system on September 8th last year and only booked about 3 weeks of sales in the Q3 of 2021.
On a standalone basis, however, assuming it had remained a separate entity in both periods, our Airway Clearance product line achieved growth of 139% year over year in the Q3 of 2022. This performance reflects the ongoing adoption among the respiratory DME reps we partnered with. As I've described previously, these respiratory DMEs portfolios of complementary products, coupled with the existing clinicians that they serve, are leading them to both new and existing patients that are well qualified to benefit from airway clearance therapy via the Aflobest. The case for at home treatment with Aflopest is a compelling one as these eligible patients are likely to require hospitalization if left untreated due to recurring pulmonary infections and pneumonias. And from an economic standpoint, Aflovest receives favorable reimbursement, making it a compelling product for our DME partners.
With this as a backdrop, we believe the strong demand we're seeing is largely driven by identifying eligible patients that need at home airway clearance therapy within our channel partners' existing customer base and referral networks. Importantly, we also believe our growth is benefiting from identifying patients that would have otherwise been left unidentified or untreated if not for the efforts of these reps. We couldn't be more pleased to be bringing AFFOVEST therapy to countless underserved patients, which is in keeping with Tactile's mission to both reveal and treat those suffering from underserved chronic diseases in their homes. During the Q3, we also continued to see our existing DME partners expand the availability of Afloves to additional branches within their networks, aided in part by our team of respiratory specialists. This represents another important driver of demand and one with significant runway as we continue to expand the number of reps, branches and DMEs bringing in Afloves relief to more patients.
Lastly, from a supply side, we continue to make progress in expanding our Aflobe vest production capacity. We continue to work closely with our existing supplier, And we're also able to secure some initial inventory from our new second supplier to support demand, although their initial progress remain dependent on spot buys. While we expect some lumpiness through the rest of the year, we remain on track to be fully up and running with our 2nd supplier by year end, which should position us to keep pace with the strong demand we expect going forward. Stepping back, When we acquired our Airway Clearance business a year ago, it represented the largest acquisition within Tactile to date. It had generated just under $17,000,000 in revenue over the prior 12 month period and remained in the initial phases of validating its strategy to leverage the DME channel.
Given the progress we've achieved over the last year and as indicated by our updated guidance, The fact that we now expect to generate upwards of $36,000,000 in airway clearance revenue this year, we're convinced we're pursuing the right strategy with the right asset to support our focus on delivering sustainable growth and improving profitability. Shifting to a review of our Q3 operational highlights. Most notably, in July, we began the full market release of our 2 latest solutions for our lymphedema patients, our ComfortEase garments and our Kylie mobile application. It's important to note that these represent the first new product introductions from Tactile Medical in over 3 years and reflect our multi year effort to enhance our focus on R and D and new product development. Let me update you on our recent progress with respect to each of these solutions.
As a reminder, our ComfortEase garments are designed to be used with our Flexitouch system on the lower extremities. Our primary goal in designing this latest generation of Flexitouch garments was to enhance the overall user experience for our patients by improving ease of use, comfort and fit, while insisting on preserving and delivering our clinically proven results. With this goal in mind, our Comfort Ease garments were developed to be more intuitive to put on and take off, much like any other article of clothing and were created out of lighter, cooler and more malleable materials to improve patient comfort. Many patients with lymphedema in the lower extremities have limited mobility. So our ComfortEase garments are designed to help them overcome these issues within their daily management of their lymphedema at home.
These improvements were also intended to make it easier to train patients, promote strong patient adherence and ultimately facilitate optimal treatment outcomes. Following the full market release, we've received excellent feedback from our sales reps, Trainers, clinicians and most importantly, our patients. Our reps are excited to have a new product to facilitate conversations with existing and potential new clinician prescribers. And as I mentioned earlier, we're pleased with the level of customer engagement they're seeing. And our patient trainers have broadly shared that patients are finding our ComfortEase garments more intuitive and easier to use.
