Myomo Inc.

Good day and welcome to the MIOMO third quarter 2024 financial results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Tim, I'm sorry, to Kim Golodetz.

Please go ahead. Thank you, Operator, and good afternoon, everyone. This is Kim Golodetz with Alliance Advisors IR. Welcome to the Mioma Third Quarter 2024 Conference Call. Earlier this afternoon, MyOMO issued a news release announcing financial results for the three and nine months ended September 30th, 2024. If you would like to be added to the company's email distribution list to receive future announcements, please register on the company's website at myomo.com or call Alliance Advisors IR at 310-691-7100 and speak with Danny Chertok. With me on today's call from IOMA are Paul Godonas, Chairman and 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 MIOMA's business, financial condition and operating results. These and additional risks, uncertainties and other factors are discussed in MIOMA'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 CEO, Paul Godonis. Paul, please go ahead.

Thanks, Kim. Well, good afternoon, everyone, and thanks for joining us today. We achieved another quarter of strong growth in the third quarter of 2024, building on our momentum since the Medicare fees for the MyoPro powered arm braces went into effect beginning April 1st. We're now able to serve the many patients in the US who are covered by standard Medicare Part B And we achieved quarterly records in important business metrics, including revenue, revenue units, pipeline ads, border rent pipeline size, insurance authorizations and orders, and MioPro shipments. But with the reclassification of the MioPro into the brace category and the publication of the Medicare allowable earlier this year, we established three major objectives for the company. Start providing the MyoPro, the eligible standard Medicare Part B beneficiaries who we had to turn away before. Engage the many orthotics and prosthetics clinics across the country who 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'll provide a status report on these initiatives by reviewing the key data points across our revenue cycle, from patient candidates who are interested in MyoPro through to revenue units in the quarter. We added 645 medically qualified candidates to the patient pipeline, which is up 69% from the year-ago quarter as our addressable market is increased to include Medicare Part B patients that did not have access to the MyoPro in the past. Our marketing efficiency also improved with the cost per pipeline ad down 25% from last year to $1,618 per qualified ad. We received insurance authorizations and orders for a record 225 MyoPros in the third quarter, including medically qualified Medicare patients, which was up sequentially and also up 44% year over year. Revenue units based on devices delivered to patients or payments received totaled 161 MyoPros, up 35% from a year ago, and the ASP, or the average selling price, increased to an adjusted $52,700 per unit, as Dave, our CFO, will explain. As a result of more MyoPro volume and a higher ASP, our product revenue is a record $9.2 million, up 83% over the same period in 2023. These revenue units included 87 myopros delivered to Medicare Part B beneficiaries, and this is in addition to the shipments to Medicare Advantage, VA, orthotics and prosthetics clinics, and international customers. With the large number of additions to the patient pipeline, we exited the quarter with 1,263 candidates in the process of obtaining a physician's order and the necessary medical documentation for a myopro. And with a large number of new orders, our backlog stood at a record 316 units, which represents over $16 million of potential revenue. As for developing the O&P channel, in September, we attended the American Orthotics and Prosthetics National Association Assembly, which is the largest conference for orthotics and prosthetics, or O&P clinics, in the U.S. With clarity on Medicare Part B reimbursement, we're now able to recruit these O&P clinics to provide the myoprobe to stroke survivors, knowing that this is a patient population they already serve with ankle, foot orthoses, and other braces. Our team of business development managers and clinical trainers serving this O&P channel is up and running, and we have a standing room only crowd of more than 100 clinical professionals attending our manufacturer's workshop at the conference. To train these clinicians on the MyoPro, we launched the MyoOmo Academy, which is an online learning platform specifically for O&P professionals. We're also conducting a number of in-person training sessions as part of the certification program for O&P clinics to become a MyoPro center of excellence. These training sessions have included many independent O&P clinic owners and CPOs, which are certified prosthodontists, orthodontists, as well as Hanger Clinics, which is the largest nationwide operator of O&P clinical facilities. We set a goal of recruiting and training 100 clinicians by the end of this year, and I'm pleased to report that we've already surpassed that goal. These prosthetists and orthodontists are now starting to evaluate patients, and after they receive the necessary medical documentation, they'll begin to place orders for custom eye opal for their patients. We've already seen an uptick in activity from the O&P channel, and we expect that O&P orders will increase in 2025 as their patient pipelines are growing. Order can take several months for patients to see their primary care or other qualified physician and to obtain all the necessary clinical notes, which are required before a mile per order can be placed. While our direct provider business with Medicare, our international operations, and our progress with the O&P channel have been going well, I'm frustrated with some of the Medicare Advantage plans. Rather than following Medicare's lead in covering the MyoPro for their members, we've seen mixed results from these payers so far. It's been widely reported that some Medicare Advantage payers are making it more difficult for patients and providers to get the care they deserve, which is what we are seeing as well. As a result, more authorization requests are being denied initially, forcing us to file more appeals for pre-authorizations with some plans. On the other hand, some Medicare Advantage plans that did not cover the MIOPRO in the past have started to do so, which is a good thing for their members. Additionally, the good news is that we've seen some of the Medicare Advantage plans pay a more appropriate amount now that the Medicare allowable rate has been published. As for the third objective, contracts with payers, since this year's developments with Medicare, our chief medical officers have been working with private payers to begin the contracting process for Myomo to become an in-network provider. While this can be a multi-year process due to the meetings required with medical directors and then the contracting staff, we recently announced we've entered into our first two contracts, one with Blue Cross Blue Shield of Massachusetts, another with Paradigm, which is a leading workers' compensation organization. Together, these two payers represent 3 million covered lives at the Blue Cross Blue Shield plan, plus employees served by Paradigm for workplace injuries. We have other ongoing dialogues with other payers, which we believe will lead to additional contracts down the road. With the growth in the pipeline, orders, and channels even adding capacity to meet demand, We've gone from about 100 employees at the beginning of the year to 180 now, and we'll be moving to a larger production facility in the Boston area later this year to accommodate the expected growth in shipments this quarter and in the future. As I mentioned, our international operations based in Germany continue to perform well, with a record $1.1 million of revenue in the quarter. Also, our China joint venture, Jiangxi Myomo, is making progress in obtaining the necessary regulatory approvals from the NMPA, equivalent of a Chinese FDA, to begin sales and production of Myomo units, in addition to undertaking a clinical trial with some key hospital partners as part of their market access plan. We don't expect much in the way of revenue from China at this point, but we're getting well-positioned to capitalize on this very large opportunity. 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 with some additional comments on our business plan.

