Myomo, Inc. (MYO) Earnings Call Transcript & Summary

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Summer Investment Conference 2026. Our next presenting company is Myomo, Inc. [Operator Instructions] I'd now like to turn the floor over to today's host, Mr. Paul Gudonis, who is the Chairman and Chief Executive Officer of Myomo, Inc. Sir, you may begin.

Thank you, and good afternoon, everyone. It's a pleasure to introduce Myomo to you, and I'll sell for existing investors to provide an update on our business progress here. So let me start by first reviewing our safe harbor statement about any forward-looking statements over here. And then I'm going to cover the investment highlights at this point in the company. At Myomo, we're a wearable medical robotics company. We've created a new product category for a large unmet need, as you'll see, we have the first mover advantage with a strong competitive position. We recently got Medicare reimbursements and new payer contracts, which expands patient access to our life-changing technology. We've got growing revenues from recurring patient sources as we've adjusted our go-to-market model. And we've got an attractive margin profile and opportunity for scale economics as our Chief Financial Officer, will review this afternoon. So let's start by the diagnoses that we are addressing. So we address arm and hand paralysis of the upper extremity, mostly caused due to injuries from stroke other nerve damage diseases and major diagnoses being stroke or cerebrovascular accidents. We got a blood clot or hemorrhage in the brain, which then damages the motor cortex, other parts of the brain leaving the individual with half paralysis on one side of the body might be a traumatic brain injury suffered through an accident. We've held bedrooms. Woven injured due to an ID exposure, individuals with spinal cord injuries, brachial plexus, which is a shoulder of injury and a bunch of other lesser diagnoses that we could address as well. And the typical patient journey after having suffered a stroke on these other neuro injuries is you start out on the onset, you look to get stabilized by going to an acute care facility to get, again, stabilized. And then you may go down to a subacute facility where you're trying to relearn maybe speech, how to use an arm and a leg again. And then you'll go to outpatient therapy for 6 to 12 months. And here's where occupational therapists will work with your upper extremities, physical therapists with the legs to try to regain the motion that was impacted due to the stroke or other injury. And it works for about half of the population that goes through this type of regimen. But then the other half were basically told, after 6 to 12 months, get used to it, you will never use your arm and hand again for the rest of your life, and they become part of this large population of what we call chronic hemiparesis, half paralysis impact more inside the body. Now in terms of the market opportunity and the size here, let me start with the presence population. This is just the U.S. market here. There's 3.8 million people who suffered stroke and they're left with this upper extremity impairment over 1% of the population. We narrow the target addressable market up this pyramid here, you got to be living at home. Not in assisted living or have insurance pay for this. You have to meet our medical inclusion criteria. Some people may be so kindly impaired. They're really not a good can for the device. Then you have to have insurance that we'll pay for this medical technology. The good news is with Medicare coverage that started 2 years ago. We basically doubled the adjusted market among seniors, which is the population that is most impacted by strokes. And then that leaves us at the top of the pyramid, 400,000 to 800,000 patients you may qualify for MyoPro. And on the left-hand side, the annual incidence is 800,000 strokes a year. And then again, using those same metrics about those that survive, go through occupational therapy, we're still left with 40,000 to 80,000 new patients every year that go into that prevalence population. So it's a huge and growing population here and with -- you'll see our Medicare reimbursable in the U.S. is $68,000. So this is a multibillion dollar market opportunity we are addressing. Now what our solution is the MyoPro Arm Brace, so this is our proprietary technology. We've already delivered thousands of these devices. The patients in the U.S. as well as Germany and a couple of other European markets. I'm going to play this video. It's also available on our website. This is one of our television commercials because in order to inform patients, caregivers, family members, health care professionals about our device were on Facebook, we're on Instagram, YouTube. This is one of our television commercials. [Presentation]