Importantly, they're seeing that patients with limited mobility are able to put on and take off Comfort Ease garments more easily. We've also been pleased with the feedback received following the launch of our Kylie mobile application for both the iOS and Android platforms. This app is intended to expand our support for lymphedema patients that are earlier in their journey towards obtaining a definitive diagnosis and effective treatment. Our analysis has shown that it takes an average of 3 years for the average lymphedema patient to obtain a Definitive diagnosis following the onset of symptoms and engagement with 3 or more health care providers along their journey. This underscores the lack of awareness and understanding that exists among healthcare practitioners when it comes to lymphedema, which is unsurprising given the little attention the lymphatic system receives in medical training even among most specialty programs.
With Kylie, patients can easily learn more about lymphedema and their treatment options and then use the app to document their disease progression. In doing so, we believe they'll be able to arrive at the doctor's office better informed, ultimately, shortening the eligibility time it takes to obtain one of our Entre or Flexitouch Plus systems. Once a patient receives an Entre or Flexitouch, they can also use the product tutorial videos and FAQs available on our Kiley app to complete their training easily and effectively or use it as a source of support. Following its launch, we focused on introducing the Kiley app to our clinician prescribers and making it available to patients in their doctors' offices through our in clinic patient demos and via social media platforms. While still early, we've seen some patients initiating therapy immediately upon receipt of their device, finding the video vignettes easy to understand and responding with satisfaction scores equally high to those with an in home training experience.
In time, Kiley is expected to grow in its utility, including as a path to exchange documents and process orders more efficiently, but also in ways for us to continue to our ongoing patient engagement, keys to delivering high patient satisfaction scores, while reducing our overall cost to serve. In addition to promoting the use of our Kylie mobile app, we're continuing to raise awareness for lymphedema and its effective treatment within the medical community through virtual and in person clinician education events. In the Q3, we hosted a total of 45 educational programs that were attended by approximately 1500 U. S. Clinician participants.
Year to date, we've hosted over 100 and educational programs and trained nearly 4,900 participants both in person and virtually. We plan to continue hosting educational events focused on cancer related lymphedema, including survivorship and proper management of cancer related lymphedema. All in all, we were excited to complement our stronger than expected financial performance with continued operational progress during the Q3. Brent will now review our Q3 financial results in more detail along with our updated financial guidance. Brent?
Thanks, Dan. Total revenue in the 3rd quarter increased 24% year over year to $65,300,000 compared to $52,500,000 in the Q3 of 2021. Looking at our total revenue by product line, Sales of our Airway clearance products, which includes the Afloves product line we acquired on September 8, 2021, increased $10,200,000 year over year to $11,000,000 And sales and rentals of our lymphedema products, which includes our Flexitouch Plus and Entre systems increased $2,600,000 or 5% year over year to 54,200,000 Total revenue by channel was comprised of $36,200,000 from sales to commercial payers, $11,300,000 from Medicare, dollars 11,000,000 from durable medical equipment distributors and $6,800,000 from the VA. As a reminder, durable medical equipment distributors is comprised of revenue from our acquisition of the Airway Clearance Therapy Business. These figures compare to our total revenue by channel in In the Q3 of 2021, in which commercial, Medicare, DME Distributors and the VA represented approximately $36,000,000 $8,900,000 $861,000 $6,700,000 respectively.
Continuing down the P and L, unless noted, all references to 3rd quarter results are on a year over year basis. Gross margin was 71.7 percent of revenue compared to 70.4% last year. Non GAAP gross margin increased nearly 40 basis points year over year to 72.2% compared to 71.8% in the prior year. The increase in non GAAP gross margin was attributable to both product and payer mix. Non GAAP gross margin excludes non cash intangible amortization in both periods.
