Good day, and welcome to the Myomo Third Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tirth Patel, with Alliance Advisors IR. Please go ahead.

Thank you, operator, and good afternoon, everyone. This is Tirth Patel with Alliance Advisors IR. Welcome to the Myomo Third Quarter 2025 Financial Results Conference Call. Joining 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 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, 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 Securities and Exchange Commission. Actual outcomes and results may differ materially from what's expressed in 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, 11/10/2025. It's now my pleasure to turn the call over to Myomo's CEO, Paul Gudonis. Paul, please go ahead.

Thanks, Tirth. Good afternoon, and thank you all for joining us today. I'm pleased to announce that Myomo had another strong quarter with revenue of $10.1 million, coming in at the high end of our expectations. This was driven by record revenues in our international markets and a growing number of O&P providers. In addition, we saw our pipeline increase, and for the first time this year, our quarterly authorizations and orders increased sequentially. We are seeing more Medicare Advantage payer authorizations and orders from the new in-network contracts we signed earlier this year. Now before turning the call over to Dave to review the financial results in detail, I'd like to touch on the progress we made during the quarter on the key initiatives that we outlined on our last call. These were to: one, improve the identification and qualification of prospective patients; two, expand the MyoConnect program and O&P channel; three, expand insurance coverage; and four, reduce our overall operating costs. First, as mentioned, the core area of focus has been improving the identification and qualification of prospective patients. The number of new patient candidates who qualify for MyoPro is growing, and with the shift in our advertising media mix, the cost per pipeline add is beginning to decrease. In Q3, we shifted more of our advertising spend to TV from social media, which yielded a higher percentage of leads that met our clinical criteria to become a successful patient. These candidates were also more motivated to quickly complete the screening process. Thus, we enhanced the quality of our pipeline adds as well as generating a sequential increase in the number of candidates in the pipeline. We hired a new head of marketing with extensive experience in healthcare direct-to-consumer advertising as well as B2B marketing to support our…

Thank you, Paul, and good afternoon, everyone. Let me start with a review of our third quarter financial results. Revenue for 2025 was $10.1 million. This represents a 10% increase versus the prior year and was driven by a higher number of revenue units offset by a lower average selling price or ASP. We delivered 186 MyoPro revenue units during the quarter, up 16%, with 57% of those units from authorizations and orders received in the third quarter. Our ASP decreased 5% versus the prior year to approximately $54,300 and was roughly flat sequentially. ASP in the prior year period was unusually high due to the change in revenue recognition for Medicare patients to be upon delivery instead of payment. In that period, we began recording Medicare and some supplemental revenues at delivery in addition to some at payment on deliveries prior to the accounting change. This had about a $4,300 favorable impact on ASP in 2024. Normalized for the accounting change, ASP increased 3% year over year. Medicare Part B patients represented 54% of revenue in the third quarter. Medicare Advantage revenue was 18% of third quarter revenue and in dollar terms was down 18% compared with the prior year. Medicare Advantage revenue remained constrained by the high number of pre-authorization denials, forcing us into an appeals process in order to serve these patients. This is not unique to Myomo. Unfortunately, insurance companies force patients into this process, hoping they will not appeal. And while successful appeal rates vary, we typically see about 45% to 50% overturned on appeal for those that stay engaged with us in the process of trying to receive a MyoPro. 73% of revenue in the third quarter came from the direct billing channel, compared with 81% in the prior year quarter. International revenue was…

Thanks, Dave. Operator, we're now ready to take our attendees' questions. Thank you.

We will now begin the question and answer session. And while we're waiting for the first question, I'd like to mention that we will be attending the Craig Hallum Alpha Select Conference in person in New York City on November 18. Hope to see some of you there. Okay, operator, whenever you're ready, let's take the first question.

Yes. First question comes from Chase Knickerbocker with Craig Hallum. Please go ahead.

Good afternoon. Thanks for taking the question. So maybe just to start, could you help us quantify the scale of your U.S. O&P business at this point? So just from a domestic O&P perspective, how many units did you ship into that channel in the third quarter just to help us think about how that business is scaling?

