Myomo, Inc. (MYO) Q2 2024 Earnings Report, Transcript and Summary

Good day and welcome to Myomo's Second Quarter of 2024 Earnings Call. All participants are in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Also please be aware that today's call is being recorded. I would now like to turn the call over to Kim Golodetz with LHA. Please go ahead.

Thank you, operator, and good afternoon, everyone. This is Kim Golodetz with LHA. Welcome to the Myomo second quarter 2024 conference call. Earlier this afternoon, Myomo issued a news release announcing financial results for the three and six months ended June 30, 2024. If you would like to be added to the company's e-mail distribution list to receive future announcement,s please register on the company's website at myomo.com or call LHA at 212-838-3777 and speak with Carolyn Curran. With me on today's call from Myomo are Paul Gudonis, Chief Executive Officer; and Dave Henry, Chief Financial Officer. Before we begin, I'd like to caution listeners that statements made during this conference 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 certain risks and uncertainties and other factors that may affect Myomo's business, financial condition and operating results. These additional risks, uncertainties and other factors are discussed in Myomo's filings with the Securities and Exchange Commission, including on Forms 10-K and 10-Q. Actual outcomes and results may differ materially from what's expressed in or implied by these forward-looking statements. 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. It is now my pleasure to turn the call over to Myomo's CEO, Paul Gudonis. Paul, please go ahead.

Thanks, Kim and good afternoon everyone. Thank you for joining us today. We are delighted to report excellent financial results for the second quarter of 2024, which was the first quarter since the Medicare fees for the MyoPro powered arm braces went into effect beginning April 1st. As a result of our ability to add patients covered by standard Medicare Part B to our target market, we achieved quarterly records in revenues additions to and the total number of patients in the patient pipeline, authorizations and MyoPro orders and shipments. As you know the MyoPro is reclassified by CMS into the brace benefit category as of January 1, 2024, which resulted in lump sum payments for these custom devices for patients with paralyzed arms. During the first quarter, Medicare paid claims for patients who met the agreed-upon criteria for medical necessity. However, the reimbursement amount was below the proposed allowable rate. The MyoPros delivered to patients after April 1st, the approved fees were $65,872 for the MyoPro Motion-G and $33481 for the Motion-W model. And just to note the Motion-G represents over 90% of our unit volume, because it enables function of both the arm and the hand. We were able to recognize revenue on 74 MyoPros delivered to Medicare Part B beneficiaries during the second quarter, a population that we previously had to turn away. Shipments to these patients who are in addition to the shipments to Medicare Advantage, VA, orthotics and prosthetics, clinics and international customers, all of which contribute to growth in product revenues of 77% over the second quarter of 2023. Now Medicare Part B patients contact us directly or referred by a physician or a therapist our direct billing provider team can engage with them. This led to a record number of 550 additions to our patient pipeline in the quarter, and 1,179 patients in the overall pipeline. As a reminder the patients in the pipeline are those who are in the -- have begun the reimbursement process. Our marketing spend is now far more efficient as we're able to expand this pipeline at a cost per candidate that was 26% lower than a year ago. During Q2, we received 213 insurance approvals, Part B medical documents and orders from the VA system and O&P clinics, which is up 70% year-over-year. We received evidence of payments with the Medicare Part B claims much faster than we had anticipated, which as Dave will explain led to revenues coming at higher than our guidance. We've also seen our average selling price or ASP trend upward to more than $47,000 in the second quarter with these payments under our direct billing operation, which are typically paid at 80% of the Medicare allowable amount plus any co-pays by secondary insurance or out-of-pocket payments by patients. As for the Medicare Advantage plans, they are required to cover what standard Medicare covers and we've seen mixed results from these payers so far. Dave will elaborate further in his remarks. We need to obtain a preauthorization for MyoPro for patients covered by these plans. In some cases, the approval percentage has gone down as these plans try to control their utilization costs post-COVID, which of course is contrary to Medicare regulations. Our Chief Medical Officer works with patients, to appeal certain cases at administrative sharing, but we've recently seen a positive trend with judges overturning denials by declaring that the MyoPro is not experimental or investigational, but that it is not medically necessary since Medicare is covering the device. These are wins for the patients with these Medicare Advantage plans. And I hope these decisions set a precedent, with these payers and others. More good news is, that we've seen some of these Medicare Advantage plans start to remit payments to us at the Medicare rate, , which is contributing to the higher ASP. To meet the growing demand from an expanded addressable market, we've been adding capacity across the revenue cycle. We've added intake coordinators to answer inquiries. We've increased our reimbursement staff and licensed clinicians in the field and we've added employees in our manufacturing quality and fulfillment operations. Our staff has increased from approximately 100 employees at the beginning of the year to about 160 currently. We're also finalizing plans to move to a larger production facility in the Boston area later this year, to accommodate additional expected growth in shipments this year and in the future. Our international operations primarily in Germany continue to do well generating over $1 million of revenue in the quarter. We also expanded the clinical and business development teams, to support the expected growth in this market. And with the clarity on the Medicare Part D reimbursement, we've seen keen interest from domestic O&P clinics, since this is a patient population they already serve with ankle foot orthoses and other braces. We recruited an experienced O&P channel team of business development managers, and clinical trainers and we've established a certification program for O&P clinics to become a MyoPro center of excellence. We started training some of these skilled professionals and they plan to evaluate patient candidates in the near future. After receiving the necessary medical documentation and support reimbursement for their patients, we expect that they'll be placing their initial MyoPro orders later this year. Next month is the National Assembly for the American Orthotics and Prosthetics Association, which is the premier annual conference for the O&P industry. We've already planned to manufacture this workshop and will participate on the research panel to introduce the MyoPro to a larger audience of O&P clinicians. Our plan is to build this distribution channel over the coming months in order to add to the business produced by our own direct filling operation in 2025. Now with that overview, I'll turn the call over to our CFO, Dave Henry for a deeper dive into the quarterly financials and I'll return to some additional comments on our business plans. Dave?

