Earnings call transcript: Myomo Q2 2025 results show revenue growth

Myomo Inc. reported its second-quarter 2025 earnings, revealing a revenue increase of 28% year-over-year but a slight earnings miss. The company’s stock experienced a post-market decline of 3.83% despite a positive aftermarket adjustment. Myomo’s revenue exceeded forecasts, but earnings per share (EPS) fell short of expectations, impacting investor sentiment. According to InvestingPro analysis, the stock is currently trading below its Fair Value, suggesting potential upside opportunity despite recent challenges.

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Key Takeaways

• Revenue increased by 28% year-over-year to $9.7 million, surpassing forecasts.
• EPS reported at -$0.11, slightly missing the forecast of -$0.10.
• Stock price fell by 3.83% in regular trading but saw a slight uptick in aftermarket trading.
• Gross margin decreased to 62.7% from 70.8% a year ago.
• Company announced an 8% workforce reduction to save $2 million.

Company Performance

Myomo’s performance in Q2 2025 showed significant revenue growth, driven by increased sales of its MyoPro units and a higher average selling price. However, the company’s gross margin declined, and it reported an operating loss of $4.6 million. Despite these challenges, Myomo continues to expand its market presence, particularly internationally, with notable growth in Germany.

Financial Highlights

• Revenue: $9.7 million, up 28% year-over-year.
• EPS: -$0.11, compared to a forecast of -$0.10.
• Gross Margin: 62.7%, down from 70.8% in the previous year.
• Operating Loss: $4.6 million.
• Cash and Cash Equivalents: $15.5 million.

Earnings vs. Forecast

Myomo’s revenue of $9.7 million exceeded the forecast of $9.17 million, representing a 5.78% surprise. However, the EPS of -$0.11 missed expectations by 10%, as the forecast was -$0.10. This mixed performance reflects the company’s ongoing efforts to balance growth with profitability.

Market Reaction

Following the earnings release, Myomo’s stock fell by 3.83% during regular trading hours, closing at $1.83. In aftermarket trading, the stock saw a slight recovery, increasing by 2.73% to $1.88. This movement reflects investor concerns over the earnings miss and margin pressures, despite positive revenue growth. InvestingPro data reveals the stock is trading near its 52-week low of $1.67, having declined over 70% in the past six months. Five analysts have recently revised their earnings expectations downward for the upcoming period.

Outlook & Guidance

Myomo has set its revenue guidance for 2025 between $40 million and $42 million, indicating a growth rate of 23% to 29%. For Q3 2025, the company expects revenue between $9.5 million and $10 million. Myomo is focusing on improving its pipeline conversion and expanding its orthotics and prosthetics channel.

Executive Commentary

CEO Paul Gudonis stated, "We are moving as quickly as possible to improve our results in the direct point channel." CFO Dave Henry added, "We believe that our cash, cash equivalents are sufficient to fund our operations for the next twelve months." These comments highlight the company’s strategic focus on operational efficiency and financial stability.

Risks and Challenges

• Declining gross margins may impact profitability.
• Challenges with Medicare Advantage authorization rates.
• Potential risks from international market expansion.
• Macro-economic pressures affecting consumer spending.
• Competition in the orthotics and prosthetics market.

Q&A

During the earnings call, analysts inquired about the company’s shift in advertising strategy from social media to television and its impact on lead quality. Executives also addressed concerns regarding Medicare Advantage authorization issues and provided insights into international expansion strategies.

Full transcript - Myomo Inc (MYO) Q2 2025:

Peter Patel, IR Representative, Alliance Advisors: Good day, and welcome to Myomo’s Second Quarter twenty twenty five Financial Results Conference Call. All participants will be in listen only mode. Today’s presentation, there will be an opportunity to ask question. Please note this event is being recorded. I would now like to turn the conference over to Peter Patel, Alliance Advisors IR.

Please go ahead. Thank you, operator, and good afternoon, everyone. This is Herf Patel with Alliance Advisors IR. Welcome to the Myomo’s second quarter twenty twenty five conference call. With me on today’s call are Myomo’s Chief Executive Officer, Paul Gudonis and Chief Financial Officer, Dave Henry.

Before we begin, I’d like to caution listeners that statements made during this call by management other than historical facts are forward looking statements. The words anticipate, believe, estimate, expect, intend, guidance, outlook, confidence, target, project, and other similar expressions are typically used to identify such forward looking statements. These forward looking statements are not guarantees of future performance and may involve and are subject to risks, uncertainties and other factors that may affect Myomo’s business, financial condition and operating results. These risks, uncertainties and other factors are discussed in Myomo’s filings with the Securities and Exchange Commission. Actual outcomes and results may differ materially from what’s expressed in or implied by these forward looking statements.

Furthermore, except as required by law, Myomo undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances after the date of this call today, 08/11/2025. It’s now my pleasure to turn the call over to Myomo’s CEO, Paul Gudonis. Paul, please go ahead. Thanks, Kurt. Good afternoon, and thank you all for joining us today.

As you’ve seen in our press release issued earlier today, our second quarter revenues were slightly ahead of our expectations, while several operating metrics were below our plans. Those metrics and trends will impact our near term performance. We’ve made a number of adjustments in marketing operations and we’re already seeing initial signs of success. But before we review our quarterly results, I’d like to briefly address some understandable shareholder concerns. We recognize that our recent stock price performance has been disappointing, and we appreciate your candid feedback.

