Tandem Diabetes Care, Inc. (TNDM) CEO John Sheridan on Q1 2020 Results - Earnings Call Transcript

Tandem Diabetes Care, Inc. (NASDAQ:TNDM) Q1 2020 Earnings Conference Call April 30, 2020 4:30 PM ET

Company Participants

Susan Morrison - Executive Vice President & Chief Administrative Officer

John Sheridan - President & Chief Executive Officer

Brian Hansen - Executive Vice President & Chief Commercial Officer

Leigh Vosseller - Executive Vice President & Chief Financial Officer

Conference Call Participants

Chris Pasquale - Guggenheim

Travis Steed - Bank of America

Will Fafinski - Craig-Hallum

Brooks O’Neil - Lake Street Capital

Ryan Blicker - Cowen

Matthew Blackman - Stifel

Matthew O'Brien - Piper Sandler

Matt Taylor - UBS

Steven Lichtman - Oppenheimer

Matt Henriksson - Citi

Ravi Misra - Berenberg Capital Market

Jeff Johnson - Baird

Danielle Antalffy - SVB Leerink

Matt Wizman - Raymond James

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Tandem's First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference maybe recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today EVP and Chief Administrative Officer, Susan Morrison. Madam, please go ahead.

Susan Morrison

Thank you, and welcome everyone to Tandem's First Quarter 2020 Earnings Call. Today's discussion will include forward-looking statements. These statements reflect management's expectations about future events, product development time lines and financial performance and operating plans, and speak only as of today's date. There are risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in our forward-looking statements.

A list of factors that could cause actual results, to be materially different from those expressed or implied by any of these forward-looking statements is highlighted in our press release issued earlier today and under the risk factors portion and elsewhere in our most recent annual report on Form 10-K, quarterly report on Form 10-Q and in our other SEC filings. We assume no obligation to publicly update any forward-looking statements whether as a result of new information, future events or other factors.

In addition, today's discussion will include references to adjusted EBITDA, which is a non-GAAP financial measure. Adjusted EBITDA is a key measure used by us to evaluate operating performance, generate future operating plans, and make strategic decisions for the allocation of capital. Please refer to our press release issued earlier today for further information.

Today's call participants include, John Sheridan, President and Chief Executive Officer; Brian Hansen, Executive Vice President and Chief Commercial Officer; and Leigh Vosseller, Executive Vice President and Chief Financial Officer. Following our prepared remarks, we'll open up the call for questions. Thank you in advance for limiting yourself to asking two questions before getting back into the queue.

With that, I'll now turn the call over to John.

John Sheridan

Thank you, Susan, and welcome everyone to today's call. It's hard to believe how much the world has changed in just the past two months, since we held our last earnings call. First, we'd like to thank all of the health care providers we work with, who are finding creative solutions and ways to support people living with diabetes, during these challenging times. In addition, to all frontline workers, who are working tirelessly to take care of people affected by COVID-19 and who are helping to keep us safe and our families fit. I'd like to express our sincere appreciation. Thank you.

Thank you also to our suppliers, who have continued to support us during this challenging times without disruption. And finally, a special thank you to our employees, who in the face of the current pandemic have demonstrated incredible flexibility and adaptability to prioritize the well-being of the diabetes community. I'm very proud of what we achieved in this first quarter and the modern features of our products, systems and services are providing even greater benefit in this environment.

Our strength in the first quarter can largely be attributed to the power of Control-IQ, which is bringing an unprecedented benefit to our customers' lives. As we look more recently, the demand for Control-IQ is offsetting some of the inherent sales pressures from COVID-19. It's a stark reminder that diabetes management is different than an elective procedure.

As a result, many people are continuing to invest in their health, during a time when it is more important than ever. What you will hear on today's call is that, these challenging times have only strengthened our conviction that we have the products, the people and the drive to continue delivering high-growth to achieve our longer-term goals that we have set for our company.

With this conviction for the long-term employee and with COVID-19 top of mind, we thought it would be helpful to focus our prepared remarks on how our business is operating during this pandemic to give you a better perspective on the challenges we face in the near-term and how we are overcoming them.

First, I'm going to talk about our employee base overall, then discuss our manufacturing operations specifically, and Brian will provide some perspective on what we are experiencing in the field and internationally. Then, I'll touch up on the pipeline before handing the call over to Leigh.

Overall, I have never been more proud of our employees than in these past few weeks. As the concerns regarding COVID-19 increased throughout March, we were ramping up our precautionary measures, which started with the option to work from one for all employees, whose positions allowed it at our headquarters in San Diego and our smaller facilities in Boise and Toronto.

When California issued their stay in place restriction in March, our employees who were able were successfully set up to work from home. It was a tremendous effort by our information Technologies team, our ability to transition so quickly can largely be attributed to the scalability efforts we kicked off last year, and our investments in technologies that support remote operations.

Departments throughout our company have risen to the occasion. It identified creative solutions and are staying motivated, true to our mission to improve the lives of people living with diabetes. Our customer service and technical support teams are all outfitted with laptops and are working from home, and we have the systems and infrastructure in place to support doing so in an compliant and efficient manner.

As a result, we've been able to provide a high level of service to our customers during this time, be it the help with troubleshooting, insurance verification for purchasing a new pop, or simply ordering supplies.

Overall, it's been business as usual. And that we haven't missed a beat operationally even though we are working in an unusual way during very unsettling times. We have been deemed an essential health care business based on the critical nature of the products we offer and the community we serve. As an essential business, our manufacturing operations and warehouse teams have diligently continued to come to the facility to perform their jobs. They realize the importance of the roles and ensuring that we are able to continue to provide pumps and supplies to people with diabetes and as a result, we are meeting all of our production goals. We have taken extra cautionary measures to help keep these employees safe and are grateful for their dedication.

Our supply chain has been another area of significant focus, since early in this pandemic. Our procurement team has regular communications with our component suppliers and we have not experienced or do not anticipate any shortage in components needed to manufacture our pumps or cartridges over the next several months. Also, our pump inventory as well as the available manufacturing capacity meets or exceeds our target levels and positions us well against unforeseen disruption in the near future.

As Leigh will discuss further, we observed customers purchasing cartridges and infusion sets at a higher rate than anticipated at the end of the first quarter. And as a result, our inventory for finished cartridges and infusion sets is below our targeted levels. Our third-party cartridge manufacturer recently commenced, commercial scale manufacturing to supplement our existing parts manufacturing capacity and we will be steadily scaling volumes across this year. In addition, our primary infusion set manufacturer is currently working through inventory constraints and so we are carefully managing our pump supplies inventory while we work to overcome these temporary challenges.

I'd now like to turn the call over to Brian to provide perspective on what our commercial team and our partners are experiencing in the field. Brian?

Brian Hansen

Thanks, John. It's been incredible to see our employees work so closely with the diabetes community as we navigate this pandemic together. The commercial organization is always the face of the company to our customers and health care providers and I'm very proud of how they represented themselves and tandem during these challenging times.

At the start of the quarter, our focus was on training more than 7,000 U.S. health care providers on our Control-IQ technology. It received high marks for being easy to learn and easy to teach. Then in late January, we commenced new pump shipments with Control-IQ and also began offering it as a no cost software update to our in warranty t:slim X2 users. Today, more than 30,000 people have updated their t:slim X2 to Control-IQ technology and the feedback from customers continues to support why it's so often referred to as life changing.