Non GAAP gross margin in the Q3 of 2021 also excludes inventory write offs and non cash purchase price adjustments related to the acquisition of the Aflobest in this period. As a reminder, we have provided reconciliations of certain GAAP to non GAAP measures in our earnings press release. 3rd quarter operating expenses were $48,400,000 an increase of $10,100,000 or 26%. The increase in operating expenses year over year was primarily driven by a $4,400,000 increase in sales and marketing expenses, largely due to the addition of our Aflobest sales team and new hires added to our lymphedema sales team, along with increased travel and related expenses as we return to normalized business activities. The year over year increase in operating expenses was also driven by a $3,800,000 increase in non cash intangible asset amortization and a non cash earn out expense related to the acquisition of the Airway Clearance Therapy business, an increase of $1,800,000 in reimbursement, general and administrative expenses and $172,000 increase in research and development expenses.
Excluding the aforementioned non cash expenses along with litigation defense and executive transition costs in both periods, our non GAAP operating expenses increased 18% year over year in the 3rd quarter. Operating loss was $1,600,000 compared to $1,400,000 last year. Non GAAP operating income was $3,900,000 or 6% of sales compared to $1,100,000 or 1.8 percent of sales last year. Interest expense was $700,000 compared to $100,000 last year, driven by incremental borrowings related to our acquisition of the Airway Clearance business in the Q3 of 2021. Income tax benefit was $77,000 compared to an expense of $1,900,000 last this year.
The difference relates to a full valuation allowance being recorded against all net deferred tax assets in the current period, whereas no valuation allowance was recorded for 2021. Net loss was $2,300,000 or $0.11 per diluted share compared to a net loss of $3,400,000 or $0.17 per diluted share last year. Non GAAP net income was $1,900,000 compared to a non GAAP net loss of $1,600,000 last year. Weighted average shares used to compute GAAP diluted net loss per share were $20,100,000 $19,800,000 and the 3rd quarters of 2022 2021 respectively. Adjusted EBITDA increased 74% year over year to $7,200,000 or 11% of sales compared to $4,100,000 or 7.8 percent of sales last year.
As of September 30, 2022, we had $23,400,000 in cash and $49,800,000 of outstanding borrowings. This compares to $23,400,000 in cash $50,500,000 of outstanding borrowings as of June 30, 2022 $28,200,000 of cash $55,000,000 of outstanding borrowings at December 31, 2021. Turning to a review of our 2022 outlook, which we updated in our earnings press release today. We are raising our full year guidance range to account for our stronger than expected performance during the Q3 of 2022. We now expect total revenue in the range of $242,000,000 to $245,000,000 which represents growth of approximately 16% to 18% year over year.
This revised outlook compares to our prior revenue guidance range of 238 to $242,000,000 representing growth of approximately 14% to 16% year over year. Our updated 2022 total revenue guidance range assumes sales of our lymphedema products in the range of 207 to $209,000,000 representing growth of 2.5% at the midpoint of the range, consistent with the growth expectations in our prior guidance range, which also points to growth in the second half of twenty twenty two in the mid single digits. And sales of our Airway clearance products in the range of approximately $35,000,000 to $36,000,000 This compares to our prior guidance range of $30,000,000 to $32,000,000 For modeling purposes, For the full year 2022, we expect gross margins in the 71% to 72% range, our GAAP operating expenses to increase 26% to 28% year over year compared to 23% to 24% previously. The higher expected growth in our GAAP operating expense for this year is driven primarily by Non cash intangible amortization and earn out expense of $3,300,000 in Q3 and approximately $500,000 of executive transition and legal expenses, neither of which were contemplated in our prior guidance ranges. Note, our updated full year guidance now assumes legal expenses of approximately $3,500,000 compared to $3,000,000 previously.
