Myomo, Inc. (MYO) Q4 2024 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Myomo Fourth Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Tirth Patel. Please go ahead.

Thank you, operator, and good afternoon, everyone. This is Tirth Patel with Alliance Advisors IR. Welcome to the Myomo fourth quarter and full-year 2024 conference call. With me on today's call 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 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 and 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 today, March 10, 2025. It's now my pleasure to turn the call over to Myomo's CEO, Paul Gudonis. Paul, please go ahead.

Thanks, Tirth, and good afternoon, everyone. Thanks for joining us. 2024 was a transformational year for Myomo, capped off by a milestone fourth quarter as we generated record financial and operating results by capitalizing upon market access for patients covered by Medicare Part B. After several years of discussions with CMS staff and Medical Directors, Medicare began paying for the MyoPro powered arm brace for medically-qualified patients beginning April 1st of last year. This resulted in an inflection point for our business as we gain the ability to serve roughly 50% of the market that we had previously turned away. During our last quarterly conference call, I laid out three major objectives for the company. One, to start providing the MyoPro to eligible standard Medicare Part B beneficiaries; two, to engage the many orthotics and prosthetics clinics across the country who because of the CMS decision would now be interested in becoming a distribution channel for us; and three, begin the process of establishing contracts with payers for in network status of our direct provider business. I added two other objectives to support our growth plans and create a profitable business here. Increase our capacity from our call center to manufacturing operations and clinical reimbursement staff to enable continued volume and revenue growth in 2025 and beyond, and to achieve cash flow breakeven by the end of the year as our revenue scaled up. Today, I'm delighted to share the progress we've made on each of these objectives, starting with a review of our Q4 accomplishments and full-year results. Revenues were $12.1 million for the fourth quarter and $32.6 million for the full-year, more than double the quarterly revenue in Q4 '23, and 69% higher revenue than the previous year. We delivered 220 revenue units in the quarter, double the volume of Q4 '23, and more than 600 devices during the year. We've now provided Myomo products to more than 3,000 patients and hospital customers, solidifying our position as the market leader in the upper extremity of paralysis category. During Q4, we added 657 medically-qualified candidates to our patient pipeline, and we ended the year with a record number of nearly 1,400 patients in the process of obtaining MyoPro. A record 233 MyoPros were authorized and ordered in Q4 with more than 140 of them covered by Medicare in our direct provider channel. With greater clarity and reimbursement, we built a team of business development specialists and clinical trainers to engage these O&P clinics, and this effort exceeded our expectations with 160 certified prosthesis orthopedists trained, far outpacing our goal of 100. These CPOs can now begin assessing patients and building their own MyoPro pipelines. One sign of progress in establishing this new channel is that our O&P revenue grew to $600,000 in Q4, up 94% sequentially as more O&P clinics began the process of becoming a MyoPro center of excellence. Our international business, which is primarily sales via O&P providers in Germany, performed well in the quarter, again generating over $1 million in profitable revenue and over $4 million for the full-year. Our China JV is working on a clinical trial to obtain regulatory approval to begin selling the Myomo products to patients and hospitals later this year. Moving out the O&P distribution channel is a critical part of our long-term strategy. While Myomo's direct provider model allows us to work directly with patients and insurers, the O&P channel provides a scalable way to expand reach and drive adoption through an established clinical network. The demand from O&P clinics is increasing as they recognize MyoPro as a complementary solution for their patient base. We're supporting these partners through several methods, hands-on clinical training and certification. As I mentioned, we exceeded our initial goal by training 160 CPOs in 2024 and we expect to further scale this effort in 2025. With improved reimbursement clarity, greater understanding of Medicare coverage has led O&P clinics now having a clearer pathway to secure payment for the MyoPro. And through dedicated field support, we've deployed a team of business development specialists and clinical trainers to help O&P clinics onboard patients navigate reimbursement and optimized delivery processes. Although this channel is still in its early stages, we expect O&P-driven revenue to increase meaningfully in the second-half of 2025 as more clinics begin generating orders. Importantly, the high touch nature of O&P clinics means that patients can receive in person evaluations, measurements and fittings leading to a convenient adoption process. While reimbursement for patients covered by standard fee for service Medicare Part B is going well, we still see too many patients being denied MyoPro by Medicare Advantage and other commercial payers. The situation has not improved over the last three to six months and reflects the same reality other healthcare providers face with these payers. Our Chief Medical Officer and Legal Counsel will continue to make the case for coverage by engaging with payer medical directors and by advocating for patients by filing appeals and taking denials all the way to administrative law judge hearings, where we've been successful in making the case for medical necessity and a favorable ruling for the patient's MyoPro. On the payer front, my third objective for the business was to enter into contracts with health insurance plans so that Myomo can be an in network provider with our direct billing business. We continue to make progress obtaining payer contracts. Since our third quarter call, five new contracts have been entered into or in the final stages of taking effect. These new contracts are primarily State Blue Cross Blue Shield plans. And altogether, we now have signed and pending contracts covering approximately 18.6 million lives. As for the two additional goals I set for the company, here's how we've done. We relocated operations from Downtown Boston to a new 35,000 square foot facility in Suburban Burlington. We increased our manufacturing capacity to 120 units per month, more than doubling since the beginning of 2024. This enables us to reduce MyoPro revenue units, clinical evaluation units and the demo units we need to support our growing internal staff and the O&P channel. We also hired 100 people during the past year, bringing our year end headcount to 190. And we plan to continue hiring to expand capacity to serve a larger number of patients this year. I'll wrap up by pointing out that we overachieved in our fifth objective to become operating cash flow breakeven by Q4, and we completed a successful capital raise to fund our growth plans in 2025 and beyond. I'll now let our CFO, Dave Henry, provide the details on these financials. Dave?