As we look at the last portion of the quarter, COVID-19 began to significantly impact people's daily lives. This is where I will be focusing the majority of my comments to try and help provide perspective on what our sales and clinical teams have been experiencing over the last few months. At the beginning of March, our employees reported little disruption due to COVID-19. And throughout the month things began to change daily as the virus spread nationwide with increasing restrictions in many of our health care provider offices. Some representatives were asked not to visit if they were not feeling well or had been traveling internationally and others were restricted to meeting only specific clinicians or office staff.

Throughout March, we at Tandem also increasing the restrictions for our employees. As we closed out the quarter more and more practices were limiting in person patient visits to emergencies only and moving to telehealth for continuity of care appointments. Keeping the health and safety of our employees in the diabetes community at the forefront, all in person field-based activities were suspended.

Our field team was able to quickly pivot to an all virtual sales and clinical model leveraging our existing technology making the transition quite seamless. In states, where there aren't restrictions, a few clinicians have reported that they're still seeing patients in person a day or two or a week, but the vast majority are conducting appointments through telehealth while some have just delayed the visit to a later time.

In this transition to telehealth, our team really shined in using technology to virtually support both customers and health care providers. Many clinicians turned to us to help them optimize the use of our tools to support their telehealth practices and the trust they place in us is something we do not take lightly.

A key part of our virtual solution is our t:connect data management application. The cloud-based system allows a patient to upload their pump information and allow access to their health care provider. This provides our customers clinician with critical information such as their patients' blood glucose trends pump and CGM information all in one place which helps them better manage their therapy.

As we've moved to a virtual world it's really highlighted where the ease of use of our t:slim X2 and automated insulin delivery technologies stand out. We are now offering all new customers remote training options including people who are new to pump therapy. We began dedicated efforts to create a virtual pump training program a few years ago and so have had time to develop and refine it. Patients who have trained remotely report high levels of satisfaction with their training and importantly we have not seen an increase in call volume to our customer services groups from these customers.

As you saw in our results, pump sales in the first quarter were strong. It's important to remind you that in our domestic sales cycle, a person typically starts to purchase an insurance verification process about 30 days before making a purchase decision. So our pump shipments in March were largely initiated in February. What is encouraging in that in addition to our shipments being strong, demand has continued through April and it's natural to think that would have been even greater absent COVID-19.

What about Control-IQ's benefits of spreading. And similar to Basal-IQ, where we saw momentum build over multiple quarters, we expect Control-IQ to do the same. It's not uncommon for a person with diabetes to give consideration of pump therapy for a period of weeks or months following a quarterly visit with their clinician and they often take time to do their own research before making a decision.

This is likely why we will continue to see people purchasing the t:slim X2 even though much of the country has shut down. That being said, depending on the depth and duration of this pandemic, we anticipate that we will begin to experience a greater slowdown in customer orders until people start to resume their normal daily activities.

In the first, quarter we continued to see approximately half of our new customer adopt pump therapy from multiple daily injections and the remainder coming from competitive conversions. The high rate of conversions is notable, as a percentage of former Animas customers has declined, as anticipated from an average of 18% in the first three quarters of last year to less than 5% of new customer shipments this quarter. These trends have also been consistent throughout April, which is interesting, because there is a natural assumption that people using multiple daily injections may be less likely to start pump therapy in this environment.

We're also cognizant that a global economic recession can cause people to limit their spending. However, when someone purchases Basal-IQ or Control-IQ, they are making an investment in their health, particularly when you consider the potential for a reduction in hospitalization and other complications that can be very costly. Overall, healthcare is an area that people tend to prioritize, particularly at this time. And so, we could see things like greater utilization of flexible spending accounts and high deductible accounts, which could contribute to greater seasonality in the year.

As a reminder, people with diabetes typically pay about 20% of their co-pay out of pocket. We've offered payment plans, as have our distributors, for quite some time, to allow customers to pay month-to-month, but it's actually a program that is rarely utilized. We will continue monitoring to see if usage increases in the current environment and are offering accommodations for people in their payment plans. We will always look at creative options for our customers, if this upfront payment is burdensome.

Our customer renewals are also continuing to be a more meaningful part of our domestic business and we've increased our internal resources focused on this effort. We saw increased momentum in the first quarter, growing more than 80% year-over-year to approximately 2,200 renewal pump shipments and I'm pleased with the progress we are making.

While the majority of our sales take place in the United States, we believe the effect of COVID-19 will have a greater proportional impact on our international markets. This is mainly due to the difference in the diabetes care model outside the United States in that patients are more often seen through the hospital systems versus a stand-alone endocrinology clinic and those hospital systems are currently focused on taking care of the critically ill.

We remain in close contact with our international distributors who are responsible for all selling and customer support activities to monitor the impact of COVID-19 on them during these times. They are still open, servicing customers and taking care of business and we remain confident that post COVID-19 our international sales will continue to be a meaningful driver for our company.

The new regions we are entering this year, Germany, France and Benelux, have been ramping up in preparation for launch. Our training for our distribution partners in these regions was completed before COVID-19 began picking up and travel restrictions were in place. Their initial orders were placed at the end of the quarter and their launch to customers will be dependent on the state of the pandemic in each country.

We are hearing the same overwhelming positive feedback on Basal-IQ outside the United States that we heard historically here in the U.S., similarly we are hearing great feedback on the Tandem Device Updater, which was launched outside the United States to existing t:slim X2 customers beginning in the latter part of 2019. We are thrilled to bring the benefits of our technology to more people with diabetes worldwide and still expect to begin rolling out Control-IQ later this year.

Overall, I'm very confident that the products we offer are continuing to change the standard of care and insulin pump therapy. Our team has done an amazing job meeting the demands of our patients and our partners during this pandemic and we believe any slowdown relating to COVID-19 will be short-lived in hopes that we will see a continued flattening of the curve and that people can safely resume their day-to-day activities. Until then, our teams remain busy and we are here for the diabetes community.

John Sheridan

Thank you, Brian. As excited as we are about our current products, we're also continuing our new product development efforts. While being mindful of the FDA's public communication in mid-March that they are understandably prioritizing COVID-19 related devices. Like most of us, the FDA reviewers are also working from home, so we expect that review times may be longer than usual.

We are fortunate that a clinical trial for Control-IQ for pediatrics was completed earlier this year. During the first quarter, the data from the study in children aged six to 13 was included in the submission to the FDA to lower the age indication for control IQ. There's always inherent uncertainty with any FDA submission. But during these unprecedented times, it's even more difficult to predict the timing of any approval process. In the meantime, we will continue to prepare for an expanded age indication pending the FDA's review.

We are not actively in the clinical trial phase for any of our other products in development. However, we had planned a significant amount of human factors testing in the second quarter for both the t:slim X2 mobile bolus feature and for t:Sport, our smaller pump that is controlled entirely through a mobile app. These studies are typically performed in multiple geographies with diverse demographics.

Due to the current COVID-19 environment, we have delayed commencing the testing for both of these future products. As a result, since the data is required for our regulatory filings, the target submission timing for both mobile Bolus and t:Sport, will be pushed out until it's safe to travel again and the protective government restrictions are lifted.

That being said, we remain very excited about both products. Our mobile application with Remote Bolus capability for the t:slim X2 is one of the most highly requested features by our customers. It's built based on the new mobile app platform that is the foundation of our digital health strategy. The first generation of this app had a beta launch in the first quarter and will be rolled out more broadly in the upcoming weeks.