Thank you, Paul and good afternoon, everyone. Let me start my remarks, with a review of our second quarter financial results. Revenue for the second quarter of 2024 was $7.5 million. This consists of entirely product revenue and was up 77% over the prior year quarter's product revenue. Total revenue was up 26%, over last year's second quarter, which included a license payment from our joint venture partner in China. Product revenue growth was driven by a higher number of revenue units, which were up 63% year-over-year and by a higher average selling price as Medicare and certain Medicare Advantage payers reimburse for the MyoPro in line, with the fees published by CMS that became effective as of April 1, 2024. Revenue came in higher than our initial guidance due to a higher-than-expected velocity of Medicare payments and hence revenue. 40% -- 47% of revenue in the second quarter came from Medicare Part B patients. As a result, ASP was approximately $47,500, up 9% year-over-year. Revenue from patients with Medicare Advantage plans represented 26% of second quarter revenue, which was down 26% year-over-year. This decrease came in part from a more challenging reimbursement environment. It appears that utilization management initiatives are underway at key Medicare Advantage payers and a higher proportion of initial claims are being denied than we'd seen in prior quarters. Of the 158 revenue units in the second quarter, approximately 20% resulted from fill, which is our term for authorizations and orders received and converted to revenue in the same quarter. Driven by revenue from Medicare Part B patients 78% of our revenue in the second quarter came from the direct billing channel, which is similar to the prior year quarter. 14% of second quarter revenue came from international markets primarily Germany. Given our success in being paid by CMS for Medicare Part B claims effective as of July 1, 2024, we are recording revenue upon product delivery and the filing of claims with CMS. In the second quarter of 2024, both pipeline additions and total pipeline, reached new records. The pipeline was 1,179 patients at the end of the second quarter, an increase of 22% year-over-year. There were 550 additions to the pipeline in the second quarter, an increase of 35% year-over-year. 19% of the pipeline at the end of the second quarter was Medicare Part B patients. Of the pipeline additions in the second quarter, 167 were Medicare Part B patients. Reported backlog represents insurance authorizations and orders received, but not yet converted to revenue. And in the case of Medicare Part B patients, those patients for whom we've collected medical records and deemed qualified for delivery based on our inclusion criteria. Our backlog at the end of the second quarter of 2024 was a record 282 patients, up 58% from our backlog at the end of second quarter 2023. Ending second quarter backlog includes 96 Medicare Part B patients that have either been qualified for delivery with appropriate Medicare documentation or have received a MyoPro and claims have been filed, but payment has not yet been received. The Medicare portion of the backlog increased 16% sequentially. Contributing to our record backlog was a record 213 authorizations and orders, an increase of 70% year-over-year. Gross margin for the second quarter of 2024 coming entirely from product sales was 70.8% compared with 71.8% for the prior year quarter. The decrease was driven primarily by the impact of 100% margin license revenue in the prior year, offset by a higher ASP, I mentioned earlier. Excluding the license revenue, gross margin on product sales was 60.5% in the second quarter of 2023. Operating expenses for the second quarter of 2024 were $6.4 million, an increase of 20% compared with the second quarter of 2023. This increase was driven primarily by higher head count, as we added clinical and reimbursement capacity in order to grow revenue in the second half of the year and beyond, and higher engineering head count to accelerate completion of certain sustaining engineering projects and new product development, offset by lower stock-based compensation expense. Advertising expense of $800,000 was unchanged year-over-year, but cost per pipeline ad was $1,545, which is down 26% compared to