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

Good day, and welcome to the Myomo Second Quarter 2026 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Vivian Cervantes, Investor Relations. Please go ahead.

Thank you, operator, and good afternoon, everyone. This is Vivian Cervantes with Alliance Advisors IR. Welcome to the Myomo Second Quarter 2026 Financial Results Conference Call. With me today 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 and 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 SEC. Actual outcomes and results may differ materially from what's expressed 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, August 5, 2026. It's now my pleasure to turn the call over to Myomo's CEO, Paul Gudonis. Paul, please go ahead.

Thanks, Vivian, and good afternoon, everyone. Thank you all for joining us today. Our mission here at Myomo remains straightforward, to restore function and independence to people living with chronic arm and hand paralysis. Every day, we hear from patients whose lives have been changed by the MyoPro, individuals who can once again see themselves, carry groceries, return to work and simply use both hands for everyday activities. This mission and our goal to serve a much larger number of patients continue to guide every decision we make. From a business perspective, the second quarter demonstrated continued progress in executing the strategy we introduced earlier this year. Rather than relying primarily on direct-to-consumer marketing, we're building a more durable and scalable business by evolving our go-to-market strategy by emphasizing recurrent patient referrals, expanding reimbursement coverage, tightly managing our operational execution and continuing our market leadership through innovation on our wearable robotics platform. Importantly, we're seeing measurable progress across all 4 of our success pillars, which I set out earlier this year. Our first success pillar is the shift to recurring patient sources. Overall revenue for the second quarter increased 21% year-over-year to $11.7 million, and recurring patient sources represented 53% of total revenue during the quarter. That's double the 26% of revenue from these sources a year ago. Our shift to recurring patient sources is resulting in an improvement in patient quality as well. The conversion rate of referral leads into pipeline adds is significantly higher than the conversion rate of advertising-sourced leads to pipeline adds. We added more than 150 referral sites, bringing us to over 300 active locations with a growing number already referring a second patient or more. O&P revenue doubled versus the prior year, and the Ottobock Care national rollout is progressing well, alongside discussions with other national O&P organizations. Our second success pillar is to increase market access. We signed additional Elevance state contracts under our national agreement, further expanding our in-network footprint. [ Combining ] other payer relationships established in the quarter, we are now in network with Optum's workers' compensation product, which is a part of UnitedHealthcare. The benefit of being in-network is higher authorization rates from contracted payers. [ While ] still small but growing number of cases, we're seeing higher authorization rates compared with noncontracted payers, which demonstrates the value of these agreements in improving patient access and reimbursement efficiency. Meanwhile, we continue to serve a growing number of Medicare Part D patients with a 100% reimbursement rate for patients with a complete medical documentation, supporting the delivery of a MyoPro to them. Our third success pillar is to demonstrate operating leverage. As I mentioned, revenue increased 21%, while operating expenses grew only 1%. And we improved our adjusted EBITDA by over $3 million compared to the second quarter of last year. Revenue per employee continues to improve as we implement new systems and efficient processes. In our manufacturing organization, we now have a trained Six Sigma team that has been executing cost reduction initiatives, which include the mobile app rollout to replace the cost of a laptop [ reach ] device. We're using our new facility here in Burlington, Massachusetts to expand in-house assembly from outsourced contractors. And we made a very new investment in 3D printing capabilities. We still remain confident that these and other initiatives will result in expanding margins and lower cash burn. We're demonstrating the ability to grow revenues at a faster rate than operating expenses, which puts us on the path to profitability and sustainable positive cash flows. Our fourth success pillar is continued progress on product development and clinical research. Development of the next-generation MyoPro 3 continues on schedule. At the OTWorld Conference in Germany in May, which is the largest O&P industry event in Europe, we introduced a hand-only prototype for the German market, thus expanding future market opportunities by serving the patient population that needs only a device for hand function. This is the latest example of building upon our wearable robotics platform, which now includes a cloud-based data collection system and mobile app for communicating with patients and clinicians. Meanwhile, we're making good progress at the University of Utah randomized controlled trial, which has enrolled 25 of 50 patients. And an updated 6-month outcomes publication is planned for the second half of this year. As you can see, the key operating metrics continue to move forward in the right direction. We're expanding recurring referral sources, increasing payer access, demonstrating operating leverage, investing in innovation based on our platform, and most importantly, helping more patients regain the use of their arms and hands. And some additional highlights in the quarter as I wrap up my remarks. The evolution in our go-to-market strategy to recurring patient sources is yielding terrific results, including record quarterly orders totaling 255 MyoPro units in the second quarter. One example of how the strategy is working is the case of Barbara, who was referred to Myomo by her therapist at a major rehab hospital in New Jersey, where she'd be attending therapy after her stroke. Barbara is 14 months post stroke, and it plateaued with her upper extremity progress. With limited ability to use the right arm, the therapist contacted us as a potential MyoPro candidate. After positive evaluation, her physician provided the necessary medical documentation. The MyoPro was authorized by her health insurance plan, Blue Cross Blue Shield, within 30 days of the assessment, and she was fitted with her test MyoPro within 90 days of the referral. And she is doing well. She is making great progress with her therapy and training on how to use her new MyoPro. She is also able to take advantage of our recently released 4-finger saddle, which will help improve her functional grasp for the daily -- activities of daily living, which she can now do at home. Barbara's case exemplifies the effectiveness of our patient referral program, which engages recurring rehabilitation sources at the point of care to advance the patient's return to mobility and independence and can lead to a faster revenue cycle. I'd also like to highlight that we enhanced our Board with the appointment of Joe Manko of Horton Capital, one of our largest shareholders, and Will Febbo, a seasoned health care and medtech executive. Our expanded Board strengthens our governance framework and strategic capabilities by adding directors with significant industry experience, financial expertise and proven leadership in building shareholder value. And with that overview, I'll now turn the call over to Dave Henry to review our financial results in greater detail.