It was about $900,000, and I must say it was roughly 30 units, but I'll get you the exact number.

No worries. That's helpful. And then maybe just as far as your new Head of Marketing goes, can you just cue us in on what kind of levers were identified as far as potential avenues for improvement in terms of reducing customer acquisition costs? I respect that you're becoming more focused on MyoConnect here, but just kind of within that direct billing channel, any levers that were initially identified as far as we need to be doing this, need to be doing this better, etcetera?

Yes. During the interview process, Chase, we were looking for people who had experience in various media: social media, television, YouTube, other channels. And so we're looking at that and doing a comprehensive review right now of, okay, how effective is our television advertising? Are we using social media the right way? What else should we be doing to again generate more leads at a lower cost per lead for qualified patients? So that's the review that's underway right now. And she started about two weeks ago.

Got it. Maybe just kind of turning to the pipeline, etcetera. There was a noticeable uptick as far as backlog drops are concerned. Can you just kind of walk us through what might be the driver there, kind of what you saw in the quarter as far as how the backlog progressed?

Yes. I think a lot of the backlog drops, I would say about 40% of them came from Germany as a result of what I think was, I don't think the backlog in terms of some of those trials that did not convert was updated, and I think there was some cleanup that went on in the third quarter. And so I think part of that higher number of backlog drops is due to that. So like I said, about 40% of those drops related to that, with the rest just normal activity.

Got it. Maybe just last one for me, Dave. Is this the right way to think about OpEx for the foreseeable future? I mean, how should we be thinking about OpEx kind of building off of Q3 levels? And then along those same lines, if you could just talk about how you guys are thinking about the time to return to positive adjusted EBITDA and kind of how you're managing the business with that in mind?

Yes. So I think in terms of the operating expenses, our plan is to, there is going to be some growth in the operating expenses. For example, we do intend to spend more on advertising, though not as much of an increase as in 2025. We are going to spend more on R&D, particularly for that randomized control trial that we're funding that I mentioned earlier. But other than that, our intention is to not grow the operating expenses as much as possible. And we want to be generating and showing that we can generate operating leverage and grow revenues faster than operating expenses. And in terms of when we get back to positive adjusted EBITDA, again, we'll provide more of an update when we give our 2026 guidance.

Understood. Thanks for the questions.

Thank you. The next question comes from Scott Henry with AGP. Please go ahead.

Thank you and good afternoon. A couple of questions on the metrics. I guess first, reimbursement or not reimbursement, but pipeline adds, they were up slightly in Q3 to Q2. Do you think you could still see big gains there, or is it going to be harder at some point, there's a saturation level? Or is it maybe it's just flattening before jumping higher again? How do you think about that pipeline add or that top of the funnel?

Well, Scott, given the size of the market opportunity, of the prevalence and a quarter million new cases just in the U.S. every year, I don't think we're near saturation. I think we've got to find better innovative ways to reach those patients. But also, I think through the O&P channel referral program, I'm expecting we're going to see more of our patient pipeline adds coming through those channels. And so I expect that's what's going to drive more growth not only this quarter but into 2026 because there are so many people coming out of these rehab hospitals and stroke clinics with a paralyzed arm. We want to make sure that they know about the MyoPro because what we found is they are more medically qualified. They pass our screening criteria because they are more recent to their stroke. We also find that they're more motivated because they might have just lost their ability to use that arm a year ago versus twenty-five years ago. So you don't have that sort of patient inertia. That's why we want to capture more patients in the prep in incidence population. I think we'll grow the pipeline, but also improve the quality of the pipeline.

Okay. All right. That's helpful. Thank you. And then when we think about Q4, you're going to have a smaller backlog entering Q4 than you did entering Q3. And typically, the quarter before you use backlog is an indicator for what we should expect in the next quarter. So I know your guidance targets growth, but if you could just kind of walk through sequential growth from Q3 to Q4, if you could just talk about how you're going to do that with a smaller backlog? It may just be other levers that are pulling, but I just want to get a better understanding from your perspective. Thank you.