IMO remains committed to market leadership with our proven MyoPro product line, adjusting our plans to grow the business and managing our financials to sustainable cash flow positive operations. On today’s call, we’ll dive into this with a transparent discussion of the challenges we face, highlight tangible progress we’re making, and outline our plan forward through these, achieve these goals of sustainable growth and profitability. We appreciate your continued trust and look forward to demonstrating meaningful results. Let me begin with an overview of the dynamics of generating leads and converting qualified leads into our pipeline. Recall that in the first quarter, Meta changed its Facebook algorithm in response to privacy concerns around using someone’s health information or browsing history as a means to target advertising.

As I discussed during our last call, despite stepping up our advertising spend, the number of new leads did not increase in January and February. So we engaged a new digital ad agency to help us with the workaround and lead flow started increasing significantly in March and April. We are pleased with those results and knowing we need to rapidly add more pipeline ads, we allocated more dollars to digital media in the second quarter, and it worked. We had a record level of leads in June with four times as many leads generated as in January earlier this year. And in addition to generating a higher number of leads, our cost per lead returned to historical levels.

Consistent with generating record number of new leads, we expect an even greater number of pipeline ads. To add prospective patients to our pipeline, we’ve engaged with the lead on the phone, review their health insurance status and completed a telehealth screening or in person evaluation to verify that they’re medically qualified candidate for the MyoPro. There are three factors that prevented the record number of leads generated in the second quarter from turning into pipeline ads at the historical rates or levels. First is that the lead quality, particularly the Facebook leads, were not as good as what we’ve seen in the past. Reasons for that, Jerry, but the fact is the leads were just of poor quality.

Second, as we analyze past data about our pipeline ads, we discovered that there is a cycle time effect. More specifically, about half of our pipeline ads come from leads generated within the past thirty days, while most of the rest come from patients who contacted us six or twelve months ago, even longer. At our recent Investor Day, we reviewed the patient decision making process during which stroke survivors will want to get more information, talk to family members and clinicians, and even go back to more rehab therapy before committing themselves to obtaining MyoPro. Last year, there was a large number of Medicare Part b patients who’ve been interested in a MyoPro, and they were able to access the device beginning in April 2024 when Medicare coverage began. Currently, we have a large cohort of Part b leads that have expressed interest since the beginning of the year.

And based on history, many of them are expected to take the next steps somewhere over the next six to twelve months. The third factor impacting pipeline adds is a patient’s clinical presentation. To qualify for a pipeline, a patient must meet our inclusion and exclusion criteria during a telehealth screening or an in person evaluation by one of our clinicians. We typically exclude over half of the patients that approach us. This year, we’ve seen that percentage increase somewhat.

Upper patient selection is necessary to improve long term clinical outcomes, which is critical for maintaining reimbursement. Going forward, our assumption is that that percentage of patients we exclude will stabilize, and I’ll discuss how we plan to offset this in a bit. The result of these factors and despite achieving a record eight sixteen pipeline additions in the second quarter, Cost for pipeline add increased to approximately $2,900. And although this is up from about $1,500 in recent quarters, it’s down from nearly $5,000 of pipeline add after Apple’s privacy changes a few years ago. To improve our top of the funnel metrics and generate more qualified leads, we redirected advertising dollars from social media to television.

Our strength shows that a higher proportion of leads generated by the TV ads engage with us right away to pass the telehealth screening and move forward into the pipeline. Our cost per lead in the third quarter is expected to increase with a higher mix of television advertising, but we expect that the cost per pipeline ad will decrease. Early indications so far indicate that this shift has increased pipeline ads, reflecting better patient engagements. Since we increased our ad spend, we reduced costs elsewhere in the organization. In July, we undertook a headcount reduction that impacted about 8% of our U.

S. Workforce. We also cut back on outside services spending and are limiting new hires until we see a significant uptick in our revenue growth. These actions are expected to save us at least $2,000,000 in operating expenses and capital expenditures over the next twelve months, and we will continue to be disciplined in our spending, emphasizing those areas that produce revenue and increase our competitive position. In addition to the challenges in converting leads to pipeline adds, we’ve been experiencing a lower conversion rate from pipeline adds to authorizations, which is impacting backlog growth.

To address this, we’re expanding our clinical referral program by increasing education activity at rehab hospitals with our field clinical staff. Expansion of this program is expected to result in more high quality patients entering our pipeline. To date, we’ve trained over 1,500 occupational therapists on the MyoProbe all across the country. And now that Medicare and coverage in place is in place, we believe that they will be referring more patients to us and to our O and P channel partners. Number of qualified patients from clinical referrals doubled over the last year, and we are organizing screening days at facilities to accelerate this momentum.

We’re creating what amounts to a new sourcing channel for our direct provider business and O and P partners to participate with us in these clinical events. For example, I recently attended a patient evaluation training day at one of our OMP partners in Virginia that is becoming Myomo certified. After our training, these clinicians have now fit their first patient with MyoPro, and we’re eager to introduce the MyoPro to rehab hospitals in the area where they have strong working relationships, which our clinical team participated in just this past week. We’re actively certifying O and P clinics by having them evaluate and fit several patients until they meet our standards and are self sufficient to provide the devices to their clients. We’re seeing a growing pipeline of O and P patients in the reimbursement process.