Thank you, Paul, and good afternoon, everyone. As Paul just discussed, our go-to-market evolution continues to gain traction, and I'm pleased to report another quarter of solid financial and operational execution. Our revenue for the second quarter of 2026 was $11.7 million, up 21% versus the prior year period. The increase was driven by both a higher average selling price, or ASP, and a higher number of revenue units. ASP for the quarter was approximately $55,500, up about 2% versus the prior year. And we recognized revenue on 211 MyoPro units, an increase of 19% over the second quarter of 2025. Looking at payer mix, Medicare Part D patients represented 50% of second quarter revenue compared with 56% in the prior year period. Medicare Advantage plans represented 16% of second quarter revenue compared with 20% in the prior year period. Our transition towards recurring patient sources continued to accelerate during the quarter. Recurring patient sources represented 53% of second quarter revenue compared with 26% in the prior year quarter, achieving our objective of 50% of revenues from recurring patient sources 6 months ahead of schedule. Within these recurring channels, 23% of total revenue was generated by direct billing referrals through our MyoConnect program, up from 20% in the first quarter. We also continue to see strong momentum from our other recurring channels with international revenue representing 17% of revenue, growing 32% year-over-year, and the U.S. O&P channel representing 10% of revenue, growing 130% year-over-year. VA patients represented 3% of revenue in the second quarter. Turning to our metrics. We received a record 255 MyoPro orders during the quarter, up 23% year-over-year. Higher conversion of orders to revenue reflects the efficiency of our operations as 57% of second quarter revenue units came from orders received during the quarter. We added 739 patients to the pipeline during the quarter, up 2% sequentially. Advertising spending was up 11% sequentially. Pipeline adds in the quarter were impacted by maintenance activities on our website, which resulted in a temporary pause in data sharing with our digital ad agency. Those activities have been completed, and the website is functioning normally. Patient quality in the pipeline is improving, however, as 17% of pipeline adds in the second quarter were generated by direct billing referrals, which is reflective of our progress in adding referring sites and is an increase of 11% from the first quarter. To illustrate the impact of MyoConnect, typically about 25% of our pipeline adds on a quarterly basis are Medicare patients. Looking at only MyoConnect pipeline adds so far in 2026, roughly 50% of patients entering the pipeline are Medicare patients. As a result, increasing direct billing referrals, combined with our continuing market access efforts, are improving patient quality and are starting to translate into a higher authorization rate as well. We ended the quarter with a backlog of 218 patients, down modestly from the first quarter, as higher revenue velocity offset stronger order growth. Turning to our financial results. Gross margin for the second quarter was 72.1%, up from 62.7% in the prior year quarter. The improvement was driven primarily by the higher ASP, lower overhead spending and the favorable impact of material cost reductions, including the rollout of the Myomo mobile app, partially offset by somewhat higher clinical costs reclassified to cost of goods sold. Operating expenses were $10.7 million, representing an increase of less than 1% compared with the second quarter of 2025. Higher general and administrative expenses offset lower advertising and R&D spending. Operating loss improved significantly to $2.3 million compared with $4.6 million in the prior year quarter. Adjusted EBITDA improved to a loss of $800,000 compared with a loss of $4 million a year ago, representing a 79% year-over-year improvement. Note that a portion of the improvement in adjusted EBITDA is due to higher stock-based compensation expense, as certain employee incentive payments were paid in stock during the quarter as part of our cash management initiatives. Below operating loss, second quarter results include a noncash charge of approximately $1.2 million related to a mark-to-market adjustment on the valuation of our derivative liabilities as well, as cash and noncash interest expense associated with the Avenue Capital term loan. Including these noncash charges, net loss for the quarter was $4 million or $0.09 a share compared with $4.6 million or $0.11 per share in the second quarter of 2025. Turning now to our balance sheet and cash flow. As of June 30, 2026, cash, cash equivalents and short-term investments totaled $13.5 million. Cash used in operating activities during the second quarter was $1.9 million, a substantial improvement compared with $8.9 million used in the second quarter of 2025. Prior year cash burn was impacted by a temporary payment hold imposed by the DME MACs and payment of 2024 incentive payments in cash. Let me conclude with our outlook. For the third quarter, we expect revenue to be in the range of $11.5 million to $12 million, representing 14% to 19% year-over-year growth. Given the strong first half performance and continued momentum across the business, we're raising our full year revenue guidance to a range of $45 million to $47 million, up from our previous guidance of $43 million to $46 million. We expect a modest sequential increase in operating expenses in the third quarter. We're also maintaining our previously communicated operating leverage objective to limit the growth of operating expenses in 2026 to half the rate of revenue growth. In addition, we expect total cash burn during the second half of the year to be less than $2 million. Overall, we're very pleased with the progress we're making. The evolution of our go-to-market approach, continued improvement in operating leverage and strong execution position us well for the balance of 2026. With that financial overview, I'll turn the call back to Paul.