This app will benefit patients by allowing our t:slim X2 to wirelessly upload data from their pump and CGM to our cloud-based t:connect data management application, a feature that will provide even greater benefit in this current environment, but is also significant as it takes away a burdensome step for our customers and their healthcare providers of having to upload data through the USB cable to see tracking and trending information in t:connect.

As we've shared in the past, ACT often tell us that they raise meaningful office time accepting data from different insulin pumps each day. With the launch of this new app, we will be offering the first wireless phone-based solution to address this issue and thereby improving office efficiency by streamlining visits, and providing important resource for telehealth initiatives.

Now, I'd like to turn the call over to Leigh to discuss our financial results as well as the financial guidance. Leigh?

Leigh Vosseller

Thank you, John, and good afternoon, everyone. Our entire organization has executed remarkably well managing through the challenges presented by these uncertain times. Focusing on our performance in Q1, we are proud of our achievements, particularly the successful launch of Control-IQ and the incredible feedback we continue to receive on its performance.

The impact of COVID-19 would likely be much greater on our business without its availability. And as a result, we are not seeing the same level of negative impact as in other health care sectors. Our first quarter results were only modestly impacted by COVID-19, as Brian discussed.

We began the year with $98 million in worldwide sales this quarter, which is our second highest ever, behind only our most recent fourth quarter. Our success is a direct result of the growing demand for t:slim X2 and all of the benefits it offers. We shipped 17,400 pumps in the first quarter versus 14,700 a year ago. Our first quarter sales included $18 million from international geographies.

Our domestic pump shipments of 13,200 increased 36% year-over-year, delivering $80 million in sales for the quarter. We were able to achieve this growth on the strength of Control-IQ even with the outsized Animas benefit in the first quarter of 2019. In total, domestic pump sales were $50 million with the remainder from pump supplies.

As John mentioned, we observed some customers purchasing cartridges and infusion sets more frequently than the routine quarterly cycle, potentially stocking up on supplies. We estimate that this resulted in an acceleration of sales from the second quarter of approximately $3 million.

We shipped 4,200 pumps to markets outside the U.S., including our initial orders to Germany and France late in the first quarter. This was our highest international pump shipment quarter since the Animas opportunity ended, which was mostly complete in the second quarter of 2019.

The 5,100 pumps shipped in the first quarter of 2019 benefited in large part from Animas conversions as well as the beginning of the turnaround from a backlog in 2018. Therefore, there is no meaningful business comparison to be made against our 2019 first quarter international results.

Our worldwide and warranty installed base grew to approximately 155,000 customers, which drove a greater than 90% year-over-year increase in supply sales. This breaks down to approximately 127,000 people in the U.S. and 28,000 people outside the U.S. As a result pump sales represented 61% of total sales followed by infusion sets at 27% and cartridges at 12%.

We have begun to experience and expect to continue to see downward pressure on our sales in the face of this COVID-19 crisis as healthcare providers and patients work through the disruption to their typical interactions and some patients choose to delay their purchasing decisions due to financial uncertainty.

As we discussed, what is encouraging is the extraordinary feedback we have received on Control-IQ, which we believe helps mitigate a slowdown in sales. It is difficult to estimate with any degree of certainty the depth and duration of COVID-19's impact on our business. Therefore, at this time, we are withdrawing our 2020 annual guidance and will instead provide color for the near term-based on the best information we have available today.

As Brian mentioned, the dynamics are anticipated to vary greatly between the U.S. and the U.S. In the U.S. it is not only typical for our pump to scale seasonally across the quarters and a calendar year as people begin to meet their insurance deductibles, but also across the weeks and months within the quarters.

Accordingly, March was our highest month of sales in Q1. We expect to achieve at least $75 million in domestic sales in the second quarter, which implies at least 7% growth compared to the second quarter of last year. We are not assuming the same seasonal progression across the weeks in the second quarter or even the third quarter until we see signs of a recovery.

Despite the excitement for Basal-IQ outside the U.S., we expect that the international markets will experience a greater impact because their patients tend to be treated more commonly in the hospital study.

In the second quarter of 2020, we anticipate at least $10 million in international sales, primarily driven by pump supply for our existing installed base. Keep in mind that the second quarter was already lined up to be a difficult comparison for our international sales based on the same factors that influenced our first quarter results for last year.

In summary we anticipate our worldwide sales in the second quarter to be at least $85 million. Although, we have withdrawn our annual guidance and obviously have no visibility to what COVID-19 recovery curve will look like we have not completely dismissed the possibility of a scenario that could result in achieving our original guidance range as more and more people experience the benefits of Control-IQ.

Wrapping up our first quarter performance gross margin was 51% this quarter consistent with the prior year. We saw an improvement in each of the individual product margins compared to the first quarter of 2019 based on higher volumes and progress on the initiatives that will drive us to our long-term gross margin goal of greater than 60%. This benefit was partially offset by the impact of product mix with pumps representing 61% of worldwide sales in the first quarter of 2020 versus 70% in 2019.

We also recognized royalty expense in conjunction with the launch of Control-IQ in January both for new pump shipped as well as the software updates that occurred within the quarter. The resulting royalty cost was approximately 1% of total sales this quarter.

Non-cash stock-based compensation was equivalent year-over-year at approximately 2% of sales. We demonstrated leverage in our operating expenses as reflected in improvement to adjusted EBITDA which excludes the impact of non-cash stock comp. The adjusted EBITDA margin increased to 4% of sales in the first quarter up from essentially breakeven in the prior year.

We have now reached six straight quarters of positive adjusted EBITDA. Operating expenses grew to $64 million in the first quarter including $14 million in non-cash stock comp as we continue to drive programs to support our long-term market leadership customer support and profitability objectives.

This compared to operating expenses of $44 million in the prior year including only $9 million in stock compensation. The non-cash stock comp charges are expected to start declining in the second half of 2020 from these higher levels we have seen in the last few years.

We ended the first quarter with $160 million in total cash and investments which is a $16 million decrease from the end of the year. This decline was anticipated in part due to typical first quarter seasonality where we experienced lower pump sale levels associated with the timing of customer insurance deductible resets.

The decrease was magnified by other planned investments. These include capital expenditures for manufacturing capacity and facilities expansion building up inventory to meet safety stock levels for protection against supply chain disruption and the payout of annual incentive compensation awards.

This spending was partially offset by proceeds from employee stock option exercises of $11 million. Even in light of uncertainties due to COVID-19 we are focused on making prudent and thoughtful investments in the organization to continue to drive growth and ensure achievement of our long-term sales and profitability initiatives.

These activities include continued recruitment of key employees advancement of the R&D pipeline and implementation of advanced technology solutions all of which may result in an additional decrease in cash in the near term. We will continue to evaluate our planned uses of cash in the coming months as new information becomes available and make changes is considered necessary.

Considering our near-term outlook for Q2 2020 sales and our intention to continue making key investments, we expect gross margin to be relatively flat in Q2 compared to Q1 with modest pressure on adjusted EBITDA margins. We remain committed to achieving our long-term margin objectives.

With that I will turn it over to the operator for questions.

Susan Morrison

Operator, are there any questions on the line? Well we apologize on behalf of the system because it looks as though there's some sort of technical difficulty happening and the operator isn't able to connect to be able to ask questions. So maybe we'll give it a minute more in case they're able to resolve this issue.