Yes. Well, it's obviously going to come from fill units and from authorizations and orders that we get inside of the quarter. You're correct that the backlog is lower. But we've also been demonstrating that as we get authorizations and orders, our operations are actually able to turn them into revenue faster. And so that's what we plan on seeing, that growth in the fourth quarter coming from.

Okay. So we should expect that to continue and even accelerate, that day trippers, if you will, people that come and go in the same quarter.

I think as the authorizations and orders go up, I think that we will probably, the number of fill units that we have just in whole numbers will probably also go up as we go through time.

Okay, great. And then I guess final question, and it's somewhat strategic. It's always a little higher risk profile to take on debt when you're losing money. The question is, is this a sign that you think, I mean, obviously, you have eighteen months runway before you have to start paying it back. But do you feel based on your ability to take this debt that eighteen months from now, you could be close to breakeven? Just trying to get a sense of the decision to take debt over equity, even though I know you're not probably happy with the share price, but certainly debt has a degree of risk that comes with it.

Sure. First off, I guess, we would not have done this transaction if we didn't feel like we could pay it back. That was really the first criteria. And so, I think that also sort of says that before in the eighteen months that we, before we started having to pay this back, we would expect that we're not burning cash by the time we get to that point. That's so we're managing the business that way through continuing to grow revenues. And by holding down the growth in operating expenses and generating more incremental operating income from those additional revenues. So we feel like that we could pay it back. Obviously, that was the first criteria. And then it was the best combination of capital that was provided to us with the minimum amount of dilution. And so we've been very consistent that if we were to look for additional, we wanted to do it in a way that was the least dilutive way possible. And we feel that we accomplished that.

Okay. Thank you for that insight into the decision-making. I appreciate that. That should do it for me. Thank you for taking the question.

All right. Thanks, Scott. The next question comes from Anthony Vendetti with Maxim Group. Please go ahead.

Hi, it's Anthony. So Paul and David, in terms of the O&P clinics, how many have been trained so far? Do you have a goal in terms of the number you'd like to have by the end of '25? Or by the end of '26? And then, I was wondering if you could discuss a little more of the details of MyoConnect. What's behind that initiative and what do you hope to accomplish there? Thanks.

Yes. Hi, Anthony. So we've been training a lot of O&P clinicians, but in various stages of their certification process. For example, a couple of hundred have taken the online training program on how to evaluate a patient. And then those that have moved forward to get that patient into an evaluation, we show up in person with our clinical team to do the evaluation with them. So there's that additional training. Then they have to fit up three units in order to become fully certified. That number is growing. The good news is we've got a lot of interest among Hanger clinicians around the country. We've got the other major firms like Ottobock has a number of clinicians, O&P has its four motion clinics, and Equal, there's like 90 clinics. So we continue to do seminars on reimbursement, on clinical training, on how to do the marketing as well. So our goal is to have a couple of dozen, I would say, that are actively placing orders this year, and our goal is to continue to expand that. I think what you'll see is, I've mentioned this in previous calls, someone will do one order, see how it works out for their patients, get good outcomes, make sure they get the reimbursement check, they'll do another one, and that starts to take off from there. As far as MyoConnect, one of the assets we have is we've got a dozen field clinicians, primarily occupational therapists, who are well-versed in the MyoPro. They're in these rehab hospitals all the time, training therapists on how to work with users who get a new MyoPro. We train some 80 to 100 therapists every month, and in the process of doing so, we conduct in-service presentations, and we're seeing a growing number of clinical referrals now. And we think that will be a real source because the strategic shift that I'm looking to execute here is from one-time sort of advertising-driven orders from a patient to recurring sources of patients. So that's O&P providers in the U.S. and Germany and rehab hospitals who will hopefully provide us with a steady flow of new patient candidates. So that's the outline of the MyoConnect program.

Okay. And then just lastly, maybe more for David, but just in terms of getting to breakeven, any update on what that quarterly revenue run rate needs to be or timeline for getting there?