Thank you, Paul, and good afternoon, everyone. Let me start my remarks with a review of our fourth quarter financial results. Revenue for the fourth quarter of 2024 was a record $12.1 million. This represents a 154% increase versus the prior year quarter and was driven by a higher number of revenue units and a higher ASP. I note that revenue for both periods consisted entirely of product revenue. Our growth was fueled by record revenues from patients with Medicare Part B coverage and record international revenues. We delivered a record 220 MyoPro revenue units during the quarter, up 106% year-over-year reflecting the higher velocity of revenues particularly from patients with Medicare Part B. A record 78 revenue units came from authorizations and orders received in fourth quarter. Our average selling price or ASP increased 24% versus the prior year to approximately $54,900. This figure is down slightly from the atypically high ASP in third quarter. Medicare Part B patients represented 57% of total revenue in fourth quarter, up from 55% of revenue in third quarter, highlighting our continued success in educating this patient population. Medicare Advantage revenue grew 4% year-over-year representing 22% of fourth quarter revenue, but we continue to face challenges with first time authorizations and denials. The Medicare Advantage appeals process remains slow and frequently requires us to escalate cases to administrative law judge hearings. To address these hurdles, we are strengthening our payer engagement strategy, advocating for expanded coverage with Medical Directors and collaborating with trade groups regarding coverage deficiencies by Medicare Advantage organizations. For Medicare Part B and certain commercial payers are recognizing revenue at the time of MyoPro delivery and the amount expected to be paid by both the primary and supplemental insurance payer with the exception of Medicaid. Medicare Advantage payers are in most cases now reimbursing us based on the fees published by CMS. Encouragingly, 90% of our fourth-quarter product revenue was recognized at either shipment or delivery, compared with 79% in the fourth quarter of 2023, reflecting a more predictable revenue cycle as reimbursement processes become more established. 81% of our revenue in the fourth quarter came from the direct billing channel, compared with 65% in the prior year quarter. International revenue is a record $1.5 million in the fourth quarter, representing 12% of quarterly revenue primarily from Germany. In the fourth quarter of 2024, both pipeline additions and the total pipeline reached new records. The pipeline stood at 1,389 patients at the end of the fourth quarter, an increase of 33% year-over-year. In fourth quarter alone, we added a record 657 new patients, which is up 72% from the prior year's fourth quarter, 33% of fourth quarter pipeline additions were Medicare Part B patients, and 18% of the quarter end pipeline were Medicare Part B patients. This reflects the increased velocity in moving Medicare patients through the process of obtaining MyoPro as compared to the payers that require pre-authorizations. 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 have collected medical records and deemed qualified for delivery based on our inclusion criteria. We ended the quarter with backlog of 272 patients, up 18% versus the prior year. This includes 101 Medicare Part B patients that have been qualified for delivery with appropriate medical documentation. Contributing to our backlog, we've received a record 233 authorizations and orders during the fourth quarter, an increase of 27% during the year. Gross margin for the fourth quarter of 2024 was 71.4% compared with 65.3% for the prior year quarter. The increase was driven primarily by a higher ASP and higher fixed cost absorption. Total operating expenses for the fourth quarter were $8.9 million, up 60% over the fourth quarter of 2023. This increase was driven primarily by a higher headcount throughout the organization as we increased capacity, higher R&D expenses, and higher incentive compensation accruals. Advertising expense declined 6% year-over-year to about $800,000, reflecting typical fourth-quarter cutbacks. Cost per pipeline ad fell 46% to $1,224, reflecting greater efficiency in performing initial patient evaluations. Operating loss for the fourth quarter narrowed to $200,000 compared with a $2.4 million operating loss in the prior year quarter. Net loss for the fourth quarter of 2024 was $300,000 or $0.01 per share. This compares with a net loss of $2.5 million or $0.07 per share for the fourth quarter of 2023. Approximately $7.1 million pre-funded warrants are still outstanding from our offerings in 2023 and January 2024. These pre-funded warrants are considered common stock equivalents under GAAP and are included on our weighted average shares outstanding. A highlight for the quarter was achieving positive adjusted EBITDA, which we reached for the first time in our history. Adjusted EBITDA was about $200,000, a significant improvement compared with a negative $2.1 million for the fourth quarter of 2023. Looking at our full-year financial results, revenue for 2024 totaled $32.6 million, up 69% in 2023. Excluding license fees in 2023, product revenue increased 86%. Our gross margin in 2024 was 71.2%, up from 68.5% in 2023. Excluding license fees, gross margin on product revenue was 65.3% in 2023. Operating expenses for 2024 were $29.4 million, an increase of 37% compared with 2023. Operating loss for 2024 was $6.2 million versus an operating loss of $8.2 million in 2023. Net loss was $6.2 million or $0.16 per share, and this compares with a net loss of $8.1 million or $0.28 per share for 2023. Adjusted EBITDA improved to a negative $5.1 million for 2024, compared with a negative $7 million for 2023. Turning to our balance sheet and cash flows, a key financial milestone for 2024 was achieving positive operating cash flow break-even in fourth quarter. I'm pleased to report that we achieved that objective with $3.4 million in cash from operations in the fourth quarter and free cash flow of $2.5 million. We define the latter as cash provided by operations, less capital expenditures. Cash, cash equivalents of short-term investments as of December 31, 2024, were $24.9 million. Additionally, we maintain a $4 million accounts receivable credit line, which is currently on draw. In February, we entered into an amendment to our line of credit facility, the Silicon Valley Bank. In addition to changes to increase availability under the line, we also entered into a $3 million term loan facility, which can be drawn at any time until February 28, 2026. We believe our cash and cash equivalents are sufficient to fund our operations for at least the next 12 months. Looking ahead, our financial guidance for 2025 reflects expectations for continued strong growth and further strategic investments in scaling operations. Q1 revenue is expected to be between $9 million and $9.5 million, reflecting typical seasonality, yet expected to be up 140% to 153% over the prior year. For the full-year, we're introducing guidance for 2025 revenue to be $50 million to $53 million, representing growth of 54% to 66% over 2024. The proceeds from our financing in December 2024 are being invested in growing our direct provider channel, which we control, while we work on accelerating revenue growth in the O&P channel. We expect to nearly double our advertising expenses in 2025 to over $6 million and to hire additional personnel in our clinical, reimbursement, and operations functions to help us serve a larger number of patients. Patients obtained through our higher advertising budget are not expected to generate revenue until the second-half of 2025. So, our revenue profile is expected to be weighted toward the second-half of the year compared to the first-half. From a cash standpoint, we expect negative cash flows in the first three quarters of 2025, the second quarter being the highest earned quarter due to incentive compensation payments. However, should we meet our revenue objectives, we anticipate a return to positive operating cash flow by fourth quarter 2025. With that financial overview, I'll turn the call back to Paul.