Executive transition costs of approximately $300,000 recognized in the Q3 and not contemplated in our prior guidance, interest expense of approximately $2,800,000 compared to $2,000,000 previously and fully diluted weighted average share count of approximately 20,000,000 shares. In 2022, we now expect to generate adjusted EBITDA of approximately $15,000,000 to $16,000,000 compared to our prior guidance of $14,000,000 to $16,000,000 In addition, our adjusted EBITDA guidance range excludes of approximately $14,800,000 compared to $11,500,000 previously stock compensation expense of $11,000,000 compared to $12,000,000 previously and depreciation expense of approximately $2,400,000 We continue to expect to deliver improving cash flow from operations and profitability in the 4th quarter. Specifically, We expect cash flow from operations in the 4th quarter to exceed the expected cash outflows, including operating capital needs, debt service and the earn out payment related to the acquisition of Afloves due in Q4. Note that we recently updated the terms of this earn out payment to $5,000,000 due in Q4 with the remaining $5,000,000 balance deferred until May of 2023. In summary, we remain confident in our balance sheet and financial condition.
With that, I'll turn the call back to Dan for some closing remarks. Dan? Thanks, Brent.
As Brent mentioned, we're raising our total revenue guidance for the 2nd time this year to account for our outperformance in the 3rd quarter. We're proud of the financial performance that we've achieved so far this year along with the enhancements made to our product portfolio and our sales force and company leadership. Looking ahead to the Q4, in our Airway Clearance business, we expect The solid demand that we've seen to date will continue, paced somewhat by our current supply constraints. As I mentioned earlier, our team is working diligently to to cure additional production capacity to support future demand. And I want to underscore how well our operations team has done in supporting growth beyond our expectations, especially in one of the most challenging supply chain environments we've seen.
Their efforts should ensure we're well positioned in 2023 to continue penetrating the greater than $5,000,000,000 market opportunity that lies ahead of us in airway clearance as more of the estimated 4,000 respiratory DME reps begin identifying qualified patients that stand to benefit from our airway clearance therapy at home. In our lymphedema business, we remain cautiously optimistic about our expectations regarding the pace of recovery, given the dynamics that I outlined in our Q2 earnings call in August. Specifically, our team continues their work to reestablish ourselves in those accounts that went unrepresented a couple of quarters back when sales vacancies were more prevalent overcome patient volumes at clinics that remain below pre COVID levels and navigate the headwinds created by payer dynamics where we've seen some commercial payers favoring the use of the basic compression device as a precondition to becoming eligible for an advanced device. With that said, in the Q4, we continue to expect strong sequential improvement and improving year over year performance in our lymphedema business. In terms of our operational priorities, we remain focused on driving continued execution with respect to the following four objectives: improving the productivity of our sales reps that we've hired over the last 12 months as we enter the 4th quarter, which as a reminder typically benefits from seasonal strength with more patients covered under commercial insurance plans meeting their annual deductibles.
Number 2, continuing to facilitate and leverage the successful introduction of our new Comfort Ease garments and Kylie mobile app. 3, helping current and future respiratory DME channel partners to integrate and feature Aflobast to their prescribing clinicians and patients, while expanding our capacity to meet that demand. And finally, improving profitability by continuing to advance operational with a focus on reducing overall cost to serve. We believe our continued execution on these objectives will help enable us to achieve 4th quarter total revenue in the mid teens, generate GAAP net income profitability and finished the year with over $20,000,000 in cash and equivalents. We remain committed to bringing 2022 to a strong conclusion and returning to sustainable growth and improving profitability in the years to come as we continue to reveal and treat for underserved patients in the lymphedema and bronchiectasis communities.
I'd like to thank and congratulate our employees for their dedicated efforts this past quarter. We appreciate your commitment to the success of Tactile Medical and to the well-being of the patients that we serve. Operator, we'll now open the call for questions.
We do ask that you limit yourself to one question and one follow-up. And if you would like to ask additional questions, we invite you to add yourself to the queue again by pressing And our first question comes from the line of Ryan Zimmerman with TIG, please proceed with your question.
Good evening. Thanks for taking the question. Dan and Brandon, congrats on the progress. It sounds like you guys are turning the corner on a lot of macro factors this year. So maybe just the first question for me.
I know we're not going to get 2023 guidance, but I'd love to understand kind of your underlying assumptions, both within the lymphedema segment And also the Aflobez or the respiratory segment. How to think about the growth of that Aflobez product Into next year and kind of what you're expecting in terms of just maybe the normalization of patient volumes In the lymphedema clinic. And then I have a follow-up on the balance sheet.