In fact, the number of O and P orders doubled from Q1 to Q2 of this year, and we’re expecting continued order growth from this channel going forward. Another factor impacting the conversion from pipeline adds to authorizations is the behavior of the Medicare Advantage plans. Since just over half of seniors are covered by Medicare Advantage plans, we are taking steps to increase the number of authorizations from these payers. We’re feeling more denials and taking more appeals all the way to the administrative law judge or ALJ hearing, and I’m pleased to report that we’re winning a larger percentage of appeals reflecting the standards we set for patient inclusion and the strength of our legal position. As discussed during our June Investor Day event, we plan to double the number of ALJ hearings in the second half of the year in order to generate more authorizations and put more pressure on these plans.

In this environment, the only way to grow Medicare Advantage revenue is to put more shots on goal. Since these patients are being unfairly denied access to MyoPro in violation of the code of federal federal regulations, we intend to escalate our concerns to formal appeals and direct engagement with plan administrators and regulators, reinforcing that Medicare Advantage plans are obligated to follow national Medicare policy. As I mentioned a moment ago, Medicare Part b patients are critical to our growth plans, and we’d like to see more of them in our funnel. While we don’t control the insurance coverage of prospective patients, we proactively engage with those covered by Medicare Part b and their health care providers to accelerate the path to MyoPro. Roughly half of our fill units in the second quarter represented Medicare Part D patients.

We’re also starting to see more authorizations for patients covered by the contracts we entered into over the past year, and we have additional negotiations underway to increase patient access to the MyoPro. We’ve expanded our contracting to now cover 35,000,000 lives with signed or pending agreements. So in summary, we’re moving as quickly as possible to improve our results in the direct point channel. Our international and O and P channels also continue to grow, complementing our direct point channel and diversifying our revenue streams. Our strategy for expanding access, improving conversion efficiency and managing costs position us well for the 2025 and beyond.

While we expect 2025 to be another year of revenue growth, reflecting the number of leads, pipeline adds and insurance authorizations year to date in the direct billing channel, we are updating our expectations for revenue growth to 23% to 29% in 2025 as Dave will discuss. With all those who have followed Myomo over the past several years, you’ve seen us pivot strategically when necessary, develop new opportunities such as Medicare coverage, and adjust our operations to support our ten plus year track record of volume and revenue growth. With that overview of our performance and actions, I’ll turn the call over to our CFO, Dave Henry, to provide more of the financial details. Thank you, Paul, and good afternoon, everyone. Let me start with a review of our second quarter financial results.

Revenue for the 2025 was $9,700,000 This represents a 28% increase versus the prior year and was driven by a higher number of revenue units and a higher average selling price for ASP. We delivered 178 MyoPro revenue units during the quarter, up 13% with 95 of those units from authorizations and orders received in the second quarter. This higher velocity is also reflected in the fact that approximately 91% of our second quarter revenue was recorded as either shipment or delivery. Our ASP increased 14% versus the prior year to approximately 54,200. Medicare Part b patients represented 56% of revenue in the second quarter.

Medicare Advantage revenue was 20% of second quarter revenue, and in dollar terms was down slightly from a year ago. Medicare Advantage revenue remained constrained on a high number of pre authorization denials forcing us into an appeals process in order to serve these patients. 77% of revenue in the second quarter came from the direct billing channel compared with 78% in the prior year quarter. International revenue was 1,500,000.0 in the quarter, representing 15% of the total, primarily from Germany. International revenue was up 41% year over year.

As of 06/30/2025, the pipeline stood at 1,611 patients, an increase of 37% year over year. 61% of the quarter end pipeline were patients with Medicare Advantage or other commercial insurance. In the second quarter, we added eight sixteen patients to the pipeline, which is up 49% over the prior year quarter. This includes fifty four patients who are identified by our O and P centers of excellence as we start to get visibility into their individual pipelines. Financing were a record, they were lower than we expected given the lead flow and were also lower than we needed them to be given Medicare Advantage authorization rates and our expectations.

I’ll analyze the pipeline in detail, so I won’t repeat that here other than to point out that there were 213 Medicare Part b patients added in the second quarter or 28% of the total direct billing ads. And the total Medicare Part b pipeline was 256 patients at quarter end or 16% of the total. As a result of the lower lead quality, cost per pipeline add excluding the COE additions was $2,926 in the second quarter, which was up 89% year over year. Backlog represents insurance authorizations for orders received but not yet converted to revenue. And in the case of Medicare Part B, patients for whom we collected medical records and being qualified for delivery based on our inclusion criteria.

We ended the quarter with a backlog of 230 patients, including 72 Medicare Part b patients, down 19% versus the prior year. The decrease in the total backlog reflects our higher intra quarter conversion velocity and reduced Medicare Advantage authorizations and the fact that intra quarter fill units are making up an increasing percentage of our quarterly revenues. Indeed, 53% second quarter revenue units came from fill units. We received two zero seven authorizations and orders during Q2, a decrease of 3% year over year. Gross margin for the 2025 was 62.7%, down from 70.8% for the prior year quarter.