Thanks, Dave. Well, to summarize, we're keenly focused on implementing our 4 success pillars to grow MyoPro volume and revenues, while improving the key financial metrics, including gross margin, adjusted EBITDA and cash usage. We've now delivered over 3,000 devices to patients, and our technology platform is making a dramatic difference in their lives. And while we established Myomo as the market leader in addressing this large unmet need, we're still at the early stage of market penetration with a prevalence population of hundreds of thousands of qualified individuals who are suffering with chronic arm paralysis and tens of thousands more each year going through rehab clinics that could be potential MyoPro candidates as well. And now, Dave and I are ready to take your questions. Operator?

[Operator Instructions]

While we're waiting for the first question, I'd like to mention that in September, we'll be participating in the H.C. Wainwright 28th Annual Global Investment Conference in New York on September 14 and 15. We'll attend in person at this conference and are available for one-on-one meetings. Okay. Operator, let's take the first question when you're ready.

Absolutely. Our first question comes from Chase Knickerbocker of CHLM.

This is Jake on for Chase. Congrats on the results. We're clearly inflecting back to growth here. Do you mainly attribute this to MyoConnect? Are you seeing much higher conversion rates of these patients that come through MyoConnect? And then also, what portion of the pipeline is now made up of MyoConnect referrals?

You're right. It's -- we see the MyoConnect program really gaining momentum here. We are adding more sites. We're up to 300 referral sites. Now, what we're seeing is, as Dave mentioned, not only better medically qualified patients because the therapists have been informed by us who makes a good MyoPro candidates, they tend to have better insurance. So a larger percentage of them have Medicare Part B, which is easier to get reimbursed for that patient. So, that MyoConnect program is really driving the growth, but we also have some other growth drivers. Our O&P business is growing. In fact, we'll be at the AOPA National Conference next month to continue building relationships over there. And Europe is growing strongly as well. So we've got multiple growth drivers going on over here. I think Dave can answer your question about the pipeline.

Yes. There were -- as I mentioned, there were -- 17% of our pipeline adds in the quarter were from the MyoConnect referrals. That was up from 11% in the first quarter. And so, that was -- that's about 122, I believe, referrals -- referral pipelines.

And then, just one more for me. How are you thinking about readout timing for the Utah RCT? And what's going to be the chief benefit that you will reap here assuming good data? Is it predominantly increasing covered lives outside of Part B? Or do you expect it to help with demand generation in O&P and within MyoConnect?

Well, I believe the answer to the second part is, all of the above. I think we'll be able to go with our Chief Medical Officer to medical directors at various payers and make the case that MyoPro is not experimental. It's not investigational. It's proven. It's being covered by Medicare and other payers. Thousands of people are already benefiting from it. And here's more research data about it. As I mentioned, we have 25 of the 50 patient subjects already in the study. We'll do a readout at 6 months. And then, we expect the full publication sometime in 2027.

Our next question comes from Scott Henry of AGP.

Starting with a couple of questions on the metrics. First, when you talk about the 255 orders, is that the same as what historically was referred to as authorizations?

Same thing, yes. Scott, it's a combination of insurance authorizations that we get from our direct billing operation and then orders -- POs we get from an O&P provider or a PO from a VA.

Okay. And historically, you've given us the reimbursement cumulative pipeline. Do you still have that number? Or are we going to get that or not?

Yes. The overall pipeline at the end of the quarter was 1,491 patients.

Okay. So that's a little lower, but is there some rationalization of that? I know sometimes you kind of take some people out. You change -- it's not always apples-to-apples.

I think -- yes, I mean, there's -- I mean, remember, with all of the -- with the challenges trying to get Medicare Advantage patients authorized, a lot of them stick in the pipeline a while. So I think looking at pipeline adds because they're sort of closer, particularly as we migrate towards MyoConnect, I think that's probably a better metric to kind of look at instead of the overall pipeline and who might be stuck in there longer term. So I would focus on the pipeline adds.

Okay. And there, I think the number was 739. Do you think that's a good number? Yes. Is that a reasonable number going forward?