And if not then we'll change over and apologize but happy to do any questions or things in follow-up or if people would like to e-mail me directly, our analysts you have my e-mail address. This is Susan Morrison. If you want to send it to me, I'm happy to be able to actually just facilitate these amongst us and the management team now. We'll wait for a mic.

Question-and-Answer Session

Operator

Thank you for your patience. [Operator Instructions] Our first question comes from the line of Chris Pasquale of Guggenheim. Your line is open.

Chris Pasquale

Thanks. Can you hear me okay?

John Sheridan

We can.

Chris Pasquale

Okay. Perfect. I was hoping to start off with if you could give us just a little bit more color on the assumptions behind the $85 million number for 2Q. What are you assuming in terms of the pressure on new patient starts? And then how have you thought about how that progresses relative to what you saw in April?

Leigh Vosseller

Thanks for the question Chris. The Q2 guidance is really based on what we've already seen through right now. So as you can imagine we already know what April looks like. And we have orders in the system that will dictate pretty much how May will come in.

The biggest question mark right now is what happens in June and as we progress forward. At this point we haven't anticipated a typical seasonal scale, which would mean that June would normally be the highest month of the quarter. So we're just going to keep monitoring that. But at this point based on what we already know today and about our international orders that we have in hand, we're very confident that we can hit at least $85 million. Interestingly our metrics that we typically monitor the number of people that are coming from MDI versus competitor conversions those have all stayed intact now through April even though we're seeing some pressure on orders overall.

Chris Pasquale

Okay. That's helpful. And then just for this quarter I want to understand -- thank you for the impact of the supply stocking. Was there actually a revenue contribution from the new European territories this quarter? Was there stocking that went into the OUS number here in 1Q?

Leigh Vosseller

Yes. We haven't quantified that but we did have our initial stocking orders for Germany and France in particular which contributed to the international sales this quarter.

Chris Pasquale

Okay. Thanks.

Operator

Thank you. Our next question comes from Travis Steed of Bank of America. Your line is open.

Travis Steed

Safe and well. Thanks for taking the questions. Just on the $85 million in Q2, how much below that is -- be your original plan is that? Just kind of think through kind of what scenarios have to happen in the back half. In order to get to your original expectations?

Leigh Vosseller

Sure. As you think about how to look at the entire year, we obviously don't give any of our detailed modeling assumptions, but it really comes down to what sort of recovery curve one might anticipate. And you hear lots of conversations about a V shape the U Shape even a W shape. At this point our only visibility is what we have in front of us right here for the upcoming month or so. And so we're not factoring in as we go into Q2 even thinking about Q3 any sort of seasonal uptick that we would ordinarily see.

Travis Steed

Okay. And then I know you're suspending guidance for this year. Are you still reiterating the five-year plan 500,000 patients? And then also I know you built in some conservatism originally for competitive launches, but you got fortunate and had your product approved and your competitors haven't yet. So it seems like there's a chance that those could get delayed. Just trying to think through what kind of incremental opportunity there could be on the margin from competitive launches getting delayed?

John Sheridan

Travis, I would just say that we have not -- we still intend to get the numbers to be put in place for our five-year plan. And I think that we have to wait and see what happens with the competitors obviously on their own specific clinical studies and plans. But at this point in time I think it just gives us runway. We had anticipated about six months to a year of runway to build momentum on Control-IQ. We think that's still the case.

Susan Morrison

And operator is there a next question?

Operator

Yes, ma’am. Our next question comes from Alex Nowak of Craig-Hallum. Your line is open.

Will Fafinski

Great. Good afternoon everyone. This is actually Will Fafinski on for Alex here. Thanks for taking the question. Just to start, John how are you guys positioning the sales force to sell in a post-COVID world where it might be harder for reps to access these medical clinics?

John Sheridan

Well, I'll just say that our team did a great job transitioning two virtual interactions with our physicians. We have excellent relationships with our physicians. We're in touch with them frequently both our sales organization and our trainers. So the transition was smooth. They did a great job. I'll let Brian add a little color to that.

Brian Hansen

Yes, John, I think we're going to take their lead. We're going to see what and how they would like us to interface with them. Thankfully we had many of these tools in place both for the virtual training. And then also clearly everyone has the tools in place for e-mails and calls and video conferencing now with the physicians.

So we've even done some really unique sales calls via a virtual setting now. And we'll see how that all plays out. I think it's going to vary account by account and we'll kind of follow their lead and take it a day at a time. But so far we've been in direct conversations in communication with all of our accounts and they're adjusting to the new norm as well.

Will Fafinski

No. That's great to hear. And then second question is just stepping into the patient's shoes a little bit what is the end user diabetics saying about COVID? And their willingness to switch devices. During a time when it might be tough for them to access the doctor or hospital? Is this turning patients off from upgrading at all? And what would that do to the end-user demand through the end of the year? Thanks.

John Sheridan

I think we can only speak through Q1 and in April what we've seen so far in the calls into our team and our communications with our field team has been very robust. So you might actually look at this a little bit that they have time at home. They're doing their research. They are communicating still through telehealth with their physician.

And then they're reaching out to us with that time to have the conversations with our inside and external sales teams we've actually found them to be very accessible right now and very open to those conversations. So unlike the face-to-face visits we may have had before some of the walks or Gallas that we may have participated in before our virtual sales calls have gone very well and we're actually finding a very captive audience right now.

So again we're adjusting to the new norm, we only know what we know four months into the year. But so far it's gone very well and patients have been very open as you can tell from our NBI numbers to switching therapies and coming onto a pump so far.

Brian Hansen

I'll also add that the stress levels that come along with just dealing in an environment with the COVID-19 affect people's blood sugar control, as well as COVID-19 itself has been shown to actually cause, significant issues with hyperglycemia and blood sugar control. So we're hearing that people are actually -- they're appreciating the benefit of Control-IQ, because it does have such improvements in their overall control. And we expect that to continue to drive demand to the device.

Will Fafinski

Sounds good to hear. Thanks, everyone and best of luck moving forward.

Brian Hansen

Thank you.

Leigh Vosseller

Thank you.

Operator

Thank you. Our next question comes from Brooks O’Neil of Lake Street Capital. Your question please.

Brooks O’Neil

Thank you. Good afternoon and congratulations on continuing progress guys. So my first question is, do you see any indication of a building backlog? I understand the normal seasonal patterns and I understand that. The comments you made about not assuming any buildup. But do you see any indication that the patients have delayed purchasing pumps but that when normal life resumes there might be a bolus jump in demand for the product.

John Sheridan

Brooks. First of all I would say that without COVID-19, we would have done better in the first quarter. And as Brian indicated, we anticipated weakness in March and April as people converted to virtual visits and virtual training. And we were surprised, obviously very pleased to see the strength in those two months and it's largely driven by Control-IQ.

It's interesting because right now it's approximately three months from the time we started to actually ship Control-IQ back in January. And when we look at back and what happened with Basal-IQ, after the first three months people started to talk to their physicians, they began to actually see the benefit of Basal-IQ. The same thing is happening now with Control IQ.

So Brian mentioned, growing momentum. We expect to see continued growing momentum for Control-IQ. And as people express the great results they're seeing to their physicians, that's only going to underscore the value of the product. So I think that we do anticipate that there will be a bump when we get through this. And we're well prepared to deal with that.

Brooks O’Neil

Yes. Great. I understand in general what overwhelmingly positive customer feedback means. But can you give us just a little color on some of the sort of anecdotal things or whether really the elevated, the bolus correction is really resonating with your patients?