The decrease was driven primarily by higher material costs, demo unit bills, and overhead spending, including payroll and higher lease expense for the new facility. Operating expenses for the 2025 were $10,600,000 up 65% over the 2024. This decrease this increase was driven primarily by higher advertising spending to compensate for a lower conversion of leads to pipeline adds and the higher headcount throughout the organization as we increased capacity in the direct billing channel and spending on R and D efforts, including added headcount and outside engineering services. Advertising expense in the second quarter was $2,200,000 an increase of 162% year over year. As Paul discussed, we reduced fixed costs in July to better align operating expenses with revenue and to offset the higher advertising spend.

We expect cash savings from this initiative to be at least $2,000,000 over the next twelve months. Operating loss for the 2025 was $4,600,000 compared with an operating loss of 1,100,000.0 in the prior year quarter. Net loss for the 2025 was 4,600,000.0 or $0.11 per share. This compares with a net loss of 1,100,000.0 or $03 per share for the 2024. During the twenty twenty five quarter, approximately 2,700,000 prefunded warrants were exercised.

As of 06/30/2025, approximately 4,400,000 prefunded warrants remain outstanding from our offerings in 2023 and January 2024. These prefunded warrants are considered common stock equivalents under GAAP accounting and are included in our weighted average shares outstanding. Adjusted EBITDA for the 2025 was a negative $4,000,000 compared with a negative $1,200,000 for the 2024. Turning now to our balance sheet and cash flows. Accounts receivable were 7,100,000.0 as of June 30, up from 4,700,000.0 as of March 31.

The decrease was the increase was due to one of the DME MACs holding payments on claims for the entire quarter until CMS processed our address change in their system. All age claims have now been paid, but that payment hold affected second quarter cash flow by approximately $1,500,000 In addition, there were two other DME MACs that have been conducting prepayment audits of our claims since the beginning of the second quarter. To date, out of the 27 audited claims with the terminations, 21 have been paid and six were denied and are currently in the appeals process. The claim audits take roughly sixty days to complete, which has negatively impacted our day sales outstanding. We expect that the majority of these claims of these denied claims will be reimbursed after appeals.

Cash, cash equivalents and short term investments as of 06/30/2025 were 15,500,000.0. During the quarter, we drew down 4,000,000 on our credit facility to help finance additional advertising expenses and to offset the growth in receivables. Excluding this borrowing, cash burn was $10,000,000 in the second quarter. Our guidance assumed an elevated cash burn due to a higher sequential operating loss, twenty twenty four employee incentive payments and higher capital expenditures for the build out and additional manufacturing space that will be coming online in the third quarter, capitalized software development costs and demo units for clinicians and our O and P channel partners. Additional drivers of this elevated burn for the payment hold and a higher DSO in the DME MAC regions conducting audits as well as the repayment of approximately 700,000 to ensure to an insurer that overpaid us in a prior period.

Excluding these additional drivers and the bonus payment, q two cash burn was $4,900,000 which is more reflective of our operating performance in the quarter. This normalized amount is a close approximation of the total cash burn we expect in the second half of the year. We believe that our cash, cash equivalents are sufficient to fund our operations for the next twelve months. Looking ahead, taking into account our historical cycle time from lead generation to pipeline adds and find factoring in current convert current conversion rates through our revenue cycle. The best path forward to sustain to sustainable positive cash flow is to continuing to spend on advertising while minimizing fixed costs.

Despite the lower conversion rates and a higher cost per pipeline ad, the direct billing channel still generates meaningfully positive incremental contribution margin. Cutting spending that supports the direct billing channel would begin to decrease revenues within a short period of time. It’s just a step backward on the path to positive cash flows. While the recent with the recent workforce reduction, our head count is only about 10% above where it was at the start of the year with new hires primarily supporting capacity in the direct billing channel, revenue growth in Germany, and R and D. We plan to make only a few critical hires during the rest of the year and expect to exit 2025 with a significantly lower headcount than we had planned at the beginning of the year.

Let me close with our financial guidance. Given our backlog entering third quarter and anticipated fuel units, we expect third quarter revenue to be between $9,500,000 and $10,000,000 up 3% to 9% year over year. For the full year, we now expect revenue to be in the range of 40 to 42,000,000, up 23 to 29% versus 2024. This revised guidance assumes recent history continues regarding Medicare Advantage authorization and pipeline conversion rates and moderate improvement in Medicare Part b patient flow. With that financial overview, I’ll turn

Paul Gudonis, Chief Executive Officer, Myomo: the call back to Paul.

Peter Patel, IR Representative, Alliance Advisors: Thanks, Dave. We’re now ready to take your questions. Operator? Thank you. We will now begin the question and answer session.

To ask a question, you may press star then one on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your questions, please press star then 2. At the same, we will pause momentarily to assemble our roster. We have the first question, I just want to thank all of you who attended our June 18 Investor and Analyst Day event, either in person or online.

We posted the materials and webcast of the day on the IR section of our myomo.com website, and members of our senior leadership team continue to be available to discuss our current operations and plans to scale the business significantly over the next few years. We will also be attending the H. C. Wainwright conference virtually on September. Operator, let’s now go ahead and take the first question.