the prior year quarter. Operating loss for the second quarter of 2024 was $1.1 million, unchanged from the second quarter of 2023, which included the license revenue at 100% margin. Net loss for the second quarter of 2024 was $1.1 million, or $0.03 per share. This compares with a net loss of $1 million, or $0.04 per share for the second quarter of 2023. Approximately $770,000 prefunded warrants were exercised during the second quarter, and approximately $7.7 million prefunded warrants are still outstanding from our offerings in 2023 and January 2024. These prefunded warrants are considered common stock equivalents under GAAP and are included in our weighted average shares outstanding. Adjusted EBITDA for the second quarter of 2024 was a negative $1.2 million, compared with a negative $800,000 in the second quarter of 2023. Looking at our year-to-date financial results. Revenue for the six months ended June 30, 2024, was $11.3 million, up 20% compared with the same period a year ago. Product revenue, which excludes licensing revenue was up 47% over the first half of 2023. Year-to-date gross margin was 67.6% compared with 70.1% in the year ago period. Excluding license revenue, gross margin on product revenue was 63.4% in the year ago period. Operating expenses for the first half of 2024 were $12.6 million, an increase of 22%, compared with the same period a year ago. Operating loss for the first six months of 2024 was $5 million compared with an operating loss of $3.8 million for the same period a year ago. Net loss for the first six months of 2024 was $5 million or $0.13 per share, compared with a net loss of $3.7 million or $0.14 per share for the same period a year ago. Adjusted EBITDA was a negative $4.7 million for the first half of 2024, compared with a negative $3.2 million for the year ago period. Turning now to our cash position. Cash, cash equivalents and short-term investments as of June 30, 2024 were $9.0 million. Cash used in operating activities was $1.9 million for the second quarter of 2024, compared with $0.3 million for the second quarter of 2023. On July 11, 2024, we entered into a accounts receivable line of credit with Silicon Valley Bank, which provides a borrowing capacity of $4 million based on 80% of eligible receivables as defined in the agreement. As of today, we have not drawn on the credit line. We believe our cash, cash equivalents and short-term investments are sufficient to fund our operations for at least the next 12 months. In May 2024, our shelf registration statement on Form S-3 expired. We believe it is a good corporate housekeeping to have a valid shelf registration statement on file. So a new shelf registration statement is expected to be filed shortly resizing consistent with our prior shelf. Turning to our financial guidance. Given our backlog and the expected higher velocity of revenue being able to -- were able to record for Medicare Part B patients upon product delivery, we believe we are positioned to grow revenue modestly on a sequential basis in the third quarter and we expect revenue in the range of $8.0 million to $8.5 million. While a modest sequential increase, this represents between 58% and 67% year-over-year growth. We intend to increase our advertising spending in the third quarter and second half of the year to educate more patients and generate more volume at the top of the patient funnel. We believe we have the capacity to process a higher volume of patient leads that our additional advertising may generate. This increased spend is aimed at positioning the company for continued growth in the first half of 2025, but we may see some incremental revenue from these efforts in the fourth quarter as well. We continue to believe our full year revenue expectation of $28 million to $30 million is achievable as the required clinical reimbursement and manufacturing capacity is now in place. Our full year revenue expectation and third quarter guidance imply fourth quarter revenue approaching $10 million. We continue to believe that operating cash flow is achievable in the fourth quarter. However, our ability to compensate for higher advertising spending in the second half of the year, may impact achieving this objective. With that financial overview, I'll turn the call back to Paul.