Dave? Thank you, Paul, and good afternoon, everyone. Let me start my remarks with a review of our third quarter financial results. Revenue for the third quarter of 2024 was a record $9.2 million. This consisted entirely of product revenue and was up 81% over the prior year quarter's total revenue. which included a payment under our licensing arrangement with a joint venture company in China. Product revenue was up 83% over last year's third quarter. Product revenue growth was driven by a record 161 MyoPro revenue units, about 35% year over year. Our average selling price, or ASP, was also a record at approximately $57,200. ASP was favorably impacted by supplemental insurance payments in the third quarter on revenue units recognized in a prior period. This is the result of the transition to recognizing revenue on delivery to Medicare patients effective July 1, 2024. Excluding these payments, ASP was $52,700 in the third quarter, still a record high. Medicare Part B and certain commercial payers were recognizing revenue at delivery in an amount expected to be paid by both the primary and supplemental insurance payer, with the exception of Medicaid. Note that Medicare Advantage payers are, in most cases, now reimbursing this based on the fees published by CMS. As a result, 94% of third-quarter product revenue was recognized at either shipment or delivery, compared with 76% in the year-ago period. Fifty-five percent of product revenue in the third quarter came from Medicare Part B patients, up from 47% in the second quarter, reflecting our success in reaching out to and educating these patients on the benefits of the MyoPro. Revenue from patients with Medicare Advantage plans represented 24% of third quarter revenue, and Medicare Advantage revenue was down 26% year-over-year. A challenging reimbursement environment with Medicare Advantage plans continued in the third quarter, which is resulting in fewer first-time authorizations and more denials, leading to more administrative law judge hearings in order to obtain an authorization for the patient. Our success rate with ALJ hearings remains constant at around 40 to 50% of cases. However, as Paul mentioned, we're seeing some good news. and that certain Medicare Advantage payers that were previously not reimbursing for the MIOPRO have begun providing preauthorizations. Of the 161 revenue units in the third quarter, approximately 24% resulted from fill, which is our term for authorizations on orders received and converted to revenue in the same quarter. Driven by revenue from Medicare Part B patients, 81% of our revenue in the third quarter came from the direct billing channel, compared with 69% in the prior year quarter. International revenue was a record 1.1 million in the third quarter, representing 12% of third quarter revenue, which primarily came from Germany. In the third quarter of 2024, both pipeline additions and total pipeline reached new records. The pipeline was 1,263 patients at the end of the third quarter, an increase of 21% year-over-year. There were a record 645 additions to the pipeline in the third quarter, an increase of 69% year-over-year. Of the pipeline additions in the third quarter, 30% were Medicare Part B patients, about 15% of the total pipeline at the end of the third quarter were Medicare Part B patients. This reflects the increased velocity in moving Medicare patients through the process of obtaining a mile pro as compared with payers that require a pre-authorization. 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 from whom we've collected medical records and de-qualified for delivery based on our inclusion criteria. Our backlog at the end of the third quarter was a record 316 patients, 71% from our backlog at the end of third quarter 2023. Ending third quarter backlog includes 114 Medicare Part B patients that have either been qualified for the delivery with appropriate medical documentation or have received their MyoPro and claims have not been filed, but that's very small now in the overall percentage. A payment is not, excuse me, The Medicare portion of the backlog increased 19% sequentially. Contributing to our backlog was our record 225 authorizations and orders, an increase of 44% year over year. Gross margin for the third quarter of 2024, coming entirely from product sales, was 75.4%, compared with 68.7% for the prior year quarter. The increase was driven primarily by the higher ASP I mentioned and by higher fixed cost absorption. excluding the licensed revenue gross margin on product sales