Thank you. The first question comes from the

Dave Henry, Chief Financial Officer, Myomo: line of Chase Nicheboker with Craig Hallum. Please go ahead. Good afternoon. Thanks for taking the questions. Maybe Dave, just to start out, I’m trying to understand Q3 guidance a little bit more.

If I look at it in my model, it looks like kind of conversions from backlog would have to tick up fairly meaningfully sequentially, and there’d also be kind of meaningful improvement sequentially in kind of backlog adds. And so can you kind of listen to what you’re seeing so far through July and kind of mid August here? Are you seeing a lot more fill units? Kind of what would make kind of that elevated conversion from backlog makes sense?

Peter Patel, IR Representative, Alliance Advisors: And that’s exactly what it is. We are seeing more fill units that are being a higher percentage of our backlog. So that’s precisely what we’re seeing. But even with that, we are the guidance is $9.5 to $10,000,000 which is basically flat with where we were this year or in the second quarter.

Dave Henry, Chief Financial Officer, Myomo: Got it. And if I look at Q4, kind of what does that implicitly guide to, you were talking about a decline year over year. And so if we also think about some of that O and P volume kind of being there, hopefully, again, the direct billing channel is down year over year, certainly. So can you kind of help with kind of specifically what you think maybe even outside of kind of some of the advertising woes? It’s clear we’re not getting kind of word-of-mouth benefit.

I mean can

Paul Gudonis, Chief Executive Officer, Myomo: you just kind of give

Dave Henry, Chief Financial Officer, Myomo: me some overall thoughts as far as you think, you know, some of the challenges maybe outside of advertising as well?

Peter Patel, IR Representative, Alliance Advisors: Yeah. And and I think that one of the things that we want to do is that and Paul mentioned it in his remarks, which is the the referral program. We would like to be less dependent on advertising spending. And I think there’s a good you know, and, you know, Paul had a good quote in his in his comments earlier that he wants to move up into that continuum of of a patient’s care. And we’re going to be helping our us, ourselves, and our O and P providers by doing a lot of the heavy lifting with trying to generate referrals for for both, you know, both of us, both our R and P partners and ourselves by looking into that incidence population and not relying so much ourselves on the prevalence population.

And so we think by doing that, I will help with the, you know, the conversion rate of pipeline ads because there will you know, these people are are closer to when their stroke occurred, and they, you they may not have had some of these other comorbidities that might pop up as we might as we currently see with the prevalence population.

Dave Henry, Chief Financial Officer, Myomo: Got it. And, you know, if I think about the OMP channel, the 50 odd leads in the quarter, you know, that’s a you know, maybe share how many O and P providers you have trained at this point, but it’s a fairly small number of of kind of leads per O and P head. Is there kind of any plans to as as far as how we can kind of accelerate that contribution for the pipeline to maybe kind of diversify away from the direct billing channel on the advertising side?

Peter Patel, IR Representative, Alliance Advisors: Sure. We plan for significant growth in the O and P channel. We’ve got about 100 CPOs in that process from they’ve gone through their evaluation training. They started to do evaluations. To become fully certified with us, now we have to build a pipeline.

You have to get the authorizations, and then you have to sit three MyoPros. And our clinical team has been expanded to work with these O and P providers around the country. And so we’re getting more of them all the way through that process to get certified. Pipeline is growing compared to where it was earlier this year. We’re gonna be at AOPA, which is the National American Heart Association Conference, Assembly coming up early September to recruit more of these O and P partners to meet with the ones that have already signed up.

So I’m expecting we’re gonna continue to see growth in the channel. And as I mentioned, we wanna get more of the incidents population. There are 800,000 strokes a year. So five hundred thousand or more of those individuals survive the stroke and go to these rehab hospitals, and and a half of them come out the back end where they’ve got chronic arm paralysis. So we’ve already engaged with these therapists to train them on the MyoPro.

Now we’re actively seeking to have them refer those patients to us and to our O and P partners so we can basically have more medically qualified patients earlier in their patient journey. So we think that’s gonna be a really good new source of patient lead for us.

Dave Henry, Chief Financial Officer, Myomo: Dave, just two last kind of financial questions for you. So first on kind of the advertising spend, should we model that continuing to accelerate from a spend perspective kind of sequentially and kind of where do you see that going? And then as we’re shifting to kind of TV a little bit here, I mean, should we expect the cost per pipeline ad stabilizes, goes a little bit higher, starts to come in a little bit? I mean, kind of talk to me about kind of that, you know, it’s a little bit less focused advertising. Should we be modeling cost per pipeline ad?

You know, how should we be modeling it?

Peter Patel, IR Representative, Alliance Advisors: Yeah. I would I would assume that that advertising dollars are roughly flat in third quarter with second. And then in fourth quarter, they generally go down. You know, historically, they’re they’re a bit lower because we you know, there’s there’s competition from holidays and Medicare Advantage plans are are renewing their memberships and things like that. So we generally lower the advertising spending in the fourth quarter.

As as as I think Paul mentioned in his remarks, with the putting more of the advertising mix in the television, cost per lead is expected to increase. But we do think the cost per pipeline ad will be lower in the third quarter compared to the second quarter. I don’t I mean, it’s gonna take a while, I think, to get back to, you know, you know, some, you know, to where the $1,500 was because there’s a you know, we have there’s conditions that I think are a bit more chronic that that we have to overcome. Like, for example, you know, Medicare Advantage rates and the fact that some of the patients that we see are are also and we’re we’re disqualifying more of them. And so it’s just, you know, less of the pipeline is converting to, you know, in the backlog.