John Sheridan

Sure. The first thing I'll say is that, it's our customers who are calling Control-IQ life changing. It's not us. They're doing that. And if you look at the blogs, if you look at the e-mails that we received, the time and range people are experiencing now is in the high 80s and 90s. It's just absolutely incredible.

People love the fact that they can go to sleep and they haven't got to worry about their diabetes while they're sleeping. And they have just amazing experiences at night. And just they're able to slip through the night, which is just really positive. So it's -- everything that we're seeing right now its strong, it's great. It's easy to use. It integrates with the Dexcom G6, which doesn't require fingersticks. And it's also minimal alarms. So it's all been very, very positive.

Brooks O’Neil

Great. Thank you very much.

John Sheridan

Take care.

Operator

Thank you. Our next question comes from Ryan Blicker of Cowen. Your line is open.

Ryan Blicker

Hi. Thanks for taking my questions. Maybe starting with two quick pipeline ones. For the remote bolus feature, can you remind me what other clinical work was required besides human factor testing prior to submitting. I don't believe you needed a clinical trial? I just wanted to confirm that. And then also...

John Sheridan

That's right. Go ahead, sorry.

Ryan Blicker

I was just going to add also for the next-generation algorithm you were planning to launch in 2021 with some really attractive features. Could you give us an update on what type of clinical trial work you think might be required to launch that product? And should we expect that to launch a little bit later given what's happening in the world? Or do you still think without any incremental surprises that could launch in 2021?

John Sheridan

Yes for the mobile bolus feature, there is no additional clinical studies required. It's all about human factors. And human factors is very different than a clinical trial. And that there's definitely work. There's a lot of work that goes into planning it. The actual human factors testing takes a day or two and then there's time that's required to just analyze the results and prepare the reports.

So I'm not trying to understate the challenge of the complexity of doing all that but it's really -- it's much more contained and it happens in a much shorter period of time in a clinical study. So we think there's almost a one-for-one impact of the delays between the time we had planned on doing the human factor studies in the time that we'll actually get it done to the submission.

We are currently still -- we're working aggressively on Control-IQ, the next generations. We are actually looking at it in a risk-based manner. So the first improvements we're looking at in Control-IQ really are not going to require a great deal of clinical work. And so that's what we're prioritizing now.

There's obviously going to be clinical work that's required and we're going to be likely starting that work later this year. And I think that it's difficult to say if COVID-19 is going to impact that at all right now. But it will start-off with a series of small studies just to confirm the safety and just confirm the impact of those changes with a pivotal study sometime in the 2021 timeframe.

Ryan Blicker

Got it. Very helpful. And then can you provide any update on your conversations with major payers over the last month and change since this has emerged. Has COVID-19 installed any progress you may have been making with United Healthcare? Thank you.

John Sheridan

Well, we don't comment specifically on any of our payer interactions and activities. As we've talked about in the past our priorities really are to get as many agreements in place as possible. And then work with our payers to get additional reimbursement for some of our complex features that are definitely benefiting our patient population and also looking to streamline, the process of onboarding our patients. So there's a lot of activity going on in that direction.

The control acute pivotal data and the initial market impact has been very positively received. We're working with all the payor organizations right now and we're seeing great progress. But it takes time to do this. And I think that we'll see these things happen over time.

Operator

Thank you. Our next question comes from Matthew Blackman of Stifel. Your line is open.

Mathew Blackman

Hi. Good afternoon, everybody. Thanks for the questions. I've got a couple of for Leigh ---- So we -- I'm curious about what you're seeing in April and I don't expect that you'll tell us the magnitude of the headwinds, but feel free if you'd like to. But can you at least say that those headwinds have stabilized or bottomed?

Leigh Vosseller

Hey, Matt, thanks for the question. I don't think I could predict whether they've stabilized or bottomed at this point. All I can say is that April and May are seeing pressure compared to what we would ordinarily see, which is why the guide is sequentially down at this point. But really in our mind as we said that June is the big question mark of how it proceeds from there. So that's where we are at this moment.

Mathew Blackman

Okay. Fair enough. And I guess my follow-up question. And look this is new territory for all of us. So help us think through what metrics you guys are looking at to try to project the potential recovery trajectory? Obviously, you have order numbers but how are you thinking about the importance and impact of more macro indicators like consumer confidence or unemployment? Just help us understand how you guys are thinking about all of those cross currents? Thank you.

Leigh Vosseller

Sure. And I mean -- and beyond Q2 anyone's guess is as good as mine about what happens. But you're right it's really the macro factors that we would have to consider more that would be driving impact to the business. So for instance, as states come out of this how do they phase it out how -- when our social distancing requirements relaxed. When are state home rules relieved? And how quickly those things turn to return to what is more of a normalized environment. We believe that will happen in stages or phases over time. It won't be a quick turnaround which is why at this point we withdrew the annual guidance because no one can really guess how that's going to play out. We do so as we position very well now with me for like you. Thanks, Mathew.

Mathew Blackman

All right. Thank you, Leigh.

Operator

Thank you. Our next question comes from Matthew O'Brien of Piper Sandler. Your line is open.

Matthew O'Brien

Thanks so much. Good afternoon. Thank you for taking the questions. Just for starters, I guess, Leigh thinking about your comment and I know you're not reiterating full year guidance or not but you're saying it's not off the table either. Given what you've done in Q1 and your expectations for Q2 the back half ramp would be pretty significant to get there.

So clearly as you're rolling out Control-IQ, you're seeing extremely strong demand for that technology. So can you just talk a little bit about what you are seeing to give you the confidence and say something that you potentially could hit that guidance given the big ramp in the back half of the year?

Leigh Vosseller

Yes. I don't even -- I'm not even necessarily saying there's no upside or downside to that. It's just that it's a possibility. If you look at the variety of scenarios that occur you have the macro factors, which we can't control. But what we are very enthusiastic about is the role of Control-IQ in this. We couldn't have gotten the launched at a better time. And with the experience people are having and the success we're having with this transition to a health environment, we feel like that will help us through this. But again anyone's guess is as good as mine about how this plays out in the overall market.

Matthew O'Brien

Okay. And then the follow-up question I guess there is kind of two in one, but the gross margin in the quarter was a little bit lighter than I would have expected just given all the upfront revenue that you generated plus the bigger disposable component as well. I think a big chunk of that was OUS if my model is right. But why wasn't gross margin a little bit better? And then those payment plans that you guys keep talking about that you have available. How are you factoring that in to the business maybe later this year as we come out of the recovery?

Leigh Vosseller

Sure. From a gross margin perspective we were flat when you look at this year versus last year. And there are a couple of factors that really play into the gross margin. One is product mix itself. And so the percent of pump sales we saw in Q1 this year versus Q1 of last year was lower for pump which is the biggest driver of our gross margin.

Also add to that that it's the first time we have a royalty component associated with Control IQ, which was about in this quarter and that being about one margin point.

So really there are a number of factors playing into that. We did see improvement across all product margins though this quarter versus last year. So we're still very excited about the progress that we've made and where we expect margins to go, still believing that we will be 60% or better in our long-term models.

And then when it comes to payment plans that's something that it's hard to say we've had payment plans out there pretty much since the beginning of our business, our distributors offer them as well. We've really seen a very small percentage of people that take advantage of them. But we'll continue to evaluate them and see if there are ways where we can enhance them particularly in this environment where maybe we can help people who might be struggling and need some more financial assistance. So at this point, I wouldn't anticipate any trajectory change because of payment plans, but we do -- are always looking to hear the customer voice there and seeing what we can do to help.