with 68.4% in the third quarter of 2023. Operating expenses for the third quarter of 2024 were $7.9 million, an increase of 43% compared with the third quarter of 2023. This increase was driven primarily by the higher headcount throughout the organization to increase capacity and to accelerate completion of certain engineering projects and new product developments. In addition, advertising expense of $1 million was up 23% year-over-year as we successfully undertook efforts to increase the number of patients at the top of the funnel. Cost per pipeline ad was $1,618, which was down 25% compared with the prior year quarter. Operating loss of the third quarter of 2024 was $1 million, which is half the $2 million operating loss for the same period a year ago. Net loss for the third quarter of 2024 was $1 million or $0.03 per share. This compares with a net loss of $2 million or $0.06 per share for the third quarter of 2023. Approximately 7.7 million pre-funded warrants are still outstanding from our offerings in 2023 and in January 2024. These pre-funded warrants are considered common stock equivalents under GAAP and are included in our weighted average shares outstanding. Adjusted EBITDA for the third quarter of 2024 was a negative $600,000 compared with a negative $1.7 million for the third quarter of 2023. Looking at our year-to-date financial results, revenue for the nine months ended September 30, 2024 was $20.5 million, up 41% compared with the same period a year ago, and product revenue increased 61%. Year-to-date gross margin was 71.1%, compared with 69.6% in the year-ago period, or 65.4% excluding license revenue. Operating expenses for the first nine months of 2024 were 20.5 million, an increase of 29%, compared with the same period a year ago. Operating loss for the first nine months of 2024 was 6 million, compared with an operating loss of 5.8 million for the same period a year ago. Net loss for the first nine months of 2024 was $5.9 million, or $0.16 per share, compared with a net loss of $5.7 million, or $0.21 per share, for the same period a year ago. Adjusted EBITDA was a negative $5.3 million for the first nine months of 2024, compared with a negative $4.9 million for the year-ago period. Turning now to our balance sheet and cash flows, Cash equivalents and restricted cash as of September 30, 2024 were $7 million. Cash used in operating activities was $1.5 million for the third quarter of 2024 compared with $1.7 million for the third quarter of 2023. Operating cash flow in the third quarter was impacted by a payment delay from CMS in the last few weeks of the quarter due to a transition from check payments to electronic payments. Payment hold was mandated by CMS while our bank accounts were being verified. That delay pushed roughly $600,000 of payments into the fourth quarter. As of today, we're being paid electronically by all of the billing regions, and they have caught up and paid the outstanding claims from September. Restricted cash of $375,000 consists of funds held by our bank to collateralize a letter of credit, which represents the security deposit for our new headquarters building. We expect to occupy the building by the end of the year. We have an accounts receivable line of credit with Silicon Valley Bank that provides for borrowing of up to $4 million based on 80% of eligible accounts receivable as defined in the agreement. As of today, we have not drawn on the credit line. We believe our cash and cash equivalents are sufficient to fund our operations for at least the next 12 months. Turning to our financial guidance, Given our backlog, we believe we are positioned for a third consecutive quarter of record revenue. We expect revenue for the fourth quarter to be in the range of $9.5 million to $10.5 million. This represents between 100% and 121% year-over-year growth. As a result, we're raising our full-year revenue guidance to $30 million to $31 million, up from our previous guidance range of $28 million to $30 million. We are also reiterating our expectation that based on this revenue guidance, operating cash flow breakeven is still achievable in the fourth quarter. We also expect to approach adjusted EBITDA breakeven in the fourth quarter. However, in order to achieve these targets, we assume no supply chain disruptions, no delays in the receipts of expected payments, including a contractual reimbursement from the landlord of our new facility, and no increase in day sales outstanding. With that financial overview, I'll turn the call back to Paul.