Thanks, Dave. Well, Myomo is at the forefront of a new and expanding category, robotic orthotics for upper limb paralysis. With over 3,000 patients served, we are the clear leader in this space, and several factors strengthen our position. First, our proprietary myoelectric control system allows users to regain arm mobility based on their own neural signals, offering level functionality that traditional static orthosis can't match. Second, our multi-channel marketing strategies, which spans direct billing, O&P clinics, and international distribution, creates a broad footprint that's difficult for new entrants to replicate. The regulatory approvals, commercial operations, reimbursement traction, and clinical expertise we have built give us a strong first mover advantage. Lastly, our commitment to innovation ensures that we stay ahead. We're actively investing in R&D to build the next generation MyoPro platform that will improve functional capabilities and open new patient populations in the future. For these reasons and more, we believe Myomo is well positioned to sustain its leadership as this market grows. As we look ahead, several key growth drivers position us for continued success. Demand for Medicare Part B and Medicare Advantage beneficiaries is expected to increase with more awareness, while O&P adoption will accelerate as more clinics complete training and establish their own MyoPro patient pipelines. We are increasing efforts to educate more patients, families, and clinicians about our solution for chronic arm paralysis. As Dave mentioned, we expect to nearly double our advertising spend to more than $6 million this year. This should result in more leads coming to our website and call center and a growing number of new candidates entering the patient pipeline. Since it can take four to six months, or longer sometimes, for a patient to go through the process of obtaining a MyoPro, we expect our orders and revenue to grow more significantly in the second-half of the year. We also expect O&P orders to grow in the second-half as more centers of excellence are trained on the MyoPro. They build their patient pipelines and go through the revenue cycle process to deliver MyoPros to their patients. We're supporting these O&P clinics with more training sessions and in-person support across the country. We had a very large turnout of Hanger clinicians at the educational sessions we conducted in January at Hanger's National Clinical Meeting. This year, we'll also benefit from a 2.4% price increase that CMS published as of January 1st, bringing the Medicare allowables to $67,453 for the MyoPro G, which is over 90% of our unit volume and $34,284 for the Motion W model. With that update and overview of our plans for 2025, 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 announce that we'll be hosting our first ever Investor and Analyst Day on June 18. This event will be held at our new facility here in Burlington, Massachusetts. And among other things, it will allow for a firsthand look at our operations as well as the opportunity to meet members of our executive team, and learn about the impact Myomo is having on patients. We'll be announcing the details in the coming weeks. But in the meantime, if you're interested in attending, please contact our CFO, Dave Henry, or Tirth Patel at Alliance Advisors IR, who can reserve a spot for you. The event will also be available via webcast. Operator, we're ready for the first question.