Well, as you can see that video, it's really changing people's lives in order to be able to conduct these functional activities of daily living in their home, think about how frustrated it would be if the next day, you could not use one side of your body, not one arm in hand or for smile cord patients perhaps both on us. So it's a very life-changing technology. And here's how it works. You saw a bit in the video, we have a proprietary brain computer interface. This is noninvasive. Our sensors sit on the surface of the skin built into the brace. As you think about moving your arm on hand, for example, open a yogurt container pickup lane basket, you're basically sending a signal into that muscle and the muscle and it's a trace micro voltage on the surface of the skin, which is called the electromyogram or EMG signal. And for individuals who suffered a stroke or these other injuries, they typically have an attenuated signal, maybe less than 1% and of what a healthy individual has and that's why they struggle. They can't move that arm. They can't open the hand, but our sensors pick up that intention to move with the microprocessor and our software on board, we can amplify that weak signal and power the small motors that are on the device, enabling that type of functional movements. These technologies prevent protected by 35 patents in the U.S. and international markets going all the way through 2042. We're based in the Boston area because the technology came out of MIT with staff from Harvard Medical School. Our go-to-market approach is via 3 distribution channels. We have our direct-to-patient advertising. This is primarily to that prevalence population because there's over 3 million people just in the U.S. who are -- have been discharged from we have therapy. They're basically told, you can't use an arm and hand again anymore. They don't go to the doctors for this anymore, but they're on social media. They're watching certain television stations based on their demographics, we get the word out to them that way. And we have a call center down in Fort Worth, Texas, with a dozen people that are taking those calls or through the website. We also introduced last year the MileConnect program. So these are referrals from rehab hospitals. So we have over 150 rehab hospitals now in the country that are referring patients to us. And what we like about that, these are recurring patient sources as after referring that first patient, we see these facilities sending another patient to us in another patient because that's a great way to kind of create the same-store sales growth. And then we also deliver our products through the orthotics and prosthetics clinics. There are 3,000 of these clinics across the country from national providers like Hanger clinics and [ Autobot Care ] to smaller individual city operations. And then in terms of insurance reimbursement, this is a game changer for us because in April 2024. Medicare started covering this in the United States with an allowable $68, 800. We also get selected insurance companies. We've gotten paid by UnitedHealthcare, Aetna, Cigna, Blue Cross Blue Shield who paid for this device over in Germany, which is our largest international market. We're getting good coverage from statutory health insurers. And the GA has also been covering this for their veterans and their care for the last 10 years. And the reason we got this reimbursement is because of the research that's been published, we are 1.5 years long patient registry that demonstrated the functional value of our device, a systemic review was published last year of multiple publications, and we currently have a new randomized control trial underway at the University of Utah to get further insurance reimbursement from these insurance plans. And with that, I'll turn it over to our Chief Financial Officer, Dave Henry.