Thanks Dave. Well looking ahead, we are prepared to serve a larger number of patients with our expanded clinical team and manufacturing capacity. And we have said we would double our output from 40 to 50 units per month at the beginning of the year up to 80 to 100 MyoPros per month by the end of the year. I'm pleased to tell you that we produced 80 MyoPros to ship to patients and O&P customers during the month of July. So we are ahead of plan in meeting this objective. We're also increasing our investment in R&D as we continue to innovate in product development and to build upon our first-mover advantage in this market, and we expect to be making several product announcements later this fall. So with that update and overview of our plans for the rest of 2024, we're now ready to take your questions. Operator?

We will now begin the question-and-answer session. [Operator Instructions]

Before we turn to your questions, I want to mention that we will be participating in several investor conferences in the next two months. The Needham 9th Annual Virtual MedTech & Diagnostics one-on-one conference on Monday, August 12; the H.C. Wainwright 26th Annual Global Investment Conference being held September 9 through 11 in New York City and virtually; and the Lake Street Best Ideas Conference on September 12 in New York City. Our presentation for the H.C. Wainwright Conference will be prerecorded and available on demand beginning September 9 at 7:00 A.M. Eastern Time. We're also available for virtual and in-person investor meetings at all of these conferences, so to arrange the meeting contact the conference organizer or alternatively contact LHA Investor Relations, who can assist you to schedule a meeting. Okay operator, we are ready for the first question.

Our first question will come from Chase Knickerbocker with Craig-Hallum Capital Group. Please go ahead.

Good afternoon, everyone. Thanks for taking the question. Just first Paul, good to hear on the 80 MyoPros in July. Maybe just speak to the confidence around increasing capacity from there and then kind of when you would expect to need to increase that footprint on manufacturing to kind of support your internal growth expectations? Is that Q4? Is it first half of next year? Just kind of benchmark us there when you would need to increase that footprint? Thanks.

Sure. Thanks for the question Chase. So, we've been rapidly able to expand our monthly manufacturing capacity. And as I mentioned, we're in the process of finalizing plans to move to a larger facility here in the Boston area in the suburbs. That will give us a broader footprint. We can hire more people. So, I expect that we'll have expanded capacity beyond that, 80 units per month by the fourth quarter. And then now we've got the runway to expand that next year even more footprint possibly a second shift. So we will keep expanding capacity as the pipeline grows and the orders come in.

Got it. Thanks. And then maybe just shifting gears to the O&P opportunity. What do you have as kind of goals for that channel team that you're hiring there over the short to medium-term? Is it number of clinics in which they have trained? Is it starting to be orders here in the back half of the year? And then just maybe on the O&P channel, when would you expect it to be material from a standpoint of kind of when that would be a material source of revenue for you guys? Is that this year yet or more of 2025, at least in the US O&P opportunity? Thank you.

Yes. This year, I see is us building the channel relationships, the infrastructure getting all the training done. This is a major commitment for a CPO working for one of these O&P clinics. They have to take three days out of the clinic in order to become really deeply experts on the MyoPro. So we are organizing classes. We started to train some of these O&P clinicians. They said we will be at the major conference next month in September. We'll sign up other O&P clinics at that conference to run, what we call the COE Center of Excellence classes in the fall. And then typically after getting trained to evaluate their first patient, wait for reimbursement place their orders and then see how those patients do and make sure they get paid as expected, and then that order flow should start to build in 2025. So we don't see a lot of material increase in orders this year, but we're really building it for next year. And now we've set a goal, I mean I'd love to see 80 to 100 of these O&P clinicians trained by the end of the year.

And then as far as how that might look from a kind of contribution to your business next year, do you have any goal as far as kind of units through that channel next year? Any way for us to think about kind of your expectations maybe during the year with 100 O&P clinic professionals train? And then I'll hop back in queue. Thank you.

Well we'll really be looking to see at what pace they want to bring the MyoPro to their patients. So typically we've seen this with other new O&P products in the industry. So they'll place an initial order fit the patient, follow that patient and they'll place another order. And then the volume will start to increase over time. So I see it more kind of a linear growth rather than a step function. But over time we ought to see more and more what I'll call same-store sales growth but that will take some time just because of the clinical nature of this profession.

And our next question will come from Scott Henry with AGP. Please go ahead.

Thank you. Good afternoon. And congratulations, really strong numbers and trends in a tough environment. So congratulations for that. Just a couple of questions. First on the gross margins back at the 70% level, which is really strong, should we think about that 70% is sort of a base from here with volumes increasing? Will that start to be a typical margin? A – Dave Henry: I think there's – I think it's a good baseline for us. I think there's some gross margin expansion opportunities. I think it has more and more Medicare Advantage plans. We mentioned in the call that some of them are – we're starting to see reimbursements at the Medicare allowable as more and more do so. We think there's opportunity to grow that to increase the ASP a little bit more which will help the gross margin. And certainly more volume will help it as well. We're fortunate that we don't have a lot of – there's not a lot of fixed costs absorbed, so it's really – we're really an asset-light model in terms of our manufacturing. So it's just adding capacity it's space and people. And so there's not a lot of CapEx that's required to do that. So that shouldn't burn gross margins going forward either. So I think 70% is a good place. We have talked about gross margins getting into the 70% range and we're just getting there maybe a quarter a little bit early.