And that first question comes from Chase Knickerbocker with Craig-Hallum. Please go ahead.

Good afternoon, Paul, and Dave. Congrats on the great quarter and guide here.

Thanks.

Just first from me, can you just walk through your assumptions on unit or revenue contribution in 2025 that you assume in guidance from the O&P channel? Maybe what percentage of either of those items? And then, can you just share what goals you have for that channel in '25? Is it clinicians trained like last year, or is it ordering clinicians? Just walk us through what we should be benchmarking you to?

Well, we plan to still have more of our revenue coming from our direct provider business, and we are expanding that. We recently hired a few more CPOs around the country, plus other clinical support staff. And we're investing, as I mentioned earlier, in doubling the advertising spend. So, that channel, which as Dave said, we control and we manage it. That will continue to grow significantly this year. And the O&P channel will start to see already these green shoots. We saw revenues double from Q3 to Q4 of last year. We had 160 trained clinicians at the end of the year. We've got more trainings already planned and ongoing. So, we expect that channel will kick in, but the majority of revenue will still come out of our direct provider channel in this coming year.

Yes. And I guess financially, I mean, O&P revenue for this year, I would say was maybe a little over $1 million somewhere in that neighborhood. And so, I would expect -- we haven't given we're not giving specific guidance on what we think the O&P channel will look like, but we do expect meaningful growth I would say in that channel in 2025.