Paul Gudonis, Chief Executive Officer, Myomo: Thank you.

Peter Patel, IR Representative, Alliance Advisors: Yeah. Thank you. Next question comes from the line of Scott Henry with ATB. Please go ahead.

Paul Gudonis, Chief Executive Officer, Myomo: You. And good afternoon. First, if I could just for clarity, when you were talking about the O and P channel, I thought on the second quarter call, you noted 300 CPOs. Could you give us an update to that number? You know, how many certified prosthetic orthotics have been trained?

Peter Patel, IR Representative, Alliance Advisors: That that’s right, Scott. About 300 have gone through the evaluation training. And then there it’s up to them to then actively go out and seek their own pipeline, evaluate patients, and then move forward through the certification process, you know, where there’s three in person fittings with us. So out of those 300, we’ve got a 100 active ones in addition to the hangar clinicians.

Paul Gudonis, Chief Executive Officer, Myomo: Okay. I I think in my notes,

Peter Patel, IR Representative, Alliance Advisors: it show, you know, it

Paul Gudonis, Chief Executive Officer, Myomo: was a 160 in the fourth quarter twenty four. It was 300 at the end of the it it was a 160

Peter Patel, IR Representative, Alliance Advisors: at the end of

Paul Gudonis, Chief Executive Officer, Myomo: the fourth quarter, 300 at the end of the first quarter. So for this quarter, is it flat number or is it, you know, up? Maybe you don’t have that

Dave Henry, Chief Financial Officer, Myomo: number in front of you, but

Paul Gudonis, Chief Executive Officer, Myomo: it’s it’s up some amount.

Peter Patel, IR Representative, Alliance Advisors: Yeah. That number is probably up because a lot of people will take our online course about evaluations. But our OMP team is out there working with the active clinicians because not unexpectedly, not every clinician that goes through the training is out there marketing this. So one ones we’re focusing on are the really active ones, and it’s about a 100 of them right now. Now I think we’re we’re as Paul mentioned, you know, the the 300 relates to, you know, sort of the eval training with the first which is the first step.

But we’re focused a bit more downstream now in getting these o one p certified.

Paul Gudonis, Chief Executive Officer, Myomo: Okay. Alright. Yes. That that’s helpful. It clarifies little apple storms and stuff.

But

Peter Patel, IR Representative, Alliance Advisors: but, you know, walking through

Paul Gudonis, Chief Executive Officer, Myomo: the metrics, you know, obviously, a lot’s changed. It it’s pretty hard to gauge. I mean, it seems like a lot of this information is evolving. But, you know, starting with the pipeline adds of 816, I know you’re focused on quality as well now. Would you expect that number to be in the 900 plus range in the third quarter?

Is it still growing? As you focus on quality, I don’t know if you’ll that may kind of just flatten out in an effort to get better leads. But curious you’re taking, how we should think about that number?

Peter Patel, IR Representative, Alliance Advisors: Well, we’re not giving specific guidance on pipeline ads for third quarter, but the things that we are doing is meant to grow the number of pipeline ads over time because we obviously need to do that if we’re going to achieve the, you know, the top line results that we’re that we’re looking for. So, no, we’re not know, we’re not cutting back or anything like that on on trying to grow Live Finance. We’re trying to we’re trying to, you know, through various means like the referral program and things like that, try to generate them generate more of them, but they can let rely less on advertising to do so. Okay. We are working through a record number.

Scott, we are working through a record number of leads, so in June that we got from the advertising. So even at a lower rate of conversion of leads to pipeline, there’s still a significant backlog of these leads for our call center and clinicians to work through.

Paul Gudonis, Chief Executive Officer, Myomo: Okay. And and just another you know, there’s a couple metrics that that obviously jumped out the past couple of quarters. That authorization rate, you you may use a different fraction, but using my numbers, it it used to be around 17% to 18%. In Q1, was 14%. It looks like it’s around 13% in this quarter.

Would you expect that to get back up to the 17% range? And over what time period?

Peter Patel, IR Representative, Alliance Advisors: No. I think it’s I think that rate is gonna probably continue. Hopefully, it stabilizes here, but I think it’s gonna I I don’t know if it returns for the 17% until Medicare Advantage plans start authorizing more because as I I mentioned, we have 1,611 patients in the pipeline, sixty one percent of them were Medicare Advantage. And so, you the first time authorization rate for a Medicare Advantage patient is somewhere around fifteen percent. That means 85% of the pipeline ads for Medicare Advantage kind of sit there while we go through an appeals process and try to move them all the way through to an NALJ hearing.

So that’s Okay. That’s part of that’s that’s the headwind we face on trying to improve that authorization rate.

Paul Gudonis, Chief Executive Officer, Myomo: Okay. And then, you know, the final number in that model was the percentage of the pipeline that is is lost. You know, it used to be it’s it’s been a little higher. You know, it’s been as low as, you know, 22%. Now it’s up kind of around 30%.