Great. And then you gave us a lot of metrics on the pipeline and backlog. And one of the things I look at from quarter-to-quarter is backlog drops. And sometimes there's noise in it from changes in the way it's calculated or one thing or another. But it looked like in 2Q more than typical number of drops came from the prior backlog. Now there's a lot of moving parts right now. Anything to see there? Or is that noise? And do you agree with that statement as well?

Well we've been within 15% to 20% sort of backlog drop rate. That's where we've been operating recently. And I think if you do the math the drops came in at around 48. So that would put us at 18%-ish I guess maybe of the beginning backlog which is kind of in the range that we've been seeing.

Okay. I had a higher number but perhaps there's some ample start just in there. I'll go through that offline.

Yes. So the math is 275 beginning backlog, 158 revenue units, 213 authorizations and orders and I think with 282 ending backlog, 48 is what falls out. I think if I – if my math is right off the top of my head.

Fair enough and thank you for that feedback. And then finally, I think I've been following the company now for multiple years. So I went through a couple of political cycles. And sometimes, if I recall in prior election cycles advertising gets tricky during elections because there's so much competition both in terms of pricing and in terms of lack of availability. Do you think – are the election something we should think about with regards to pipeline adds and might there be some noise in kind of Q3 maybe into Q4 due to that factor? Or are you big enough now that we won't see that?

Scott it's a very perceptive observation. We see that all the time with – in the third and fourth quarters, especially in an election year because we're now going to be competing with Medicare Advantage plan advertising later in the year, I would say all the political advertising and then you've got a holiday advertising starts to kick in. So we've increased our advertising spend now so we can get in front of more people, their family members, physicians and so on. And then we typically scale it act somewhat just because the prices go up the availability gets reduced and then we turn it back on after the first of the year. So – but we have a large number of people in that pipeline. We've got people that are not in the pipeline yet but they are interested and our intake coordinators are following up with. So we'll keep that flow going but we typically see that on a seasonal basis.

Okay. So it sounds like you should be able to – it's not stabilized perhaps even build off of this 550 pipeline adds you had and in Q2, which was strong – a new record for you?

We'd like to see that, yes.

Okay. Great, that's it today for me. Thank you for taking my questions.

Thanks Scott.

And our next question will come from Anthony Vendetti with Maxim Group. Please go ahead.

Thank you. Yes. So I was just wondering as you look at the pipeline, is there anything that you're doing specifically or that you can do to increase the conversion rate just looking at it whether that's more outreach directly from the company? And then, secondly, as you plan to increase the marketing side of it how do you balance that without negatively impacting your bottom-line? Maybe just talk a little bit about the puts and takes that you're thinking about as you balance that for the remainder of the year.

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So the…

Go ahead Dave.

Yeah. I was just going to say that the -- I think we're starting -- we're seeing some improvement in that what I'll call the authorization rate. I think you called the conversion rate but just the -- if you take just the authorizations and orders and divide it by the beginning pipeline entering the quarter we were at about a 19% conversion which I think is higher than where we had been in terms of pipeline conversions into backlog. And I think that's driven by Medicare patients, because they're not lingering in the pipeline as long and we're not, having to go through the reimbursement exercise that we have to go through with Medicare Advantage patients. So that's what's helping that. And I think that's possible as more and more Medicare patients as they become a more prominent part of our pipeline in the future then hopefully then that rate could continue to trickle up overtime.

Okay. Great. And then just as you're looking at the end of the year in terms of your increase in marketing how are you balancing that? How should we look at that?

Well, I mean, we realize that we -- in terms of balancing things it's -- it could be potentially an impact. It's something that we have to manage if we should get to operating cash flow breakeven in the fourth quarter but we want to be in a position and make sure that we're growing revenues in 2025 as well. We don't want there to be any -- we want to minimize any potential seasonal impacts. I mean first quarter is usually a seasonally soft quarter for us and we want to try to -- we want to keep the momentum going as best we can and that starts with making investments now and getting more patients into the top of the funnel.