Thanks, Dave. Well, we're looking forward to a strong finish to this transformational year as the clarity of reimbursement with Medicare coverage and payments has been a significant inflection point for IOMO. In addition to the continued growth in quarterly revenues in Q4, we continue to build out the O&P distribution channel. In fact, this week we're attending a major regional O&P conference in New Jersey that's being attended by several hundred clinicians, and we're scheduling more training classes. We also received a very positive comment from a Hanger Clinics executive after participating in one of our recent sessions telling us that our manufacturer's training was among the best that clinicians have ever experienced, and I'm really proud of our team. 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. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, Please press star, then two. At this time, we will pause momentarily to assemble our roster.

Before we turn to your questions, I want to mention that we've participated in several conferences in the past 60 days, including the H.C. Wainwright, Lake Street, and Maxim conferences, and we will be attending the 15th Annual Craig Hallam Alpha Select Conference in New York City on November 19th. We're also available for virtual and in-person investor meetings. So to arrange a meeting, contact the conference organizer or call Alliance Advisors IR who can assist you to schedule one. Okay, operator, we're ready for the first question if you are.

Okay. The first question comes from Chase Knickerbocker of Craig Hallam. Go ahead, please.

Good afternoon. Thanks for taking the questions, and congrats on the great progress here. Just first, Just around ASP, what percentage of Part B patients is supplemental insurance or Medicaid kicking in to kind of pay that last 20%? And then I think kind of just backing up, how are you thinking about ASPs? Obviously, almost 53,000, very strong, right around that 80% of your max allowable. Do you think we still have, you know, room to go higher on kind of portfolio ASPs, or should we think about this being, you know, pretty close to the ceiling? Thanks.