Well, when we did the headcount reduction earlier this year, prior to that, we kind of gave some guidance of about $17 million to $18 million of quarterly revenue was required to breakeven. I think after that headcount reduction in July, you probably shaved about $1 million a quarter off of that. So I would say around $16 million to $17 million.

Okay, great. All right, thanks. I'll hop back in the queue. Appreciate it.

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

Hey, good afternoon, guys, and thanks for taking my questions. I just have two quick ones. First, I think you mentioned it's $1.8 million of revenue from Germany this quarter. It seems to be increasing quite well. So I was wondering if you can provide some color on that. What's behind the increase there?

Well, we've got a network of 100 O&P channel partners there that have been developed over the last several years, Sean. And in Germany, we've had very good success with the statutory health insurers so that virtually anyone in Germany who medically qualifies for the MyoPro can get access to it. We don't have to go through the same type of pre-authorization hassles that we sometimes face here by some payers. We have to appeal these and so on. So patients that are medically qualified can get a MyoPro, and that's helped drive the growth there in Germany.

I see. Thanks for that. And my last question is on the advertising spend. So do you think you've reached a new plateau now with the advertising spend following your switch to more focus on TV? Or do you expect that to go up more in Q4? And how does that impact your pipeline? How do you expect that to impact your cost per pipeline add?

Well, as I mentioned a little bit earlier, we are intending to spend more on advertising in 2026 but not at a rate of growth like we did in 2025. So the growth rate in advertising spending will be lower in 2026 versus 2025. But I think the bigger impact might be from MyoConnect and some of the efforts with the O&P channel in terms of growing the pipeline adds. And obviously, I think there's, for dollars that we invest in advertising, more pipeline adds come from that. But we're looking to increase the quality of the pipeline adds because, as Paul mentioned, people that are in the incidence population that the MyoConnect program is really targeting, those people are closer to their pre-stroke life in terms of what they remember what it was like before the stroke. And so we think that they're going to be more motivated. The quality of the pipeline should improve. And so a pipeline add overall, as the mix of patients that come from referrals and from the O&P channel increases, the conversion of those pipeline adds to revenue should increase over time. That's the intent of doing this. And we're doing MyoConnect with the people that we have today. So right now, we're not spending more for it. And so those are the reasons why we're doing it and why we think that the pipeline adds should grow, but not only that, but the quality of the adds should grow in 2026.

Okay. And that does make it a lot clearer. Thanks for that. That's all I have.

All right, Sean. Thank you.

The next question comes from Edward Wu with Ascendiant Capital. Please go ahead.

Yes. Thanks for taking my question. It looks like International Germany continues to do very well. How is the rest of your international business? And any updates on your partnership in China?

Ed, you've always been a proponent and an early spotter that Germany is going to be a really good market for us. I think we validated your thesis on that. So again, Germany is growing with a growing pipeline. We expect continued record revenues next year. Other international markets, we've just decided we're not going to spend a lot of money at this point to try to get reimbursement, which is a couple of year process there. From our last call with the China JV, they're still conducting a clinical trial to get NMPA approval. So not much progress over there, but it doesn't really cost us anything at this point. We're just regularly engaging with management of the JV.

Great. Well, thanks for the update and congratulations on Germany. And I wish you guys good luck.

Thank you, Ed. Thank you. Operator, any more questions?

No. There are no further questions. I would like to turn the conference back over to Paul Gudonis for closing remarks.

Well, thanks. Well, just to summarize our business plan going forward, we expect continued revenue growth through our direct-to-patient marketing as well as expanding O&P channels as we discussed here in the MyoConnect referral program. We're increasing market access for patients by signing additional payer contracts and engaging with the Medicare Advantage and commercial plans for coverage. We're managing our cost structure as Dave described and enhancing our manufacturing processes to demonstrate operating leverage as we scale, and we continue to innovate product development to maintain our market leadership position. Thank you all for your questions and for your interest in Myomo. We look forward to speaking to you again when we report our Q4 and full-year 2025 financial results in about four months. Have a nice evening, everyone.

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