So we're operating under a set of 4 guiding principles for 2026 that we call our success pillars. First is a shift to recurring patient sources. So previously, we had relied a lot. Our revenue growth was driven by advertising and getting attaining leads through sources like Facebook or through television. But in 2025, we found that Facebook had changed their algorithms on us. It made it difficult to target patients, the cost per pipeline ad, the cost per lead was negatively impacted. And so starting in July of last year, we made a shift towards implementing this program, as Paul mentioned earlier, called MileConnect to try to really lean into that incidence population that Paul described those 40,000 to 80,000 people a year who suffer strokes and are left with some sort of upper extremity impairment. This is, I think, a good population for us to try to reach out to and doing so through referrals and also reach out through the direct-to-patient advertising as well. But the idea here is to grow revenues from these recurring patient sources and make it easier to scale because previously, we would spend money on advertising and you'd have to wait 6 to 9 months to see any revenue from that. So we want to try to limit the growth in advertising spending here going forward and really focus on these recurring sources. So in first quarter, 49% of our revenues were from these recurring sources. These are referrals generated through our direct billing channel. Also the O&P channels, both in the U.S. and Germany and then a small slice from the VA. So 49% of revenues in the first quarter, that compares to 25% same quarter a year ago. We entered the year with a goal of 50%. And right now, we're on our way to exceeding that goal by the time we get to the end of the year. Secondly is to increase market access with additional payer contracts recently, we announced a contract with a multistate arrangement with [ Elavon ] that operates the Anthem Blue Cross Blue Shield plans across a number of states in the United States. And they have about 45 million covered lives. You can see the growth in covered lives since 2020 when we started doing direct billing. We're up to now more than 100 million covered lives, about 32 million of those lives or so somewhere in that ballpark or either Medicare or Medicare Advantage, which is really our target population. But other patients in these other commercial payers, they will sometimes pay for the device as well. So it's an important metric that shows that there's more acceptance among the payers for the device, but also when we are finding with really a small sample size right now, but we're finding that as we target patients and we find patients that have these payers that we're under contract with, we're seeing better authorization rates than we do through advertising. So the yield is better. The patient population is better because they are closer to their stroke and they have less country indications. So all those factors makes it easier to scale and allow us to demonstrate our third success pillar operating leverage. Our goal, our plan for 2026 is to grow revenue at twice the rate of the growth of operating expenses or operating expenses and half the rate of growth of revenue. And so through first quarter, we're on track to doing that. and we expect to continue to be able to demonstrate that leverage as we move through 2026. Finally, investing in product development and research. We've recently introduced the MyoPro mobile app, which is now up on Google and the App Store, you can find that for yourselves. That has allowed us to stop providing a laptop with every device saving about $500 per revenue unit that we have. So it's good cost reduction activity. We're also from an R&D standpoint, working on the next-generation product, the MyoPro 3 that's probably a late 2027 maybe 2028 introduction. And then also, Paul mentioned the randomized control trial with the University of Utah to really build up that evidence, that real-world evidence that the MyoPro is beneficial for patients as we continue to improve the reimbursement environment for the MyoPro. So looking at our revenues then for -- in the past, we've grown our revenues nicely over the past many years. We were $40.9 million of revenue in 2025. That was 25% growth. Our guidance for this year is for revenue growth of $43 million to $46 million. Looking at our financials. Revenue in the first quarter was $10.1 million. Gross margin was 68.2%. The revenues were up about 3% year-over-year. The gross margin was up 100 basis points year-over-year due to some of those cost reduction efforts I mentioned earlier also that higher ASP. As I mentioned, operating expenses, we are trying to limit the growth of operating expenses. Operating expenses were actually down 1% year-over-year to $10.1 million. All that resulted in an operating loss of $3.2 million in the first quarter compared to $3.5 million a year ago. Net loss kind of follows the same rationale, $3 million net loss compared to $3.5 million in the first quarter a year ago. In terms of the balance sheet. Our cash and investments were $15.7 million at the end of the first quarter. We have $12.5 million of debt with Avenue Capital that was entered into in November of 2025. The interest rate on that is 11.75%. We are interest-only with Avenue until May of 2027 when we began making 24 equal principal payments. And finally, we have about 42.3 million fully diluted shares outstanding at the present time. Then finally, looking at our long-term vision, looking where we're headed, we are, as I mentioned, revenues were $40.9 million of 2025. Our objective is to get to $100 million of annual revenue. With those revenues, we expect to be a 70% gross margin, positive EBITDA and cash flow. And the important factor here is getting to those things and having a durable business with recurring patient sources being the majority of our revenues and also continuing to do things like the RCT to reduce the barriers to reimbursement and then capitalize on the growth opportunities that we expect to be available, including new products, new indications as well as new markets. Let me turn it back over to Paul to talk about the team and closing.

Thanks, Dave. Well, as you see, we're very excited about continuing to grow this business. We are the market leader. We've got that next milestone of $100 million revenue in our sights here. We've got a management team that's worked together here to build this business, experienced executives from Dave being our CFO; Micah Mitchell, our Chief Commercial Officer; Dr. Harry Kovelman, 25 years in the -- as Chief Medical Officer for companies, [ Malcolm Back ], with strong engineering background. And our Board of Directors, I serve as Chairman, Tom Kirk, is our lead independent director, former CEO of Hanger Clinics, built that to a $1 billion company and the market leader there. [ Tom Crowley ] is a former Med Device CEO as well as [indiscernible], including time of Dow Boston Scientific. [indiscernible], had an experienced CFO and COO, chairs our Audit Committee. We recently introduced 2 new members to the Board, William Febbo. Will is an experienced CEO in the health care and medical device space and marketing. So he joined us and Joe Manko with Horton Fund, who's one of our largest investors joined the Board recently as well. So it's a strong Board of Directors, very committed with the management team to building value for the company here and our investors. So with that, let's see if there are any questions in the box here.

So a question about reimbursement predictability rather than demand. We made clear progress in Medicare Part B, payer contracts and MileConnect, recurring patient sources. We've also seen payment holds, prepayment audits, Medicare authorization denials. How can investors think about this risk going forward? Is this mainly a temporary scaling issue? Should we assume -- we reimburse fractional remain a recurring feature? And what are the authorization or metrics you should point us to like authorization rates and see covered lives and so on? So before we got Medicare coverage, we had to turn away Medicare Part B patients, which is almost half of the senior population. That friction has gone away. We've gone through a successful number of audits there have never had any clawback. So all those payments have been made. The same thing we've been audited by other insurance companies. What we've seen with Medicare Advantage plans, even though they are supposed to follow Medicare rules and regulations about coverage. Some have been denying claims. So we appeal these. We've been winning a number of those appeals, whether an ALJ or what we're seeing, as Dave pointed out, where we're now entering into in-network payer contracts. We're seeing a higher authorization rates. It's also a faster revenue cycle because we don't have to go through a single case agreement. We already have pricing established with those plans that's based off of the Medicare allowable. So we think over time, we're going to get more payer contracts. We're going to reduce that friction. And so what we'll report on is the number of authorizations and orders. They've been growing over the last several quarters. And so we're expecting a record number of authorizations in orders this year. Dave, I think the next one should be for you. What are the key drivers about our confidence to get the full year 2026 revenue guidance of $43 million to $46 million?