Okay. Great. Thanks so much. I'll get back in the queue.

[Operator Instructions] Our next question will come from Edward Woo with Ascendiant Capital. Please go ahead.

Yeah. Congratulations on the guidance for the back half, it's pretty solid. Is there any seasonality in your business that we should expect in 2025? What was the seasonality historically for Myomo?

Generally, the revenues in the second half of the year are generally stronger than the first half. And I think it's -- I'm not sure we've ever put a finger on exactly why. I guess my guess is that just all of the deductibles and stuff for patients reset at the beginning of the year. And most people in our patient population by the time you get to the second half of the year they don't have any more out-of-pocket expenses. And so that makes decisions like the MyoPro a little bit easier. So as -- I think as a result of that we end up seeing revenues -- the first quarter is generally the softest quarter. And then we have -- when you look back in time we have good growth through the rest of the year with things maybe growth in the fourth quarter flattening out a little bit versus the third historically just because of the fact that some of the -- particularly in years where you have the challenges with advertising like we're expecting this year's -- in this year's fourth quarter because of the Presidential election.

Very well. Thank you for answering my questions and wish you guys' good luck. Thank you.

We have time for one more question here. And that question will come from Ben Haynor with Lake Street Capital Markets. Please go ahead.

Yes. Good afternoon, gentlemen. Thanks for taking my questions. First off for me, on the O&P channel. I appreciate the commentary there of getting to 80 to 100 folks trained by the end of the year. Any chance you can share how many have started training thus far?

We've just started that with several of the O&P clinics including Hanger. We haven't disclosed how many we have. It's just started going because again, we just hired this business development and clinical training team in the second quarter Ben. So they're getting trained themselves. They're starting the training. We are riding along with some of these CPOs to assist in the evaluation work and the fittings. So it's a smaller number now, but that will start to take off in the second half of this year.

Okay. That's helpful. So clearly, Hanger is interested and recognizing they have a former executive on your Board. Is there -- any more color you can offer with regard to Hanger specifically?

No other than to say I've met with their CEO and senior leadership over there. They have a keen interest and it will be up to them. They've made a commitment to deploy this assign people to get trained on the device. And so I really don't want to say much about any one particular customer other than now we enjoy a good relationship there and we hope to both flourish and make this a win-win-win for their patients themselves as a company and of course for Myomo.

Excellent. And then lastly for me, congrats on getting 80 units out the door in July. Can you -- have you kind of identified what it's going to take to get you to 125, 150, 200 units a month? Are there key bottlenecks how difficult are they to kind of work around hire for do whatever you need to do? Any color that you could share there would be helpful.

Well, what we've been doing is our senior leadership team has been looking across that revenue cycle, making sure we balance the growth in each of these functions to avoid bottlenecks. So as we increase the advertising generate more leads inquiries, we've added more people in the intake coordinator side then we've added more people in our department of patient efficacy for reimbursement. We've added more people then in manufacturing, more people in our field clinical staff. So again, it's balancing all those functions so that again, we can scale this without running either bottlenecks or having people idle. As you can see while operating expenses went up from 20%, product revenues went up over 70%. So we're getting that type of operating leverage by doing it in a smart way.

Makes sense. So the way to think about it is where you're right now you can kind of titrate things how they need to be adjusted to kind of get the units out the door. There's nothing holding you back?

That's right other than hiring good people, training them, making sure we can order all the components in the supply chain. Some have longer lead time than others. But again, our team is working at every stage of that revenue cycle to make sure we've got enough capacity to keep on growing.

Make sense. Congrats on all the progress, gentlemen and thanks for taking the questions.

Thanks, Ben.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Paul Gudonis for any closing remarks.

Well, thank you, operator. Well, this decision by CMS to cover the MyoPro for the Part B beneficiaries that support its goal of health equity has led to a real inflection point for our company. Everyone at Myomo is keenly aware of the life-changing benefits our device brings to patients and that's a wonderful motivator around here. As just one example, we recently provided a MyoPro to Medicare beneficiary who suffered a stroke some 25 years ago. Our device enabled him to perform various activities of daily living around the house that he was unable to accomplish on his own in the past. He's extremely grateful for this newfound independence and the ability to regain control over at least this part of his life. It's a whole new world for stroke survivors now and others with neurological injuries. We look forward to keep improving the lives of many more patients in these selected markets worldwide as we scale our operations. Well, thank you again for joining our call today and have a nice evening.

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