Hey, Ryan. It's Brent. Good afternoon. So I'll talk to you a little bit about that. Certainly, I think we've always talked about the second half of the year being where we're going to start to demonstrate a return to growth.
And I think our results today at 24% revenue growth was a strong indicator that We're going to deliver on that promise. I think what we're starting to see is we finished the quarter with a lymphedema sales team That is at where we expect them to be at the end of the year. So they'll contribute strongly in our Q4. We continue to see very strong demand from Aflobest and we expect that certainly to continue as we move into 2023. So A lot of the headwinds that we had talked about earlier in terms of staffing and access seem to be subsiding a bit and providing us The benefits that we recognize in Q3 and expect to realize in Q4 as well.
Okay. That's very helpful, Brian. And then I want to turn to the balance sheet for a second. This question comes up from investors from time to time, but the cash balance is kind of stagnated. You're not really burning cash, you're not really gaining cash.
Help us think through just your ability to sustainably generate positive cash flow next year, kind of the durability of profitability in the company And kind of what we can expect to see on the balance sheet over the coming quarters?
Yes, it's a good question, Ryan, and you're right, we do get that questioning often. And I think the indicators are Again, turning favorably as we push through Q3 and then into Q4. I I think with our announcement today that we were going to increase revenue guidance and then also correspondingly our adjusted EBITDA guidance gives us some Comfort that, we're going to start to see improved profitability. As you said, I know you're not asking for 'twenty three guidance, but, I'll let you know that we are actively working on our 2023 annual operating plan, And it takes a village. So all of the senior leadership here are actively looking at Profitable growth opportunities that will benefit 2023 and our multi year outlook.
So As we push into 2023, we certainly believe that we'll be able to expand our adjusted EBITDA margin. And as we know, that's a bit of a proxy for cash as we go forward. And let me just touch on the balance sheet specifically to that's to your question. We finished Q3 with $23,400,000 of cash, roughly the same number that we ended Q2 with. But keep in mind, during the course of the 9 month period year to date, we paid down $6,000,000 of Principal on our debt, on top of having to fight some lawsuits that certainly are expensive when it comes to legal fees.
But Aside from those two items, we did generate cash in the 9 month period for year to date. But That said, we do also expect Q4 to be profitable. That will be a generator to help offset the earn out payment that will get made here in the Q4 as well. So, I guess in summary, we remain really confident about our balance sheet And the financial condition of the company.
Thanks, Brian.
And our next question comes from the line of Adam Maeder with Piper Sandler. Please proceed with your question.
Hi, Dan. Hi, Brent. This is Simran on for Adam. Thank you guys for taking the questions. I guess I'll start off with The guidance, so just doing quick math here, the guide does imply low teens sequential growth in The lymphedema business in Q4, but a pretty big step down on a sequential basis for Aflobez.
Maybe walk us through some of the key assumptions there and, specifically, why we There and specifically why we should expect to see that dynamic for Afloves?
Yes. You're talking about the $11,000,000 and then the step down a little bit in Q4 is the expectation. Yes, it's a good question, Semoran. The reason has really led to supply chain issues. So we were fortunate to have been able to get out ahead of ourselves in Q3 on some of the demand that was there to deliver their first tranche of product to us.
We're still sort of in a hand to mouth stance on that one. So The backdrop for our guidance on Q4 as it relates to Aflavest is largely driven by the supply capacity we think we can generate. I think to the credit of our ops team, they've certainly outperformed given where we expected at And we're also at the point now where I think we're getting good enough line of sight into 2023 where we think we're going to be entering with a much better position on sustainable supply chain, which is going to be important as we continue to try and build And support for our DME partners.
Got it. Okay. That makes sense. And maybe just a quick follow-up on that Same topic. Can we get a sense of how many DME accounts you're selling Afloveskin and The kind of growth in new versus existing DME accounts.
