MYOMO, INC. Q2 FY2025 earnings call

• Advertising strategy: Shifted from social media to television; June saw a record number of leads, though cost per pipeline add increased but expected to decrease in third quarter.
• Operational adjustments: In July, undertook a headcount reduction of about 8% of U.S. workforce, cut back on outside services spending, and limited new hires until revenue growth picks up; expected to save at least $2 million in operating expenses and capital expenditures over 12 months.
• Clinical referral program: Expanded by increasing education activity at rehab hospitals; trained over 1,500 occupational therapists; number of qualified patients from clinical referrals doubled over last year; organizing screening days at facilities.
• O&P channel: Orders doubled from Q1 to Q2; actively certifying O&P clinics; seeing growing pipeline of O&P patients in reimbursement process.
• Medicare Advantage appeals: Winning a larger percentage of appeals; plan to double ALJ hearings in second half of 2025 to generate more authorizations.

Second quarter revenues were $9.7 million, a 28% increase versus the prior year. Revenue was driven by a higher number of revenue units and a higher average selling price (ASP) of approximately $54,200 (up 14% vs prior year). Medicare Part B patients represented 56% of revenue. Medicare Advantage revenue was 20% of second quarter revenue. International revenue was $1.5 million in the quarter, representing 15% of the total and up 41% year-over-year. Pipeline additions were a record 816, but lower than expected given lead flow and Medicare Advantage authorization rates. Cost per pipeline add (excluding COE additions) was $2,926 in the second quarter, up 89% year-over-year. Backlog was 230 patients, down 19% vs prior year.

• Third quarter revenue expected to be between $9.5 million and $10 million, up 3% to 9% year-over-year.
• Full year 2025 revenue expected to be in the range of $40 million to $42 million, up 23% to 29% versus 2024; revised guidance based on Medicare Advantage authorization and pipeline conversion rates and moderate improvement in Medicare Part B patient flow.

• Facebook algorithm change led to lower quality leads; cost per lead returned to historical levels but lead quality was poor.
• High pre-authorization denials from Medicare Advantage plans impacting authorization growth; first-time authorization rate for Medicare Advantage patients around 15%.
• Higher percentage of patients being excluded during telehealth screening or in-person evaluation; drop rate expected to continue in 30% range.
• DME MACs conducting prepayment audits of claims negatively impacting cash flow; some claims denied and in appeals process.
• Advertising cost per lead expected to increase in third quarter with higher mix of television advertising.

Q: Chase Knickerbocker asked about Q3 guidance and what's seen so far through July and mid-August.

A: David A. Henry said they are seeing more fill units being a higher percentage of backlog, and Q3 guidance is $9.5 million to $10 million which is flat with second quarter.

Q: Scott Robert Henry asked about O&P channel, number of trained prosthetic orthotists and pipeline adds.

A: Paul R. Gudonis said about 300 have gone through eval training, 100 are active and focused on, and they are working to grow pipeline adds through various means like referral program.

Q: Sean Lee asked about reimbursement and supply side.

A: Paul R. Gudonis said Medicare Advantage plans are denying approvals but winning percentage has increased; David A. Henry said higher material costs not necessarily due to tariffs, impact on gross margin expected to be about 100 basis points this year.

Q: Jeremy Pearlman asked about Facebook leads quality, shortening patient time frame, and workforce cuts.

A: Paul R. Gudonis said Facebook leads were lower quality due to Meta's privacy policy change, patients take time in their decision-making process; about 8% workforce cut was done without major impact on day-to-day operations.

Q: Edward Woo asked about international business in Germany.

A: Paul R. Gudonis said Germany is a strong growing segment with over 100 certified O&P locations, recruiting more business development and clinical staff to accelerate growth.