Got it. And then, on the direct business, how quick can you ramp advertising spend? Maybe give us a look at what you kind of expect from a spend perspective in Q1. And then, as we think about pipeline additions, I mean really, really efficient marketing spend in Q4. I mean do you expect that kind of efficiency to continue or kind of walk us through how we should think about that?

I think to answer your second question first, I think on the cost per pipeline add, I think it's too early to tell as to whether that will continue to be a bit low. We're working through some changes that Meta made with Facebook and we're seeing how those changes are affecting us. We call we went through this. I don't know if you recall, but we went through this a couple of years ago. I think right now I think things are on track from a lead generation standpoint. So, we've worked our way through that. But we'll see where we get to in terms of the end of the quarter. But I would expect I'm sitting here right now I think maybe you'd see a bit of an increase in the cost per pipeline add here in the first quarter. And then, in terms of the pipeline adds, we'll see where we came up. We've had a decent first couple of months and we'll see where things end up here in first quarter.

Got it. And maybe if we look at '25 from an ASPs perspective, you'll start to have some O&P volumes kind of work into the model in the back half of the year. But I mean any general thoughts on ASPs as we move through the year?

Well, you do have the impact from the higher fees which are now filtering through all the payers and we're seeing payments not only from CMS but also other Medicare Advantage payers based on those new published fees. So, there will be a little bit of ASP uplift from that offset as you said from a higher mix of O&P revenue that we expect in the second-half.

Got it. Thanks for the questions guys. Congrats again.

Thanks, Chase.

The next question is from Scott Henry with AGP. Please go ahead.

Thank you. Good afternoon. Great results and great outlook for 2025. Congratulations to you guys, quite an accomplishment. A couple of questions, when we look at the model and we look at the metrics to grow from $12 million to even higher revenue per quarter, there's a couple of ways it can go up. One of them would be pipeline adds. Do you think 657, are you starting to get near the peak or do you think there's other step ups you can get into the 700s, maybe the 800s. How should we think of the potential for the top of the funnel there?

Well, I think to get to the $50 million to $53 million in revenue, we have to increase the pipeline adds so well. We don't think we've reached our peak. And I think we've gotten, we've got a very efficient organization I think that we've built now. We have now separate people in the organization that all they do is these initial valuations of patients to get them into the pipeline. We try to encourage as many patients as possible to get into the we have an online waiting room, a Doxy waiting room that we use quite extensively. And so, we're getting pretty good at it. That frees up our Regional CPOs to be out there in the field doing shape captures and delivering MyoPros as basically their entire jobs. So, we're becoming much more efficient at it and then with the higher lead generation that we expect with more dollars that we spend, that should result in more patients coming into the top of the funnel beyond what we've been able to add here so far.

And Scott, I'll add that, it's a very deep pool of patients, right. Over three million cases of chronic arm paralysis in the U.S. and if it's just 10% or 20% of them that are eligible candidates for MyoPro, it's still hundreds of thousands of patients. And so, we're expecting to see continued linear growth in the number of patient candidates finding out about us as we increase the advertising spend. The other thing that's working in our favor is the rehab therapists that are now starting to work with MyoPro patients after the patient gets their device, they have to go through recent training with the MyoPro. They are now seeing patients that could be a candidate and referring them to us as well. So, we're starting to see that momentum happen too.

Okay, great. And shifting to gross margins, I think they're around 75% in Q3, 71% in Q4. As you get to this higher volume, a little higher price point as well, how should we think about 2025? Does it look more like Q3 or Q4 or somewhere in the middle?

Yes, I would expect that we're in the new facility now, so we have a bit more overhead. But that is being offset by some but I think a higher ASP opportunity. So, I think that 70%, 71%-ish kind of gross margin would be something that I would be modeling for 2025.

Okay, great. And then, when we think about OpEx, I mean, just looking at the numbers and hearing the commentary, should we be thinking about kind of $10 million a quarter in OpEx that's all in including stock comp those are as reported, or could it be higher than that? Just trying to get some --

Yes. I mean, I think it could be higher than that. I think full-year OpEx definitely starts with a 4%.