And then maybe just since 2023 is Kind of top of mind where you expect that mix to go in 2023?
Yes. Let me just Take a step back and say, we're just really pleased with the business that we found in the Aflovest. I think that the DME channel was one that We had to explain a little bit at the beginning, but I continue to be convinced that this is precisely the right channel because they have access to all of these complex respiratory patients and all of the other solutions that they need short of the airway clearance product and a portable one at that. So we think there's ample runway of growth here. We have not added a lot of DMEs per se, but what we've been doing is Adding more branches and more participating reps within those DME channels that we've had.
It's a as you can imagine, it's an eightytwenty. There's a handful of bigger DMEs, and then there's a lot of smaller ones that we work with as well. But it's been less about adding DMEs at this point, as I said, more about ongoing working in Educating the sales channel, supporting them and we're seeing the growth as a result of more branches participating And more reps participating. And I think the last one to add is, this continues to be a very solid reimbursement area. CMS reimbursement is over $13,000 for the category.
So it's a good business for our DME partners. So, that's kind of a recipe success for success when, it's a good business for both sides.
Got it. That's it for me. Thank you, guys.
And our next question comes from the line Margaret Cagor with William Blair. Please proceed with your question.
Hey, guys. Good afternoon. Thanks for taking the question. I I was hoping to first start on LINZADIMA and focus on guidance a little bit. So I'll give Ryan's Question the second shot here.
Given you're suggesting kind of mid single digit growth, I guess, in the second half of this year for lymphedema, what does that imply And if you want to answer that, then maybe how do you get back to that double digit growth rate and when could that happen? Thanks.
Yes. I think it's a good question, Margaret. I think first of all, on the lymphedema side, We have seen some recovery in the patient volume. So we've talked a little bit about that. We're not at pre COVID levels, but we're seeing some good improvement there.
I think the opportunity for us to demonstrate improved productivity will be an important part of the 2023 recipe. I think that probably the most Foretelling piece is, the fact that we were negative in growth in the first half, it's been a tale of 2 cities. The second half, We just grew 5% in the Q3. Our guidance would imply something in the upper single digits in the 4th quarter. And all I can say is we certainly think that that puts us in a much better on ramp to 2023.
I think we're in a better position right now than we've been all year long as it relates to both sides of the business. But I think that the upper single digit growth that we'll be exiting in Q4 Certainly, it's a good way for us to enter 2023.
Okay. Perfect. Yes. And then I wanted to switch over to Afloves. I know everyone knows you as the lymphedema company, but on the same token, Afloves has just been surprising quarter after quarter Quarter.
So I guess the question I have is, do you have any sense of what the underlying demand is as supply improves, Especially as we look into 'twenty three, I can't help to bring that up again, but how much more demand, I guess, could you see? Could that 11 Actually be 15% based on what you guys are saying or much above that I guess. Thanks.
Yes. I think that we probably have Certainly had a little bit of a tug of war between supply and demand over the course of the year. And I think that as we start to look forward, There's certainly plenty of runway left, if that's kind of the question. I think if we look at the size of the market, it's significant. And what we also know is that, the majority of reps, we still are not at the inflection point with the reps at the larger DMEs.
The ones that have gravitated to it have done well, but I think there's a big opportunity for us to continue to get better coverage. Keep in mind, we're still in the early days. I mean, this is kind of the 1st full year it's been under our ownership. It took us a while to get Acquainted with all of the DME partners that we've got, this is the 1st year where a couple of them and this is one of the reasons that I think the growth has been so impressive is, They've started to make it a more focused product. And when you have aligned incentives all the way down to the sales channel at the rep level, Typically, it gets the kind of attention it deserves.
We've talked in the past, I think, too about the fact that a placement of an Aflo vest is really almost on par with placement of a non invasive ventilator and there's very little left in the respiratory bag of solutions that's at the same kind of economic threshold. So we know it's a really big market, not ready to do 2023 yet, but I can certainly suggests that we're still very enthusiastic for what 23 has got in store for us. And there's still an opportunity for us To add some additional DME partners as well. Not everybody's on our dance card yet, but it seemed a little premature for us to pursue Some of those others, if we didn't think that we had the capacity to support it. So we want to make sure that we're in a good position when we bring a partner on that we can support them.