Do you think is is that number gonna start improving? I guess, in theory, if the leads are better, that number should be decreasing. But just trying to get a sense of, you know, what you know, what you expect for that. I guess, you know, attrition rate would be a

Peter Patel, IR Representative, Alliance Advisors: Yeah. One of the Yeah. Of the things that we’re we’re doing now, and we and we mentioned it, is that there’s for some patients, there’ll there’ll be a pipeline ad and if they if they successfully pass that initial telehealth screening. But there’s some patients that successfully passed that that first free that first screening that we view as patients that might be more marginal marginal and not and might not be good candidates. So in order to try to weed out some of those patients more, you know, earlier in the process as opposed to waiting until potentially a fitting of when we have the device in the patient’s home, We’re doing a second in person evaluation for some of those more marginal patients.

And so at those and about half the time for those second in person evaluations, that take those patients won’t continue. And then half the time, they will move on to the process. So for those half of the patients that don’t continue, that reflects as as a drop from the pipeline. So I would because we’re gonna continue to do that in order to try to get more patients that shouldn’t be in a MyoPro out of the process sooner, I would expect that drop rate to continue to be in that 30% range that it is now. Okay.

And I mean, I

Paul Gudonis, Chief Executive Officer, Myomo: was just saying perspective, you you guys have done a great job growing this business. I know it’s a little tough right now, but if we look back a little further in the rearview mirror, it’s been considerable growth. So I commend you for that even if it’s challenging right now. But final question is, do you feel that your confidence is improving in the metrics? I mean, I know at the Analyst Day, you kind of felt like you had it under control, but this wouldn’t necessarily suggest that.

But now that you’ve reset expectations, are you are you feeling an increased confidence? Or are you

Peter Patel, IR Representative, Alliance Advisors: still trying to figure out, you know, how these levers are moving? Yeah. I would say we’re encouraged by the July results on on the metrics that that gives us a sense that, you know, the that the the modeling that we do internally is is making sense versus what we’re seeing. And so so I would say the answer to that is I think we have identified I mean, there’s a there’s a lot of issues there and that we’ve talked about in the call. But I think we’ve identified most of them, and we have put plans in place to deal with those things.

And we you know, and where there’s things like it’s the leads, you know, we’ve put fixes in place or it’s things like, you know, the you know, higher percentage of patients being disqualified. We know that and we’re dealing with it. We’re putting plans in place to assume that that continues and deal with it. Okay. Great.

Thank you for taking the questions. Thank you. Next question comes from the line of Sean Lee with HC Wainwright. Please go ahead.

Paul Gudonis, Chief Executive Officer, Myomo: Hey. Good afternoon, guys. Thanks for taking my questions. My first one is on reimbursement. So you mentioned you’re seeing a higher percentage of challenges in special analysis, especially from Medicare Advantage payers.

I was wondering whether you’re seeing the same thing from commercial payers and whether this high number of denials is more of an industry trend that you’re seeing or more specifically related to the lower quality of leads that you’ve had in Q2? And do you expect this number to improve in the second half?

Peter Patel, IR Representative, Alliance Advisors: Oh, Sean. So what we’ve seen is, I think, what the whole health care industry is seeing is that these Medicare Advantage plans are trying to deny, to delay approvals. And so we are taking more to hearings, and we’re winning more. In fact, our winning percentage has increased over the last two months because we have a strong medical case, and we have a strong legal case based on the code of federal regulations. On the commercial plans, some follow the same approach as Medicare Advantage.

However, I can tell you that we are getting authorizations with commercial plans such as some of the Blue Cross Blue Shield plans where we’ve entered in the contract. And as I mentioned on previous calls and as doctor Coleman presented at the Analyst Day, we’re getting more and more state Blue Cross Blue Shield plans under contract, and that’s facilitating authorizations under those plans.

Paul Gudonis, Chief Executive Officer, Myomo: Great. Thank you for the clarity on that. My last question is on the supply side. And you mentioned a part of the reason for the higher cost of goods was the increased supply cost. I was wondering whether this was related to the recent tariffs and if we expect this number to hold steady for the rest of the year.

Thank you.

Peter Patel, IR Representative, Alliance Advisors: Yeah. To clarify, I I I mentioned higher material costs, but that’s not necessarily due to pricing. Because that’s that’s due to things like, you know, higher material use for, like, warranty, for example, warranty work, higher, you know, inventory adjustments that might happen during the quarter. So for things like that, we haven’t seen too too much in the way of price increases yet as it relates to tariffs, and we’ve only had, I think, a couple of vendors actually start to actually place price increases on us for that. So it’s not meaningful right now.

And we put out we analyzed it, you know, a few months ago, and we still expect that the impact from tariffs might be only about 100 basis points on gross margin this year. Thank you. Next question comes from the line of Jeremy Goldman with Maxim Group. Please go ahead. Thank you for taking my question.

