John Aballi: Sure. So maybe I’ll start with rep sentiment. We did have our national sales meeting in San Diego. It was a great event. I got to meet several of them in person. I’ve spoken to many of them throughout the last couple of months of me being on board, but to actually see them in person and connect that way is always nice. There was a general sense, folks are energized. And it was really rewarding to see the level of engagement that people had and the level of excitement. They had just come off a successful Q4 as we just relayed. And we were seeing that momentum carry into Q1. So from that perspective, very positive, we did change the compensation plan, notably increasing the variable compensation for these reps. And I think that’s — that was an important strategic shift that we made, but we’ve also focused exclusively on AVISE CTD, whereas prior plans may have incorporated performance relative to some of our other portfolio of products.
So I think that honed in focus, both from a compensation standpoint as well as the curriculum presented at the national sales meeting was very positive. And I think that’s at least a contributing factor to some of the momentum we have here going into Q1. As it relates to the sizing of the sales team, the first part of your question, it’s an interesting question. So do I think 40 is the right number long-term? Not necessarily. I think the way we’ve approached it is we’ve taken a look at on a per sales rep basis, at what point do we at least cover the cost of the sales rep in that territory. At what point does it necessitate having a physical field-based presence there? And when you take into account those rep associated expenses, 40 is the right number for us.
This gives us a handful of territories which are, call it, expanding right? But yet, it’s not 1/3 of the sales force necessarily that is trying to reach that breakeven point, if you will. And so, we went through an evaluation, a very analytical approach and took a look at the number of tests required to breakeven per territory and what that looks like at different levels of ASP and had a sensitivity analysis associated with that. But where we arrived at was roughly 40 territories for us going forward. And that number will grow as some of our expanding territories move into that profitable space. And so it will be just a more measured — that’s what I meant when I made the comment, but it will just be a more measured approach to expansion in that capacity.
Operator: Thank you. Our next question is from Ross Osborn with Cantor Fitzgerald. Please proceed with your question.
Ross Osborn: Congrats on the progress. So starting with the fourth quarter, how much of revenue is from outstanding claims from past quarters versus tests performed and paid on during the quarter?
Kamal Adawi: Ross, thanks for the question. So with our accrual revenue recognition of ASC 606, we’re looking back 12 months on what’s being collected on all of our tests by payer to put the correct rate for that quarter. And that’s how we book our revenue. What I will say in regards to Q4, we did have a very strong quarter in terms of collections, which did result in us making year-end accounting adjustments. Obviously, there’s variability in the year quarter-to-quarter, and we make those adjustments at year-end, which took our ASP up in Q4, and that’s why we like looking at our ASP for the last 12 months. So, it takes out that variability. Also, keep in mind, in Q2 and Q3, we have commercial payer write-downs. We did not have those commercial payer write-downs in Q4. So it was a strong quarter for collections.
Ross Osborn: Okay. Got it. And then switching to gross margin. Could you provide an update on your work toward improving protest costs such as automation in the lab?
John Aballi: Yes. Thanks, Ross. Thanks again for joining the call. Great question. So as I mentioned previously and in prior discussions as well, we’re trying to implement processes across the board that we think will ultimately materialize in terms of effect here over the next several months, rather than just start on some projects that maybe have drawn on prior experience from. And so the first part of this is evaluating each respective area, whether it be revenue cycle, laboratory operations, sales, commercial, you have it evaluate each area from an analytical standpoint and then look for the opportunities to improve. On the lab side, our COGS are — our COGS are likely to be improved through continuing automation or improvements in infrastructure.
So what we have is we have multiple methodologies that are all tied together for our AVISE CTD offering. And a big part of improvements here or efficiencies over labor-based cost will be associated with that infrastructure improvement from a software standpoint. Most labs have a lab information system, which drives, we’re no different, which drives the tracking and facilitates the progress of each sample through the lab. And the better you can integrate that with all of your different instruments and remove some of the human choices that are required on a day-to-day processing standpoint. I think the more efficient you can be over time. So that’s an area that we’re certainly looking at. We are facing some inflationary headwinds from some of our vendors, as I’m sure most are, and we’re working hard to offset those through some efficiency and productivity gains.
So I should be able to provide more color as certain projects finish and materialize in effect, but really it’s looking at improvements on the infrastructure side, mostly software.
Ross Osborn: Okay. Got it. And then one more for me. Are you able to disclose the amount of savings from cutting the fiber trial at this time?
John Aballi: At this time, we’re not able to disclose that. I think what you’ll see is, obviously, we had the reduction in force, and we haven’t quantified the overall savings as it relates to some of the other projects, which likely would have been paused. But that’s something we can look to do in future periods, but haven’t at this point.
Operator: Thank you. Our next question is from Andrew Brackmann with William Blair. Please proceed with your question.
Andrew Brackmann: You guys sort of recognize that you’re not giving the full year top line guidance and certainly understand why. But maybe just from a high level, can you sort of talk about some of the key levers here for the year? Just trying to sort of get a better sense of the variables and the magnitude of those?
John Aballi: Certainly. Thanks for joining, Andrew. So, we think the most sensitive lever that we have in improving the business, not only from a top line standpoint, but overall gross margin is ASP. And that’s really where we’re focused on. That’s the heart of many of the efforts in the organization. And as is noted and I mentioned earlier in the call, the volume for AVISE CTD is substantial. And we just completed a year where we helped 135,000 patients with this test. And so if our ASP right now, our derived ASP is around $285. That’s the most sense of lever we have relative — especially relative to our Medicare reimbursed rate which for AVISE CTD is north of $1,000. So opportunistically, that’s where we’re looking. That’s where the majority of our efforts are.
I’m personally involved with several of the process improvements there, and we’ve put some of we put a good portion of the organization on that as well. So I think that’s the biggest lever to look for is consistent improvement in ASP over time. And again, quarter-to-quarter variability will come into play here. But if you take a look at maybe a longer period, trailing 12 months is what we’re using internally. We think that, that will be indicative of progress over time. And we’ll also be speaking to some of the improvements and maybe be able to provide some qualitative real-time color over those analytical points. So, I think that’s likely the most sensitive lever. Obviously, volume continues to be a strong indication of the product success as well.
But organizationally, our strategy right now is to focus entirely on AVISE CTD and focusing on the reimbursement side of that is certainly key.
Operator: Thank you. Our next question is from Kyle Mikson with Canaccord. Please proceed with your question.