I think it's the -- those drivers would be the continued success of the MileConnect program. International revenues have also been growing strongly. They grew somewhere close to 30%, 40% last year, and we'd be looking for similar kinds of growth rates for our international business and in 2026. And then continuing the growth in the O&P channel. O&P revenues were up around 70% year-over-year in the first quarter. We think there's more opportunities to continue to grow that. But I think really -- it's about the MileConnect referral program. Referral generated revenues were 20% of revenue in the first quarter. And I think if we're looking to achieve that guidance and actually and potentially exceed that guidance, then I think the success of that program will be key. The next question is about reimbursement predictability rather than demand. Myomo has made clear progress with Medicare Part B, payer contracts, MileConnect, et cetera, but we've also seen payment holes, prepayment audits, friction. Actually, I think that's the second question we saw there. It looks like that came up twice. Sorry about that. So and finally, I think looking at the next question then, MyoPro is a large population of patients with upper limb impairment after stroke, nerve injury. How should investors think about the size of that addressable market today? I think Paul mentioned that in his comments earlier, when you look at the prevalence, we divide the market into really 2 sources of patients, the prevalence population, those people that have lived with their stroke for a while. They've exited the health care system for their stroke. That's about potentially 400,000 to 800,000 patients in total. That might qualify for the device and then you have the incidence population, which are those people that have recently had their stroke and they have just exited the health care system for that. They did in therapy, they're left at their left lift and that population is about 40,000 to 80,000 people. So it's a very large patient population. We've only scratched the surface of the amount of it that we can serve. And I think we're excited about future prospects given the size of the market opportunity.

Let me take the next one here. So can you discuss the MileConnect program? And our referrals are changing patient acquisition economics. What we really like about this is we already have therapists in the field who are working with these rehab hospitals, they're doing training, they're doing clinical support. They're now asking for referrals because they're already in these facilities we're seeing these patients, and there's no incremental cost to us to get those referrals and there is no onetime advertising costs. So over time, I expect our advertising expenditures will go down as we rely increasingly on these referrals and our track record is after getting the first referral and that patient gets their device, they go through their therapy at that rehab hospital. We'll have successive referrals at no incremental cost other than the field team we have already in place, and we'll be growing that over time to further grow several hundred more of these referral sites over the coming 12 months. Dave, there's a question here about gross margin, above 68%. How sustainable is that as the revenue scales and the channel mix evolves?

I think as we move forward with the MileConnect program that will help that will help keep the ASP high because we'll be serving those patients through our direct billing channel, which is a higher ASP. So I think that provides an uplift the exchange rate in Germany has also provided a bit of a lift. It's been around $1.15, $1.16, dollars per euro. So that's -- that helps as well. And then cost reduction activities. We -- some are sort of baked into the 68% of things like the -- moving towards the mobile app, that's actually probably less in first quarter, and we'll see some realized some improvement in gross margin from that in the second quarter. Also, we're working to in-source, some outsourced manufacturing activities like right now, we're in the process of bringing 3D printing in-house using existing space and being able to absorb -- better absorb the overhead that we have there. So I do think it's -- I do think the gross margin is sustainable. I think the downside would be if there was volume hiccups as they go forward because the volume will help with the fixed overhead absorption. But there's more things that are to the upside, I think, than to the downside. And our longer-term objective is to be around the 70% gross margin.

Let me have one more question here for investors new to the story we think is the most underappreciated about Myomo's market opportunity in a competitive position. At a $50 million market cap today, we are severely undervalued given the size of this market. As I said, there's millions of people with this condition adjust in the United States, many of them could benefit from this. We're getting a greater number of our insurance coverage going forward here. And we have a strong competitive position as the only product addressing this need here in the U.S. and the living product in Germany and there are other markets that we can expand to in the future as well. And with that, I think we will wrap up. Moderator?

Ladies and gentlemen, this concludes Myomo Incorporated presentation. You may now disconnect. And please consult the conference agenda for the next presenting company.