Yeah, the 527 was based on, as I mentioned, the fact that these supplemental payments were received in third quarter off revenue units in the second quarter. Now, when we recognize revenue, here going forward for recognizing revenue and the amount that's expected to be paid. So there are some supplemental insurance plans that we believe and we've made the assessment that they're going to pay us. So if it's a Motion G, we will go ahead and recognize $64,000 roughly of revenue at delivery. Now in the case of Medicaid, where we don't have Medicaid coverage yet, which is something we're working on, we will only recognize $51,000, whether secondary coverage is Medicaid. Overall, I would say about 20% to 25% of our patients so far have supplemental insurance coverage where we'll take that incremental revenue at delivery. As to whether the $52,700 represents something, could there be ASP growth in the future? I think... I think that mix of whether these patients have supplemental insurance or not will depend on that. And then once the O&P channel kicks in, I think then we'll probably start to see a lowering of the ASP as that mix changes. But that's more of a 2025 issue.

Makes sense. And maybe just kind of going there on the O&P side, You know, great to hear about the progress thus far and what you kind of have planned through the rest of the year. How do you think as far as kind of how quick those O&P providers can start generating revenue? Do you have kind of an idea yet? And then any early thoughts on next year, Paul, as far as what that channel can contribute from a standpoint of kind of your overall volume? Thanks.

Well, in our experience with these O&P clinicians, they'll first go through the initial training to evaluate patients. Then maybe over the next month or two, they'll have the right patients come into their clinic for an AFO, and they may be a MyoPro candidate. Then I'll evaluate if they're a suitable candidate. They will send that patient to their physician to get the written order, to get all the medical documentation. Our experience with that is it's typically six to eight weeks for patients to get those appointments, come back with documentation. and that O&P provider's got to arrange to do the measurement of that patient's arm to send us the order. So it's a three to four month process after getting that initial training before we'll see those initial orders. And then my experience with this channel two is that they'll want to first fit that first patient, so it might be another 30, 40 days later when they fit that patient. They want to see how the patient does. They'll want to make sure they got that payment, whether it's from Medicare or one of the other private payers. We'll probably see an initial order from these providers over the first six months. Then we'll see another order, another order. We'll start to pick up after that. It's not going to be a step function, but we are bringing a lot of these OMT clinics into the fold. I expect we'll start to see an uptake in orders, especially in the first quarter of 2025.

Got it. And then just, you know, kind of following up on those comments, going to the manufacturing side, you just confirmed that you're still at about kind of 80 units a month as far as production capacity, what you're kind of churning out in your current facility. And then kind of how quickly do you think you can get up and running in the new facility? And then I guess how quickly do you think you'll need that expanded kind of capacity from that new facility? And what do you think you can kind of get out of one shift at this new facility? Thanks. Yeah.

Well, the good news is our manufacturing team has worked really well to get more efficient. You know, we're even exceeding that 80 units per month right now here in our Boston facility downtown. And we've got a very good plan to start a parallel facility set up in the new Burlington workspace. So we'll start manufacturing there in addition to what we've got here in Boston, and then we'll finally migrate all of it by the end of the year. So, you know, I expect that, you know, over the next six months, we ought to be able to double capacity based on all the workstations we're putting in place. And then after that, we can either add more first shift workstations or consider a second shift. So this new space, you know, gives us plenty of flexibility to keep expanding capacity and meet the growing demand.

Great. Thanks, Paul.

Well, actually, and one other thing, too. Sorry. We'll also get... Initially, we're going to move in and we'll occupy about 27,500 square feet for office and manufacturing. And then come June, around June of 2025, we will get another 7,500 square feet of manufacturing space. I think we'll have plenty to meet our needs here as we go to 2025 and beyond.

And we've got a total of 13,500 here in Boston. So you see we're basically tripling the space with most of that expansion for manufacturing. Operator, do we have another question?

Yes, we do. Our next question is from Scott Henry of AGP. Go ahead, please.

Thank you. Good afternoon. Congratulations on continued strong momentum. I'll start at the top of the funnel. New candidate ads, 645, obviously a very large number. Do you think you can grow it much from there, or... You're just trying to get a sense of what capacity is for the top of the funnel.