Matthew O'Brien

Very helpful. Thank you.

Operator

Thank you. Our next question comes from Matt Taylor of UBS. Your line is open.

Matt Taylor

Hi, thanks for taking the question. So, I wanted to focus on telehealth a little bit. You talked a lot about your capabilities, which I would say are you relatively advanced for Medtech company. It seems like you're having some success. So I just wanted you to talk about your experience with that in the U.S. and parlay that into a question about OUS, because you said OUS would be more impacted by this disruption because those folks are usually seen in hospital. So I guess you're not seeing as much use of telehealth there? Or why can't they pivot that you appear to have done in the U.S.

Brian Hansen

Yes, this is Brian. I'll start with the U.S. first. As I said, we are fortunate to have done several remote trainings back in late 2018, 2019. So we could count in the 1,000-ish, or in 2,000 range those that we'd already done and got pretty good at it. And we've got, kind of, a cadence of homework we send out the virtual training, some follow-up, a survey and then some additional things that we do to help that patient along. So we got pretty good at it and we were able to pivot pretty quickly.

What I didn't see happening as much is the virtual meetings with the physicians and the certified diabetes educators and really are accounts like we have. So they've kind of embraced that and we're all learning together and it really develops a unique bond that I think will last for a while. The trainings have been very well received. And while it's not for every patient and then we work with the health care provider on those patients who can't be trained remotely for some alternative right now before we can get face-to-face, it's gone surprisingly well and I'm super proud of my team and how they've reacted to this. And I do think it will be somewhat of a new norm going forward and a bit of a silver lining to the entire U.S. health care system.

What we're doing now in Europe is helping train our distributors on some of the best practices we've seen here. But unfortunately in that hospital setting those patients just aren't seen as much because those hospitals have really limited access in an earlier period and shifted to acute care addressing the pandemic more.

So there's just a little bit different dynamic, but that's not the same for all of them. It varies by region, by country, it varies by state here in the U.S. And so we're still seeing sales internationally. We're still seeing as we've talked about solid sales here at home. And I think this telehealth piece is a good silver lining of the process we're going through.

John Sheridan

Matt, I'd say that it really underscores the importance of our investments in our mobile health initiatives. We're well-positioned now to really improve the experience for both people using the funds and the physicians in this new virtual world. And the mobile app is really, kind of, our first foray to this. But as a company, we're really looking at building a robust ecosystem of data driven products and services that really form around the pump.

To just increase the communications, the guidance and just the access to data to help the -- both the people using the pump as well as the physicians make better decisions and basically manage the diabetes better.

Matt Taylor

Maybe just one follow-up. You mentioned that you're seeing reports of people achieving very high time and range. So I’d love if you could talk about that given there was some “controversy” about the mid-70s number from the trial. Maybe talk about why you think that's playing out so well in the real world?

John Sheridan

Sure. I think as we've talked about in the past when you look at the trial, the trial was very representative of I think the state of diabetes in the United States where there were people who had very good control and then there are people who just didn't really try to control their diabetes at all.

And so the pump in many cases there was no mobile -- excuse me, there was no bolus done during the trial in a significant percentage of people that had high A1c's. And so they typically brought the time and range down for the overall population of that group. But it was representative.

But I think now if you look at the people who are using the pump, they are serious about managing their diabetes. They do care about it. And I think when you look at that population, again we have seen just many, many reports of people who have had great experiences and they're seeing very high time and range. And it's really -- it's great to see and it's something we anticipated, and of course we're working on looking at post-market data right now. We're planning to collect it and we're looking to present it as we have the opportunity at shows and conferences here in the near future.

Matt Taylor

Thanks a lot, John.

John Sheridan

Perfect. Take care.

Operator

Thank you. Our next question comes from Steven Lichtman of Oppenheimer. Your line is open.

Steven Lichtman

Thank you. Hi guys. I guess first I wonder, if you could talk a little bit more about how the remote training works. Is this something where you've trained the offices on how to do that remote training and they take it from there? And do all your customer offices have that capability? And then Brian, you talked about alternatives for those that -- where virtual training doesn't work. Can you expand on what some of those are?

Brian Hansen

Sure. So to the first question yes, some of our accounts have been utilizing remote training as well. They have been trained by us Zoom or Teams or Skype or something to be able to do that. So, they are training their patients remotely and their educators are doing that sometimes with our help but many on their own accord which is great for us because we've got our team out there scheduled multiple trainings a day with the patients directly.

So it's really worked out well on that front. And specifically, there's some prework -- a virtual training. It's typically done through Microsoft teams for us were Zoom as many of our kids are using for school today. So everyone is getting pretty used to this virtual world we're living in. And then, after that training is done there's some follow-up. There is typically a call and a video or two. We've got a lot of online resources now.

So things we've been working on throughout the last year and those resources have really helped us during this time and allowed us to pivot quickly. And as I said earlier, the feedback has been very positive. So, if a patient can't, it doesn't qualify for a remote training. There's a variety of reasons for that, whether it's technology or just simply comfort or they're new to pump technology. They'd really like to have some type of face-to-face. We've done remote trainings with the patient in the physician's office and they've been able to help in that way.

So we're still socially distance from that perspective. But we've aided by calling into the physician office there's a health care provider that is working with them there. And that has worked out extremely well in those cases where we've had challenges doing it. So we're getting good at this. We're doing it in the thousands now and it's working out incredibly well. So I think it's going to be fun going forward.

John Sheridan

Yes Steve we've done thousands of remote trainings just in the first quarter and we expect to see that number grow through the year.

Steven Lichtman

Got it. Great. And then just secondly another follow-up. Brian, you spoke about the upfront payment flexibility. Can you talk a little bit more about what those programs look like? I mean you mentioned a month-to-month is that sort of the upfront amortized over the full four years? Is it over different periods of times? I mean just any more color on that would be helpful.

Brian Hansen

Yes. I think it varies. So what we're really looking at doing is delaying or spreading out the payments for folks. We've typically not been a company to spread out payments for that longer period of time over the warranty of a pump. And if there is a strong demand for that maybe one of our partners might be willing to offer that. But as we hear more or get asked for more whether it's pumps or supplies we're certainly open to working with our patients to ensure that they're just not facing a hardship right now. But to Leigh's comments earlier surprisingly low as far as the requests that we're getting today and it certainly has been historically low. So, we continue to monitor it and we're definitely willing and certainly able at this point to be flexible with our patients and help them.

Steven Lichtman

Got it. Thanks guys

Operator

Thank you. Our next question comes from Joanne Wuensch of Citi. Your line is open

Matt Henriksson

Yes, hi. This is Matt Henriksson in for Joanne. First question is with regards to second quarter and your commentary on pressure on orders. Based off kind of your anecdotal observations channel checks, what's the bigger driver here? Is it kind of delays from patients having to go through the telehealth setting? Or is it more delays given kind of just unemployment or other economic factors?

Brian Hansen

Yes it's Brian again. I actually think it's too early to tell to be honest with you. We certainly haven't felt the pressures. There'll be unemployment or lack of insurance yet in the interactions we've had with our patients. But again with that 30-day lag some of these discussions started beforehand and we haven't seen people necessarily fall out of a funnel due to that. So, I think we'll figure that out as we go forward here and see if that starts to manifest itself in a different way. Leigh, any thoughts from year-end on that?