Good evening. First question related to you mentioned earlier on the call that leads from Facebook were of a lower quality than what have you what do you experience in the past maybe? Do do you have any reason why you think that was? And you did said you were shifting some of your the ad spend into television. Is there do you think that these lower quality Facebook social media leads are something that that’s what’s gonna be in

Dave Henry, Chief Financial Officer, Myomo: the future, is there a way

Peter Patel, IR Representative, Alliance Advisors: to get that back to the higher quality leads that you’ve had in the past? Well, Meta, which owns Facebook, you know, implemented some new privacy policies around health care earlier in the year, similar to what Apple did with its iOS operating system a couple years ago. And that they used to be able to provide you with a more targeted group of people who might have been interested in stroke or rehab and so on. And that was very successful for us for the last several years. But with this change at the beginning of the year, we had to do some workarounds, look at what are called look alike groups and so on.

And we just found that the leads that we were getting from Facebook, while the the volume was increasing, they weren’t this high quality, meaning the the patient managers or whoever was responding to the leads are just then very curious or they weren’t responsive to our call center. You know, we make thousands of calls back to our leads every month, and we just found that they weren’t as engaged as in the past. So we just said, as Dave mentioned, you know, we’re shifting our dollars to what works. And so in our case, the targeted TV advertising we use has worked. We get more response to our call center and the ads there.

And then would that change with Facebook? I don’t know. We’re kind of expecting it to be status quo. We’ll see if, you know, we we still, you know, put some of our advertising dollars into Facebook. We’ve also diversified it to YouTube, Google Ads, and so on.

So I can’t tell if it’s gonna improve at Facebook or not. Okay. Understood. And then I know you mentioned that, you know, roughly half of, you know, pipeline ads come from leads within the past thirty days and then the rest six to twelve months. Is there any is there anything you could do to maybe, you know, shorten that six to twelve month time frame?

Just I mean, again, I’m not just my assumption that a patient who’s engaged initially might be more might be a higher quality than someone who kinda work who comes back, you know, six to twelve months down the line. Is there any way to to to shorten that time frame? Well, we engage with the patients. You know, we follow-up with them. We’ll send them information either online or by mail.

And some people have been, like, waiting for this. And so it’s like, yes. Get me screened. I’m going to my doctor and so on. But then we’ve seen a number of people.

This is not like buying a an impulse item. They say, this looks interesting. Let me talk to my family about it. Maybe I’ll go back to my doctor. I’ll go talk to other people.

I’ll go talk to the rehab hospital. Now there’s only so much we can do because and there’s a good part of our presentation during the investor analyst day that talks about the steps in that patient journey, but we stay in touch with them. Now they’re in our CRM system. We’ve got thousands of these people who’ve expressed an initial interest, and we find that they do come back. And when they’re when they come back, they are engaged because they say, okay.

Now I thought about it. I wanna move ahead. Okay. Understood. And just last question from us.

You mentioned, I think, that eight roughly 8% of the workforce was was cut to have lower expenses, reduced expenses. Is there any part of the business that you’re, you know, go or plans that you had that are are being pushed off now and delayed until, you know, let’s say revenue comes back up to expectations or it’s gonna be business as usual unless you were able to find, you know, cuts that didn’t are not affecting you really the day to day and then your plan for you guys? Well well, it’s always tough to deal with risk. We looked at, you know, how can we not impact the company’s operations, both from a revenue perspective as well as quality of operations. Now we basically pretty much across the board in a few clinical areas, which are absolutely critical to the companies and the patient success.

We took down some headcount there. And as they pointed out, you know, we’re not adding any headcount because, you know, until we see that revenue growth. And we’re staffed up right now to build 80 to a 120 devices a month. So that’s kind of our target is let’s get to that level of our revenue units. Okay.

Understood. Thank you for taking my question. Have a good evening. Thank you. Next question comes from the line of Edward Wu with Ascendiant Capital.

Please go ahead. Yes. Thanks for taking my question. It looks like you had another strong quarter in international, particularly Germany. Is there what’s working over there?

And is there any plans to accelerate growth even more than you have? Well, in Germany, you’re right. It’s our strongest growing segment here year to date. And they’ve done a good job with recruiting, training, O and P providers, And they’ve got over a 100 locations now that are certified on the MyoPro. And they also have a whole clinical team that has goes out to the rehab clinics and sources patients from those clinics, attends a lot of medical conferences.

You know, I’ve been to some like OT world, and that’s been a good source of patient candidates who are actually replicating some of that success here in The U. S. Now going forward. Great. Is there any plan for you to maybe step on the gap in Germany?

We are continuing to add a few more people in Germany. It’s about, yeah, hiring more business development managers and hiring more clinical staff. John Freuders, our head of international, tell you that the unemployment rate for occupational therapists is o point 6%. So our challenge there is recruiting quality service who wanna leave the rehab hospital and come join us. But we’ve been successful in doing that.

The team is very motivated once they join the company. Great. Well, thanks for answering my questions, and I wish you guys good luck. Thank you. Thanks, Ed.

Thank you. This concludes our question and answer session. I would like to turn the conference back over to Paul Cardonis for closing remarks. I will thank you all for your questions and for your ongoing interest in Myomo. And there was a lot to unpack in today’s release, and I hope we’ve conveyed that we are making the adjustments that will lead to continued revenue growth and greater efficiency in our operations.

And we appreciate the support of our shareholders and the Board as we drive the business forward. These goals are penetrating this large market to serve many more patients with chronic arm paralysis and building sustainable profitable business here at Myomo. We’ll speak to you again in about three months when we report out our Q3 financial results. Have a nice evening, everyone. Thank you.

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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