I think if we can finish up this year in this $35,000,000 $36,000,000 range with Aflovest, We think that we're going to have a lot better foundation and participating DMEs and reps and should be in good shape for next year.
Great. Thank you very much.
Our next question comes from the line of Suraj Kalia with Oppenheimer. Please proceed with your question.
Good afternoon, Dan and Brent. Can you hear me all right?
Yes. Good afternoon, Suraj.
Perfect. I hope everyone is safe and healthy. Hey, so Dan, one of your comments caught my attention, which was on the commercial requirement change, presumably similar to the Medicare requirement of going with ACTitouch first before going to, before Flexitouch, I was wondering if you could And on that, what has been the specific change? What is the extent of this change that you're seeing? And how do you plan for it moving forward?
Yes. Good question. And this is one that we actually raised, as you probably recall even last Quarter, Suraj. One of the things that we had mentioned last quarter we'd seen was some Medicare Advantage Plans operated by commercial companies starting to apply the Medicare criteria as opposed to their commercial criteria, which may have been a bit more lenient. And as a consequence, it with a couple of Medicare Advantage plans, it shifted mix, meaning we know that Medicare typically requires 651, which would be our Entre, before they become eligible for Flexitouch.
If they can be treated successfully with A 651 or an Entre, then that's the end of it. If they don't or can't be treated effectively with an Entre, then they become eligible for So that was the mix issue that we had described. We'd seen a little bit of a phenomenon of in Q2. I think we saw a bit of that in Q3 as well. So I think the good news is with our performance in some of the Medicare Advantage plans, we saw more entrees going out than we had in the past, and still delivered a solid mid single digit beat.
And it meant that we actually captured more patients on that front. On the Medicare side, we saw really good growth in the vascular, particularly with Flexitouch. And I think that that points to a couple of things. 1, Comfort Ease has been well received because Comfort Ease is really targeted to those patients with Bilateral disease and those that have truncal swelling and need therapeutic support In the trunk area as well as in their legs. So that really kind of points to The company's traction that we saw.
And I think the other point there is that, as we continue to see a larger universe of patients on Medicare that have gotten an entree over time. We're seeing that there is a segment of them that needs and we Expect will benefit from Flexitouch and that segment of the business actually did quite well in Q3 as well.
Fair enough. And then my final question, you talked about Comfortees, the new garments, Patient Comfort, so on and so forth. And Dan, this keeps coming up, obviously, new entrants to the marketplace. Compliance is an issue compliance with Flexitouch is an issue that is usually brought up by some of the new entrants into the marketplace. I'm wondering if you could phrase the use of companies specifically from a perspective of Here was the compliance before and here is the compliance afterwards and help us make some correlations to what the core lymphedema growth could eventually attract to?
Gentlemen, thank you for taking my questions.
Yes. Thanks, Suraj. I think the compliance component, certainly, we expect COMFORTEEZ will add to the benefits for those patients because they're going to find it easier to apply, easier to use and subsequently more likely to complete their therapy. I think if you're commenting on perhaps the there was a the Koya out there talked a little bit about the compliance, I think at a recent conference, their experience, I think, was documented on 20 odd patients. So I'm not sure that I would quite align with the stance that compliance has been an issue.
But we do know that the easier the patient experiences, human nature is, the more likely they're going to complete their therapy. So that's One of the reasons one of the key reasons that we introduced Comfortees and it's also, the backdrop for what our new product Pipeline has in store a number of attributes namely, including making sure that we've got the right therapeutics available that we can continue to make this a ubiquitous kind of easy patient therapy experience.
Thank you. We are currently seeing no remaining questions at this time. That does conclude our conference for today. Thank you all for your participation and have a great day.
Thank you, operator, and thanks to everyone