Leigh Vosseller

I think a lot of it right now the best we can tell is people adjusting to this new environment. So as Brian's point it's too early to determine what the key factors are that might be impacting us today.

Matt Henriksson

Okay. That's helpful. And then second, as we kind of look at the -- your OpEx and your spending, what levers do you guys have to pull in some of your more variable costs if you need to?

Leigh Vosseller

Right. So this year, I'll go back a couple of months. We talked about 2020 really being a year of investment for us. It's about laying the foundation for some of our long-term initiatives to further the pipeline to meet our market leadership goal in five years to invest in technologies in order to find leverage from a profitability perspective at this point. We still anticipate that we're going to continue those investments even though they don't drive necessarily this year's sales.

So those are some of the investments that we could slow down if we needed to conserve cash. We absolutely need to continue hiring people to support our installed base as we're growing and we need to invest in the manufacturing capacity. But we're definitely looking at everything on the fringe and seeing if there's anything that we can delay just to be prudent and thoughtful about what we're spending today.

Matt Henriksson

That's helpful. Thank you, very much.

Leigh Vosseller

Thank you.

Operator

Thank you. Our next question comes from Ravi Misra of Berenberg Capital Market. Your line is open.

Ravi Misra

Hi, thank you for taking the question. I hope you can hear me okay. And I hope everyone is their families doing okay. So, I want to return to the 2Q guidance and then kind of this aspirational hope of maybe 2020 original guidance not being off the table. Can you help us think about how the 2Q U.S. number I guess include some people that you might have been working on in March April that are coming in? Or if you could give us a little bit better color on the cadence of that?

And then how do you expect those trends to continue into the second half of the year? I mean were we exiting kind of 1Q with a large backlog of people and that's getting resolved in 2Q? And what trend are you seeing kind of going towards the end of this quarter? And then I have one on just telehealth after that.

Leigh Vosseller

Okay, great. Thank you. Nice to hear from you. When it comes to the trends beyond the current month or two there's really nothing I can give color to. It's anyone's guess as to what can happen from here. I wouldn't necessarily say there was a backlog coming into the quarter. What we're happy to see is we're seeing consistency in terms of ratios of our MDI versus competitor conversions.

When one might think and might still happen that MDI might be more pressured as we move forward. So, we'll have to continue to watch the patterns ourselves. But at this point I don't have any other -- I don't have anything to tell you about clarity beyond really this quarter or and really the next month or so.

Ravi Misra

Great. And then just around telehealth. Just to kind of build on some of the questions that we're seeing. Can you just help us say what are the steps that it's actually helping with?

I mean is there -- are you seeing kind of more support in new patient onboarding? Or is it kind of helping you with existing patient management or with new doctor training or making your sales force more efficient. I'm just curious in kind of where you see the strength right now? And is this all built in house? I know you talked about some kind of video vendors that you're using. But I'm just curious as to kind of what -- where the infrastructure is coming from? Thank you.

Brian Hansen

I'd say the technology is certainly the technology that everybody is using some sort of day to connect virtually or face-to-face in this way. Through an application but all the other pieces yes have been developed in-house by our team. And again we had a head start on that. So that certainly helped. But I think physicians are having to do it as well. So, they're helping. We're helping with them. We've trained them on some of it. They've helped make sure the right patients are being put into that channel so that we can get the right patient on the other line to be successful in the telehealth initiative for training our folks. We're already comfortable with it.

So, it really is nothing different than if we were on a call and we were going through something in a more technical fashion it is a change. You have to be comfortable with it. We have to be comfortable with it. And clearly we'd rather be face-to-face. That's why we have a field sales force or we would do everything inside but because the physicians have had to pivot and the patients have had to pivot there's still a demand there and our folks were already ready to do it. It's gone very well.

And quite frankly we're surprised and we're extremely proud of it right now and we'll see how all this plays out. But I think we're doing the best we can in the environment we're in and the feedback has been positive. And it's about all we can do right now. And I think that's going to continue for a while going forward here.

So, we continue to try to improve. But really nothing more than putting the right little videos together on YouTube which you can go see right now and how to fill a cartridge or do a variety of different things on our pump. The application we have on the iPhone where you can go play with it is also very helpful.

People recognize our technology through the Tandem device update. And now as John talked about the mobile app it all kind of feeds into the ability to do this. And I think it's a positive as I said earlier.

John Sheridan

Ravi I'd also just say that the mobile app is really important in that we were -- Brian and I were on a conference call last week with about 150 endocrinologists around the world. And one of the endocrinologists actually even said that over the last month he's actually had to bring on 10 additional people to download pump information into his system so that he could actually provide therapy management for his patient population. So, that was a huge burden on him.

And as I mentioned when the mobile app comes out in a few weeks, it will basically automatically upload data from the pump to the cloud. And so that will eliminate that burden on the health care practice. So, we see that as a big deal.

And again it's just -- we've got a number of things that are happening in this digital health area. And I think they're all going to go towards improving the efficiency of the health care provider and also improving the experience of the person that's actually using the pump.

Susan Morrison

Operator can we go to the next question? So, there may be another delay in our bridge. And so I'm going to go ahead and just supplement with one that I received here via e-mail. And so this question is really focusing on if we're doing more digital to prospects who are stuck at home is basically what the question is. And so basically is it working? So, people who are customers.

And I think Brian you'd probably be best to answer this. People who are prospective customers who are at home are we doing digital conversations in order to really talk to them about the benefits of pump therapy?

Brian Hansen

Yes, it's a great question, right? Marketing in a pandemic is quite interesting and something I think we're all learning about right now our first messaging to patients is really to our existing patients reassuring them that we're here and we're taking care of their needs, as far as supplies and any kind of questions or technical support they may need. We continue to stay active in the social media channels a lot of positive feedback on Control-IQ. And if somebody does want to reach out, want to be more, but digital methods we are certainly here both to interact that way or work through an inside sales channel based on them reaching out and expressing an interest through a variety of channels that we participate in.

So as I said earlier, it is nice that they're captive at home. We're kind of captive at home in the conversations and accessibility to patients have been much greater during the last two months. And I think that does benefit it, but we're not specifically trying to market or target any different right now until we learned a little bit more. We're more concerned about taking care of those that are part of the Tandem family first, and not trying to be overly opportunistic in this unique environment, if that makes sense.

Susan Morrison

Thanks. And are we able to bridge in Jeff for the next question?

Operator

Yes, Ma'am, Jeff Johnson of Baird. Your line is open.

Jeff Johnson

Thank you. Good evening, guys. Two quick follow-ups here in the interest of time, I'll just ask them both. One, supplies in the U.S. perspective anyway were 37%, 38% of revenues this quarter as you guys already mentioned. But they had been 32% 33% in the past few quarters. Should we expect in Q2 that they remain up in that upper 30 range? My gut is that people are still kind of hoarding supplies or trying to load up on supplies but would love to hear your answer there? And then if you do go to some payment plans maybe in the 10% or wherever we end up with unemployment in some of that patient base, if that payment plan let's say was over two years just to use it as an example would you spread that revenue out on the P&L over the two years? Do you recognize it upfront? I just want to understand the rev rec on that kind of payment plan. Thanks.