The answer is yes, and our plan is to continue growing it by, again, advertising expenditures. We did spend more in advertising in Q3, as Dave mentioned. We typically cut back on some of the advertising in Q4 just because we're competing until yesterday with the election advertising. All the Medicare Advantage plans are still advertised until mid-December, and you've got holiday spending there as well. So we can serve some of our spending, but we will continue to grow that pipeline. We've also added in our own direct billing operation, you know, more certified process orthotists. We have a dedicated team to evaluate patients online for that initial screening. So, Scott, yeah, we're planning to continue growing because, again, we're in a very early stage of market penetration given the huge number of people that need this myoprolithosis.

Okay, fantastic. And then, you know, thinking about 2025, if you take your 4Q number, annualizing it, you're already at 40 million. Any thoughts? as to what kind of growth we could see from 24 to 25. And also for Dave, should we factor in kind of, you know, Q1 tends to be seasonably a little weaker for a multitude of reasons. Just trying to get your thoughts on that year.

Yeah, I think, you know, part of what we were doing was spending the money we did on advertising was to try to mitigate, if you will, some of that first quarter seasonality by getting patients into the pipeline so that we can overcome what we typically see, which is, as Paul mentioned, in the fourth quarter, we don't spend as much on advertising. The pipeline ads are usually down in the fourth quarter, but we wanted to build up a pipeline to try to compensate for some of that. It's a little bit early to tell in terms of what, if we can, we'll actually be able to do that. I think we'll have, you know, the metrics that we're able to generate, the ads and things like that, and the authorizations and orders. I think I'll need to wait to see on that before I, you know, give any color as to whether we think that we can overcome some of that seasonality in the first quarter. And I think, you know, in terms of the full year, I'll wait to give guidance until, you know, until March on that, but I certainly sit here and believe that, you know, if we exit fourth quarter on, you know, $10 million, which is the midpoint of our guidance, I think that, you know, I think we'd be disappointed if we had less than $40 million of revenue in 2025.

Okay, thanks. I appreciate that color. Final question, just on the OMP channel, you know, I think Medicare we thought of as kind of a degree of magnitude relative to your base business almost kind of doubled it. How should we think about the peak impact for that O&P channel?

You say the peak impact, meaning over time? I mean, it could be a very large percentage of our total business because most orthotic prosthetics products are actually delivered through the O&P channel. If you look at other manufacturers, whether it's the C-Leg or upper extremity prosthesis and so on. We're very optimistic about building this channel up over time. In the meantime, though, we're going to continue to invest in our own direct provider business because we've shown that we have really, over the last five years, built a really good commercial engine. It's getting more and more efficient all the time in terms of the cost per pipeline add, ability to move these patients through the process to deliver high-quality patient care. So it's a dual growth strategy, the O&P channel plus our direct provider business.

You remind me of this question reminds me of a comment you made regarding Hanger because I think you had a conversation and they mentioned how many AFOs, ankle foot orthoses, they might deliver in a year. There's a good number of those people who get AFOs from Hanger that may be candidates for a Myofro. And I think that could be a very sizable number. That could be in the thousands per year just from Hanger.

That's right. Okay, great. Appreciate the color on that. And thank you for taking the questions. Thank you, Scott.

The next question comes from Anthony Vendetti of Maxim Group. Go ahead, please.

Sure, thank you. You have 316 units in backlog as of September 30th, which is up 71%, which is great. Can you talk about, you know, the value of that backlog and then, you know, when it should be recognized approximately over what time period?

Yeah, so the As you know, you know, the 316, some of those patients will drop out of backlog. It always happens. Typically, you know, that percentage is, you know, somewhere around, you know, 15 to 20% will drop out. And so, you know, that will leave, you know, being conservative, I guess, if you take 20% that may be 250 remain, and if the value of that backlog is the ASP, just say $50,000, you have a value, sort of a net value, I'll say, of over $10 million.