Okay, great. That's helpful. Final question, more of a big picture question, when you think about the reimbursement environment, tremendous strides in 2024, when we look at 2025, would you categorize it as consistent, or even improving over 2024, or perhaps getting a little worse in 2024? Just trying to get a sense of whether that's a headwind or a tailwind.

Right now, I'm looking at it as being consistent, certainly with the Medicare Part B allowables, plus this price increase. The fact that we're now entering into contracts in several states with some of the blues, there is a defined price based off of the Medicare allowable, which means that the patients will be covered, and we don't have to go through the process of obtaining a single case agreement like we had in the past. So, that should accelerate the revenue cycle on the patients that have those plans. And then, hopefully, with all the public pressure, there's government investigations of these Medicare Advantage plans, that pressure may improve that environment to get back to where we were with these Medicare Advantage plans a couple years ago.

Okay, great. Thank you for the color. Thanks for taking all the questions. Great results.

Thanks, Scott.

The next question is from Anthony Vendetti with Maxim Group. Please go ahead.

Thanks. I was wondering, do you have the cost per pipeline add?

Yes, it was $1,226.

$1,226. Okay, great. And then, I'm just curious, obviously a lot of companies deal with this denied claims, right? And then there's their appeal process, recovery process. What percent of denied claims are you able to recover over time?

So denied claims, like we file an authorization request, not even a claim, but most of the denials come at the authorization stage.

Yes, okay, sure. Let's say the authorization was initially denied, and you go back and appeal or you try to make the medical necessity case, what percent of those do you get overturned?

Well, historically, we had been winning about 40% to 50% of those over time. That percentage has come down somewhat, but the time has also been lengthened. I mean, I've recently met a patient who's been in the pipeline for over two years before he finally got his approval of his MyoPro. So, that timeline can stretch out. That's why we're pleased that we're able to serve these Medicare Part B patients more readily right now.

Okay, okay. And then, in terms of just getting physicians comfortable, do you have specific physician training goals for '25?

Well, what we do is when a patient is qualified for MyoPro, we send them to their physician. They have to have an evaluation by the physician and get all the clinical documentation, get a prescription and so on. At that point, we will send that physician one of our MyoPro brochures. We make them knowledgeable about the fact that there's clinical research available. And then, one of our local clinicians or our chief medical officer will reach out to that physician to educate them about the MyoPro. We're also starting to attend more of the conferences that physicians attend. These are rehabilitation medicine physicians and others. So, we're getting the word out that way with a lot more speaking engagements as well.

Okay, great. And then, this is probably more of a financial follow up. So, you said you're going to at least double the advertising budget to $6 million this year. Did you say CapEx overall should be greater than $10 million for 2025? And if not, if you could just clarify.

Oh, no, no. Yes, no. CapEx will be fairly low. We had CapEx recently over the last quarter or two just because of our move to the Burlington facility here. We had to furnish it and things like that. But there'll be some smaller amount of CapEx as we move into the last 7,500 square feet here in Burlington by mid-year. But overall, I would not expect CapEx to be -- it's not, I would think a million dollars or less for CapEx.

Oh, okay. So, you're going to up the advertising budget to around $6 million. But the move is largely done to CapEx for 2025 around a million. Got it.

Yes, except, like I said, except for the last 7,500 square feet that we'll furnish and equip in mid-year.

Okay. That's helpful. Thanks for the clarification. I appreciate it. I'll hop back in the queue.

The next question is from Sean Lee with H.C. Wainwright. Please go ahead.

Thank you, and good afternoon, Paul and Dave, and congrats on a great quarter and year. For my first question, I just wanted to dig in a little deeper on the reimbursement front. So, for the authorization denials, what are the main reasons that you're seeing for these denials? And is there anything that the company can do to reduce their frequency?

