Myomo, Inc. (MYO) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several concerning factors: declining gross margins, increased operating expenses, and widening losses. While there are strategic plans for revenue growth and cost management, the lack of clear guidance on returning to positive adjusted EBITDA and the impact of debt raise concerns. The Q&A session highlights uncertainties, particularly in the international market and the China partnership. These negatives outweigh the positives, leading to a negative sentiment prediction for the stock price over the next two weeks.
Key Financial Performance
Revenue $10.1 million, a 10% increase year-over-year, driven by a higher number of revenue units but offset by a lower average selling price (ASP).
Revenue Units 186 MyoPro units delivered, up 16% year-over-year, with 57% of those units from authorizations and orders received in the third quarter.
Average Selling Price (ASP) Approximately $54,300, a 5% decrease year-over-year due to an accounting change in the prior year. Normalized for the accounting change, ASP increased 3% year-over-year.
Medicare Advantage Revenue 18% of third quarter revenue, down 18% year-over-year, constrained by high preauthorization denials and appeals processes.
International Revenue $1.8 million, up 63% year-over-year, primarily from Germany, representing 18% of total revenue.
O&P Channel Revenue $900,000, up 154% year-over-year, representing 9% of total revenue.
Pipeline 1,669 patients, an increase of 32% year-over-year. 826 patients added in Q3, up 28% year-over-year.
Backlog 208 patients, down 34% year-over-year, due to reduced Medicare Advantage authorizations and faster conversion of backlog into revenue.
Gross Margin 63.8%, down from 75.4% year-over-year, impacted by higher payroll, lease expenses, and material costs.
Operating Expenses $10 million, up 26% year-over-year, driven by higher payroll, advertising spending, and R&D efforts.
Operating Loss $3.5 million, compared to $1 million in the prior year quarter.
Net Loss $3.7 million or $0.09 per share, compared to $1 million or $0.03 per share in the prior year quarter.
Adjusted EBITDA Negative $2.7 million, compared to negative $0.6 million in the prior year quarter.
Cash, Cash Equivalents, and Short-term Investments $12.6 million as of September 30, 2025.
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Operating Highlights
MyoPro 2X model: Introduced in spring, gaining traction with occupational therapists and physicians, leading to increased patient referrals.
Mobile app for MyConfig software: Development efforts ongoing, part of R&D investments.
MyoPro 3: Under development as part of R&D efforts.
International revenue: Record $1.8 million in Q3, up 63% year-over-year, driven by Germany.
O&P channel revenue: Quarterly record of $900,000, up 154% year-over-year.
Medicare Advantage coverage: Sequential increase in authorizations and orders; signed additional contract covering 35 million lives.
Pipeline growth: Patient pipeline increased 32% year-over-year to 1,669 patients.
Cost per pipeline add: Decreased due to shift in advertising from social media to TV.
Gross margin: 63.8% in Q3, down from 75.4% in prior year due to higher costs and operational changes.
MyoConnect program: Launched to engage therapists and physicians for patient referrals, reducing reliance on paid advertising.
O&P channel expansion: Focus on clinical and reimbursement education to grow adoption.
Insurance coverage expansion: Efforts to increase Medicare Advantage and private payer authorizations.
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Risk or Challenges
Medicare Advantage Revenue Constraints: Revenue from Medicare Advantage plans was down 18% compared to the prior year due to a high number of preauthorization denials, forcing patients into an appeals process. This creates delays and additional costs, with only 45%-50% of appeals being overturned.
Gross Margin Decline: Gross margin decreased to 63.8% from 75.4% in the prior year, impacted by higher payroll, lease expenses, material costs, and unfavorable changes in inventory overhead absorption. This represents a challenge to profitability.
Operating Loss Increase: Operating loss for Q3 2025 was $3.5 million, compared to $1 million in the prior year. This was driven by higher payroll, advertising spending, and R&D expenses, indicating financial strain.
Cost of Customer Acquisition: While efforts are being made to reduce customer acquisition costs, the company still relies heavily on advertising-driven revenues, which are costly and less sustainable compared to other channels.
Dependence on Medicare and Insurance Authorizations: A significant portion of revenue depends on Medicare and insurance authorizations, which are subject to delays and denials, impacting cash flow and revenue predictability.
International Revenue and O&P Channel Risks: While international revenue and the O&P channel are growing, they are still emerging and may not yet provide stable or predictable revenue streams.
Economic and Regulatory Risks: Changes in Medicare Advantage coverage and potential regulatory shifts could impact patient access and revenue. For example, insurance companies withdrawing from certain areas may create uncertainty in patient enrollment and coverage.
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Guidance & Outlook
Revenue Guidance for 2025: The company reiterated its full-year 2025 revenue guidance of $40 million to $42 million, representing an increase of more than 23% over the previous year.
Revenue Diversification in 2026: The company plans to diversify revenue streams in 2026 by relying less on advertising-driven revenues and generating growth through the MyoConnect platform, further penetration of the O&P channel, and international markets.
Operating Leverage and Cash Burn in 2026: The company aims to improve operating leverage and lower cash burn in 2026.