It usually gets realized over the next three to six months.

Yeah, sorry. And then typically the way our backlog will be realized about 35 to 40% will turn into revenue one quarter out. And then, you know, decreasing percentage from there. It depends on, you know, the number of Medicare Advantage payers that are in the backlog and how long it takes, you know, to get reimbursed from them and things like that.

Okay. Yeah, that's helpful. And then, you know, as you've been ramping up, How many direct salespeople do you have now and how many do you hope to have by the end of this year?

Remember, as a clinical services provider ourselves, we really don't have direct salespeople. We have clinicians. These are licensed CPOs who will then evaluate interested patients. We generate that patient demand. primarily through the social media, some television advertising, clinical referrals from doctors and therapists. So they're not really salespeople, they're just clinicians who are evaluating those patients, and then after we get the green light to go ahead and fit them, they will do the fitting, and then we'll just build those patients. On the O&P channel side, we've got two business development representatives. And so their job is to recruit these O&P providers, get them excited about becoming a certified center of excellence.

Okay, so you have two of those on the O&P side.

And how many clinical specialists? Yeah, so we've got 10, plus we just hired a couple more, so I'll call it a dozen right now in the field across the country.

Excellent. And then obviously you have a huge opportunity here in the U.S., Can you talk about your international plans, whether that's something you're looking at ramping now or sometime in 25, or is that more like a 26 plan?

Well, we continue to plan to ramp up, especially operations in Germany, because we're succeeding there. It's a good-sized market. Reimbursement is good with the statutory health insurance companies. We've got a network of over 100 O&P providers already trained there. And so we're adding our own staff there to support these own P providers. And we're basically doubling down there in Germany. We're looking at other markets. It's typically a two to three year process with a new market. Let's say France, for example. Italy, you'd have to put some boots on the ground. You have to meet with the regulators. You have to meet with the insurance company, medical directors. Similar to what we had to do in Germany originally, what we have to do here in the US with payers and CMS. So I think we're going to defer that until we're in a bigger position, revenue-wise, that can afford to make that investment, which, again, it pays off, but it's about two to three years of investment to get there.

Okay, so the focus, because you've been in Germany, will be to continue to build that out, the U.S., and then it sounds like maybe France and Italy will be next, but that's a two- to three-year process to get that built out and ready to go.

In the meantime, we're cheering on our China joint venture partners. They're starting to get the necessary NMPA approval, so hopefully they'll start generating revenue in 2025 and then associated license fees back to us.

Okay, and then last question on the R&D front. Any particular developments there? Any improvements there? or modifications to the current brace that's out there?

We've been expanding our R&D staff, and we've been working on new enhancements in MyoPro 2+. We've taken them out in at-home trials with patients, and we got some good feedback to, hey, make these other changes. So I said, you know what? Rather than introducing product enhancements right now, let's push that out a bit, because I'd rather put in those additional features. It also broadens the number of people who might be qualified for MyoPro 2+. And so you'll see some announcements of that probably in Q1 of 2025.

Excellent. Thanks for all that color. I appreciate it. I'll hop back in the queue.

Thanks, Anthony.

The next question comes from Ben Hainor of Lake Street Capital Markets. Go ahead, please.

Good afternoon, gentlemen. Thanks for taking the questions. First off, congrats on getting the 100 O&P clinicians trained up and, you know, obviously the high praise they received there, that's definitely encouraging. Can you talk a little bit about maybe what the demand looks like for more O&P clinicians to get trained? I mean, how quickly can you train, you know, the next 100 and the next 100 beyond that? You know, just any thoughts there would be helpful.

One of the reasons we invested in creating the Myomo Academy is an online learning platform so that clinicians who are interested, they sign a contract with us, they have access to that, and they can start to do this learning online. We do online classes for these individuals so that they can start that evaluation process. We'll team up by sending our clinicians to go with them to evaluate patients, to do in-service presentations at various rehab hospitals. And we have a plan for, you know, a number of classes in the new year. And so as we see more and more demand, you know, our team, as I said, is in New Jersey at this regional conference this week. You know, if there's more and more demand, you know, we can keep growing the team that's associated with that O&P channel because I really want to develop it.