Leigh Vosseller

Thanks for the questions, Jeff. Starting with the supply question. Supply is actually pretty easy to predict these days. I mean, it's a function of our installed base. And so it was one of the elements as we thought about the Q2 guidance of what we thought we could predict pretty, pretty easily. I mentioned that in Q1, we saw some, if you want to call it supplement to the first quarter supplies of about $3 million that were associated with people stocking up. Right now, my best guess is that's a pull forward from Q2. But otherwise supplies tend to tick-up across the year, because of seasonality a little bit, but more so just because of growth in the installed base.

To your second question, when it comes to the payment plans and the accounting treatment, there are a lot of different accounting rules about it. But for the most part, if you can assess collectability upfront you book the revenue on day one, based on your best estimate of that collectability and because we have some history with payment plans. We're able to make some estimates. So, while we would expect to still recognize the best amount of the revenue on day one.

Jeff Johnson

Thank you.

Operator

Thank you. Our next question comes from Danielle Antalffy of SVB Leerink. Your line is open.

Danielle Antalffy

Hey, good afternoon. Thanks so much for taking the question. Sorry to belabor the telehealth point, but it sounds like you guys have been doing a pretty good job here with telehealth so far in Q1. And I guess I was just curious, when you think about Q2 where you have different revenue streams here in the U.S. as it relates to patients switching from MDI, patients switching from competitive pumps and existing Tandem patients upgrading. And I was hoping to get a little bit of color, if you'd be willing to give it on which sort of patient subset is sort of the most at risk that we should be thinking about slowing significantly in Q2? And then hopefully that would be the patient subset that then recovers on the back end of COVID, but just any clarity on that.

Leigh Vosseller

I'll comment to the source of patients, if you want to call it that or the mix of patients that come to us. Frankly, we were surprised as we came in through April that we were still seeing roughly the same balance of patients coming from MDI and patients coming from competitor conversions. Because if you had asked me, a month ago, when this all began, I would have thought the MDI population would have been more impacted, just because moving to pump therapy is such a significant change from what they do. And maybe the fear of the remote training that goes with it. But like I said, so far we haven't really seen a deviation from our norm, not to say that that won't occur. But it would only be speculation at this point.

Danielle Antalffy

Okay. Got it. Thank you. And then the other question I have is on telehealth is around -- so I get that patient -- you've trained a lot of patients. As I'm doing some physician checks I'm hearing some physicians caution around training patients on pumps and clinician caution there? How do you get physicians or clinicians comfortable with the telehealth aspect of training a patient getting -- especially a pump naive patients, so specifically in MDI? I think it's less relevant for a switch, but getting the physicians comfortable. Thanks so much.

Brian Hansen

Yes. I think it varies and certainly varies account-to-account. One of the ways that we can do it, Danielle is simply showing them the method that we use. And there's a lot of rigor to it and there's a lot of pre-work and other tools that people can use and access versus the time that they're on a virtual training session with us. And our trainers are available. There's all Tandem employees. They're available to follow-up with them as well and we obviously have our tech support center here that can answer questions 24/7.

So I think it's just, if there is a physician that is a little bit concerned about the again are involved, we simply show them and share them and train them on exactly what we're using with their patients. And so far the feedback has been very positive and hopefully the patients are coming back with positive feedback. And it makes them more comfortable to prescribe another patient that might be in a similar situation. So, it really has not been a barrier so far. And clearly the physicians have to use telehealth as well. So they're getting more and more comfortable with it, if they weren't a month or two ago.

John Sheridan

Yes, I think it's just a matter of building confidence.

Brian Hansen

And then, we look at the surveys after where the trainings are complete. And if we need to amend a little bit or do something different then, we certainly try to do that. But it gives us great insight into the training satisfaction. And so far again that feedback has been very positive. It's real time. We sent that out as soon as the training is complete.

Danielle Antalffy

Got it. Thank you so much. Stay safe.

Brian Hansen

Take care of you.

Operator

Thank you. Our next question comes from Jayson Bedford of Raymond James. Your line is open.

Matt Wizman

Hey, this is Matt Wizman on for Jason Bedford. Thanks for taking my questions. So, Mine is again, on telemedicine. What percent of your endo base do you think has successfully moved to telemedicine at this stage? And I guess said a different way if you don't have that number is what inning do you think we're in that conversion?

And then, would you expect this to be sort of near 100% by the end of 2Q, with most and those kind of being fully onboard with telemedicine? And then kind of on to that, if telemedicine becomes a more permanent aspect of endocrinology in general are there any positive or negative impacts we should think about in that sense? Thanks.

Brian Hansen

Yes. Tough question on the front end, because I don't think we really know. I haven't seen any numbers published out there, as to how many have or how many haven't. I would probably lean towards most half because they have to. And they're only seeing most physicians right now that, I have spoken to our reps have reported back and are seeing more critical or emergency patients and they're delaying the visits for doing telehealth with those that are more your quarterly kind of check in visits.

But there still needs to be face-to-face for our type one diabetic. There are a lot of things that they can do from a virtual perspective. So there's going to be some mix of that going forward. I don't know that, it's 100% but I certainly believe its north of 50% right now. And I think it continues to grow as we continue to go week-to-week and folks get more and more comfortable with it.

And as John said, on the call we were on last week certainly suggests around the world. Physicians are embracing this and helping each other with it. That was the whole nature of this call was sharing best practices and how things were working across the globe, on telemedicine right now. An initiative that was started before the pandemic but now really is front and center and again very positive feedback there.

So that group certainly represented it very well and they're embracing it. We will have to as well. We are today and we're going to refine it going forward. So that's part of our offering not only in our normal hopefully back to normal day-to-day activities but if something like this occurs again we're even better prepared to service the needs of our physicians and our patients. But we're all learning to be honest with you and I really have not seen any statistics on what the adoption rate is so far but it does feel like it's high and growing.

Matt Wizman

All right, great, so I guess, my second one going into the Control-IQ launch, I think, there was some concern about the impact that the resetting of deductibles would have with the launch in January as opposed to in 4Q. So I guess looking back at the launch at least through mid-March. Do you think this seasonality dynamic had any impact on the Control-IQ launch and are there any other learning in that regard? It would be helpful.

Susan Morrison

Yes. I guess I would if anything was normal or traditional I would say that Q1 was moving in a traditional way, where we only see impact of seasonality. Doesn't matter if we launch our product don't launch a product and we've just seen lower purchases.

And when you think about seasonality for us we talk about it across the year in terms of quarters it happens within the quarters in the weeks and the months as well. So, we were moving along on normal patterns I would say with January being the lowest scaling up into March. But -- so I would say, there was nothing different because of control IQ.

Matt Wizman

All right, great, Thanks for taking my questions.

Susan Morrison

Great, thank you.

John Sheridan

Okay. I think that does it. So thanks everybody. Before I wrap-up I wanted to share a piece of customer feedback that I heard recently. During this COVID-19 pandemic, we've had customers who have been personally diagnosed. And who have had family members who were diagnosed reach out to us and said that they were able to focus more of their attention on taking care of themselves and their loved ones unless managing their diabetes because of control IQ. And they were very thankful for that.

And I just want to say that's why we're here. I'd like to thank that people who use our pump, their health care providers and particularly our employees', thanks for everything. In the upcoming weeks we are planning to participate in a number of virtual conferences hosted by Bank of America Securities, Berenberg, UBS, Craig-Hallum and Raymond James. I hope everyone here is staying safe and well. Thanks for joining us today. And we will all talk to you soon. Stay safe.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.