MyoConnect Program Expansion: The MyoConnect program is expected to develop into a scalable and cost-efficient source of high-quality referrals over time, contributing to future growth.
O&P Channel Growth: The O&P channel is emerging as a high-quality, lower-cost source of qualified patients, and the company intends to continue developing this channel to diversify revenue sources.
International Market Growth: The company experienced strong growth in international markets, particularly in Germany, and anticipates continued growth in this segment.
Insurance Coverage Expansion: The company is working to expand insurance coverage, including obtaining more MyoPro authorizations from Medicare Advantage payers and signing additional contracts with private payers.
Manufacturing and Cost Improvements: The company implemented manufacturing changes to improve gross margin and managed headcount and other cost reductions to lower operating expenses, positioning for improved operating leverage as revenues grow.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Could you help us quantify the scale of your U.S. O&P business at this point? How many units did you ship into that channel in the third quarter?
A:It was about $900,000 in revenue, and roughly 30 units were shipped, though the exact number will be confirmed later.
Q:What kind of levers were identified for reducing customer acquisition costs with the new head of marketing?
A:The company is conducting a comprehensive review of various media channels, including social media, television, and YouTube, to generate more leads at a lower cost per lead. The new head of marketing started about two weeks ago.
Q:What might be the driver behind the noticeable uptick in backlog drops?
A:About 40% of the backlog drops came from Germany due to cleanup of trials that did not convert. The rest were attributed to normal activity.
Q:How should we think about OpEx building off of Q3 levels and the timeline to return to positive adjusted EBITDA?
A:Operating expenses will grow slightly, with increased spending on advertising and R&D for a randomized controlled trial. The company aims to grow revenues faster than operating expenses. An update on returning to positive adjusted EBITDA will be provided with 2026 guidance.
Q:Do you think pipeline adds could still see big gains, or is there a saturation level?
A:The company does not believe it is near saturation, given the market size and prevalence of new cases. Growth is expected through the O&P channel and the MyoConnect referral program, targeting patients closer to their stroke incidents.
Q:How will you achieve sequential growth from Q3 to Q4 with a smaller backlog?
A:Growth will come from fill units, authorizations, and orders within the quarter. Operations have improved in turning authorizations and orders into revenue faster.
Q:Is taking on debt a sign that the company expects to be close to breakeven in 18 months?
A:The company believes it can pay back the debt within 18 months and expects to stop burning cash by then. The decision to take debt was based on minimizing dilution and confidence in revenue growth and cost management.
Q:How many O&P clinics have been trained, and what is the goal for the future?
A:A couple of hundred clinicians have taken online training, and some are progressing through certification. The goal is to have a couple of dozen actively placing orders this year and to expand further by 2025 and 2026.
Q:What is the MyoConnect initiative, and what does it aim to accomplish?
A:MyoConnect leverages field clinicians to train therapists and generate clinical referrals. The goal is to shift from one-time advertising-driven orders to recurring patient sources through O&P providers and rehab hospitals.
Q:What is the updated quarterly revenue run rate needed to breakeven?
A:The breakeven revenue run rate has been reduced to around $16 million to $17 million per quarter after a headcount reduction.
Q:What is driving the increase in revenue from Germany?
A:Germany has a network of over 100 O&P channel partners and favorable statutory health insurance policies, allowing medically qualified patients to access MyoPro without pre-authorization hassles.
Q:Has advertising spend reached a plateau, and how does it impact the pipeline?
A:Advertising spend will grow in 2026 but at a slower rate than in 2025. The MyoConnect program is expected to improve the quality of pipeline adds, targeting more motivated patients closer to their stroke incidents.
Q:How is the rest of the international business performing, and what is the update on the China partnership?
A:The company is not investing heavily in other international markets due to the lengthy reimbursement process. The China JV is conducting a clinical trial for NMPA approval, with no significant progress reported.
Q:Review of Unclear Management Responses
A:Management avoided providing a specific timeline for returning to positive adjusted EBITDA, stating that an update would be given with 2026 guidance. Additionally, they did not provide exact numbers for the units shipped in the U.S. O&P business or detailed progress on the China JV beyond the clinical trial status.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank fee
MyoConnect platform
MyoConnect program
Myomo
OP channel
OP practitioner
accounting change
benefit MyoPro
change ASP
channel partner
consumer advertising
contract result
cost source
customer acquisition
detail term
fill unit
funding
identification qualification
increase authorization
industry
insurance coverage
leverage
loan facility
margin basis
medium
network
physician therapist
program OP
qualification patient
quality referral
revenue number
term loan
therapist OP
therapist physician
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The earnings call reveals several concerning factors: declining gross margins, increased operating expenses, and widening losses. While there are strategic plans for revenue growth and cost management, the lack of clear guidance on returning to positive adjusted EBITDA and the impact of debt raise concerns. The Q&A session highlights uncertainties, particularly in the international market and the China partnership. These negatives outweigh the positives, leading to a negative sentiment prediction for the stock price over the next two weeks.
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