Makes sense. And then what goes into them ultimately becoming a center of excellence, you know, the initial training online, you know, You know, then kind of what's the procedure, what happens after that to get to that center of excellence sort of level?

Well, it's an important investment from them because it takes three days for one of these CPOs to become qualified to deliver a MyoPro. So they learn about the evaluation process. about the medical documentation that's required by Medicare or other payers. Then they learn to do what we call a shape capture to measure the arm and hand because, again, every patient is unique. And then after they place their order, we'll make sure that we assist them in terms of the delivery of the product so they have that hands-on training with the patient as well. And then there's the follow-up care. So it's a three-day program, which means they have to be out of clinic for three days. So they understand that that's the investment they have to make. But in return, they can earn that Medicare allowable for every Medicare patient that they see and put into a MyoPro.

Got it. That's helpful. And then lastly for me, on the Q4 guidance, does that have anything factored in from the O&P channel, or would that be kind of pure upside?

Yeah. I think the assumption is sort of the typical rate that we see. The O&P channel is only It was 3% of revenue in the third quarter. So, you know, we've talked about the O&P channel being more of a 2025 thing. So that's what our assumption is in the fourth quarter.

Okay. Got it. Well, thanks for taking the questions, gentlemen, and congrats on all the progress. Thank you. Thanks, Matt.

The next question comes from Edward Wu of Ascendian Capital. Go ahead, please.

Yeah, congratulations on the quarter. My question is, as you guys move into the new facility, how much more operating leverage can you get in your business?

I think, I mean, we will have to pay a higher rental, of course, so we'll have to sort of absorb that before we – and just more space and more resources. more lease dollars, so we'll have to absorb that before we get leverage. That shouldn't be too, too hard. If we're doubling the capacity, I think that if we can get up to those kinds of numbers, then sure, we'll be generating a fairly good incremental operating income from what we're doing, particularly, I think, as we're looking to see that O&P channel grow. There will be more leverage, I think, even though the ASP will be lower, because we don't have to spend incremental advertising dollars and clinical dollars for an O&P patient. We'll be really looking to see that channel grow as well in combination with the volume growth to really drive that leverage that we're looking for.

As you expand your volume and capacity, is there opportunities for gross margin expansion?

I think as I mentioned with the O&P channel, as that grows and becomes a bigger part of our revenue, I think we see the gross margins where they're in the mid-70s now, low to mid-70s, they may go down below 70% as the O&P channel becomes more prevalent because the ASP will be lower. And again, I think there shouldn't be as much incremental effects required to serve that channel. So I think it's possible that that channel is operating margin accretive as we go forward. And so that's sort of the operating model that we would like to see. So again, I think with the channel, you could see gross margin dilution a bit with that channel, but potentially operating margin accretion.

Great, well, thanks for answering my questions, and I wish you guys good luck. Thank you. Thank you.

Thanks, Edward.

We are out of time, and therefore, this concludes our question and answer session. I would like to turn the conference back over to Paul Godones, Chairman and CEO, for any closing remarks.

Well, thank you, Operator. Well, in closing, I'd like to remind you that we are in the business of patient care. There's no better proof to that than success stories. One of our recent MyoPro recipients is a 50-year-old female who suffered a stroke in 2020. She lost the ability to use her dominant right arm and hand, and she was evaluated for MyoPro back in August 2023. After receiving an insurance denial, our patient advocacy team successfully appealed this decision, and she was fit with a MyoPro this past August. And in just two months, she's become a rock star user and performs many activities of daily living, such as cooking, feeding herself, doing the laundry, and more, thanks to her MyoPro. By continuing to assist more individuals like her, we're going to build a growing and profitable company. So thanks again for joining our call today, and have a nice evening.

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