So the main reasons for a denial an insurance company will present is they'll say, well, the device is experimental and investigational. And we knock that down because we say, look, we've already had 3,000 of these units paid for. CMS has approved this device for coverage. So, obviously it's not experimental, investigational. The VA has approved the device for 10 years now. The other one would be medical necessity. And that's why we depend on the physician's medical documentation, pointing out that this is reasonable and medically necessary for these patients based on their chronic arm paralysis. They tried everything else, occupational therapy, maybe Botox, other interventions. This is the least costly, most functional option at this point. And many of these insurance plans will pay for an arm prosthesis. So, if you were an amputee and you lost an arm or a hand, those policies will cover that type of device to restore function. The MyoPro does the same thing without having to have the amputation. In fact, we saved some arms from amputation because the patient has discovered a MyoPro. So, that's how we try to knock down those arguments. Our Chief Medical Officer, Dr. Kovelman, has meetings with these medical directors to make the case. And we'll testify in front of ALJ judges to make that case and we win a number of those cases.

Great. Thanks for the additional color. With regards to the O&P channel for 2025, what sort of growth can we expect from that versus compared to your traditional advertising?

Yes, we mentioned, I think I answered this question a little bit earlier. The O&P channel was about somewhere in the neighborhood of a million dollars, give or take a few hundred thousand in 2025. And we expect, we're not giving specific guidance for that channel in 2025, but we expect the growth of that channel to be meaningful in 2025.

I see. Thanks. And my last question is on the international market, how should we think about that in 2025?

Well, Germany's performed very well. Many of the statutory health insurance plans there are covering the MyoPro. We have over 100 O&P clinical partners trained and up and running around the country. So, our German team has had a steady track record of growth year-over-year. They're expanding their marketing. They're expanding their clinical staff and business development staff. So, we should see that market continue to grow and we continue to invest in Germany. Opening other international markets is more time consuming, A couple of years of investment to get reimbursement, just like we had to invest here in the U.S. and in Germany. So, our approach is at this point, let's keep doing what's working, which is growing the German market to over 80 million population. So, that means there's over 800,000 paralyzed arms in the country. And again, we're just an early stage of penetrating that very large market. It's a good economy overall, despite some near term turbulence here. But they like high tech products and they've got a very good health care system.

Great. That's all I have. And thanks again for taking my questions.

Thank you, Sean.

[Operator Instructions] The next question is from Edward Woo with Ascendiant Capital. Please go ahead.

Yes, I also like to give my congratulations on a great quarter and keep it up. My question is on the tariffs. Are there any risks to your 70%, 71% gross margin with possible tariffs? And also, will the tariffs impact your sales into Germany?

Well, right now, I asked our supply chain team to look at this. We don't see any impact on the tariffs for what we've purchased right now. Most of it is sourced from the U.S. A little bit small, low cost components from China. But that should be de minimis and so on. Right now, there are no tariffs coming back at us for our exports to Germany, but it could raise the price to the own providers there in Germany, which they may be able to mark up to the insurance companies. That's still to be determined. And as you know, the tariffs are on one day and they're off the next day.

That sounds good. Well, thanks for answering my questions. I wish you guys good luck. Thank you.

All right. Thank you, Edward.

This concludes our question-and-answer session. I would like to turn the conference back over to Paul Gudonis for any closing remarks.

Well, thank you, operator. Well, I want to thank the Myomo team here in the United States and in Germany, our growing network of O&P clinical partners. We have hospital therapists, who help patients regain mobility, and our investors who support our mission in making this life-changing technology available to a large patient population that had been previously told, get used to it, we'll never use that arm again for the rest of your life. I'll close with a case study of one of our MyoPro recipients that was provided to me by Mark Werner of Arise O&P, a center of excellence in Arizona, about one of his Medicare Part B patients. He recently fit a 58-year-old male who had suffered a stroke 12 years ago, which affected his right dominant arm. This husband and father of two children was not able to find employment following his stroke, forcing him to take on the role of Mr. Man instead. Since being fit with his MyoPro gene, he's made tremendous gains. He's regained increased active range of motion in his right elbow and hand, as well as his right shoulder. After two months of using his MyoPro, his increased strength is such that he can now carry a bag and perform other household tasks with his right arm. He's also experienced reduced spasticity and tone in his right arm from using his MyoPro, enabling him to return to jogging on a treadmill at his gym as a result of the restoration of reciprocal arm swings. His success with his MyoPro and his desire to help other people with arm disabilities has now led to his new role as a MyoPro ambassador for Arise O&P. The stories like this that drive us forward by continuing to serve more individuals directly and through our partner O&P clinics, we'll keep building a growing and profitable company. Thanks 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.