Myomo Inc.

Good day and welcome to my almost second quarter 2025 financial results conference call all Participants will be in listen only mode should you need assistance? Please signal a conference specialist by pressing star key followed by zero after today's presentation There will be an opportunity to ask question to ask a question You may press star then one on a touch-tone phone to withdraw your question. Please rest are then to Note this event is being recorded. I would now like to turn the conference over to Patel Alliance advisors IR, please go ahead

Thank you operator and good afternoon everyone, this is Terff Patel with Alliance advisors IR Welcome to the my almost second quarter 2025 conference call with me on today's call our my almost chief executive officer Paul Godon is 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 my almost business financial condition and operating results These risks uncertainties and other factors are discussed in my almost 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 my Omo undertakes no obligation to revise or update any forward-looking Statements to reflect events or circumstances after the date of this call today August 11th 2025 it's now my pleasure to turn the call over to my almost CEO Paul Godon us Paul. Please go ahead

Thanks Terff good afternoon and thank you all for joining us today As you've seen our press release issued earlier today our second quarter revenues were slightly ahead of our expectations While several operating metrics were below our plans those metrics and trends will impact our near-term performance We've made a number of adjustments in marketing operations and we're already seeing initial signs of success But before we review our quarterly results, I'd like to briefly address some understandable shareholder concerns We recognize that our recent stock price performance has been disappointing We appreciate your candid feedback Iomo remains committed to market leadership with our proven myopropriceline adjusting our plans to grow the business and managing our financials to sustainable cash flow positive operations on Today's call will dive into this with a transparent discussion of the challenges we face I like tangible progress for making and outline our plan forward through these achieve these goals of sustainable growth and profitability Appreciate your continued trust and look forward to demonstrating meaningful results Let me begin with an overview of the dynamics of generating leads and converting qualified leads into our pipeline We called it in the first quarter meta changed its Facebook algorithm in response to privacy concerns around using someone's health information or browsing history as a means to target advertising as I discussed during our last call Despite stepping up our advertising spend the number of new leads did not increase in January and February So we engaged a new digital ad agency to help us with the workaround and lead flow started increasing significantly in March and April We were pleased with those results and knowing we need to rapidly add more pipeline ads We allocated more dollars to digital media in the second quarter and it worked We had a record level of leads in June with four times as many leads generated as in January earlier this year And in addition to generating a higher number of leads our cost per lead returned to historical levels Consistent with generating a record number of new leads we expected an even greater number of pipeline ads To add a perspective patient to our pipeline means we've engaged with the lead on the phone Review their health insurance status and completed a telehealth screening or in-person evaluation To verify that they're medically qualified candidate for the myopro There are three factors that prevented the record number of leads generated in the second quarter from turning into pipeline ads at the historical rates or levels First is that the lead quality particularly the Facebook leads were not as good as what we've seen in the past The reasons for that vary but the fact is the leads were just of poor quality Second as we analyze past data about our pipeline ads we discovered that there is a cycle time effect More specifically about half of our pipeline ads come from leads generated within the past 30 days Well, most of the rest come from patients who contacted us six or twelve months ago even longer At our recent investor day. We reviewed the patient decision-making process During which stroke survivors will want to get more information Talk to family members and clinicians and even go back for more rehab therapy before committing themselves to obtaining a myopro Last year there was a large number of Medicare Part B Patients who had been interested in a myoprobe and they were able to access the device beginning in April 2024 when Medicare coverage began Currently we have a large cohort of Part B leads that have expressed interest since the beginning of the year And based on history many of them are expected to take the next steps somewhere over the next six to twelve months Third factor impacting pipeline ads is a patient's clinical presentation We qualify for a pipeline a patient must meet our inclusion and exclusion criteria During a telehealth screening or an in-person evaluation by one of our clinicians We typically exclude over half of the patients that approach us this year. We've seen that percentage increase somewhat Appropriation selection is necessary to improve long-term clinical outcomes. It is critical for maintaining reimbursement We're going forward. Our assumption is that that percentage of patients we exclude will stabilize Now discuss how we plan to offset this in a bit The result of these factors and despite achieving a record 816 pipeline additions in the second quarter Costs per pipeline ad increased to approximately twenty nine hundred dollars Although this is up from about fifteen hundred dollars in recent quarters It's down from nearly five thousand dollars a pipeline ad after Apple's privacy changes a few years ago To improve our top of the funnel metrics and generate more qualified leads We've redirected advertising dollars from social media to television Our experience shows that a higher proportion of leads generated by the TV ads engage with us right away We pass the telehealth screening and move forward into the pipeline a Cost per lead in the third quarter is expected increase with a higher mix of television advertising Oh, we expect that the cost per pipeline ad will decrease Early indication so far and indicate that this shift has increased pipeline ads reflecting better patient engagement Since we increased our ad spend we reduced costs elsewhere in the organization In July we undertook a headcount reduction that impacted about 8% of our US workforce We also cut back on outside services spending and are limiting new hires until we see a significant uptick in our revenue growth These actions are expected to save us at least two million dollars in operating expenses and capital expenditures over the next 12 months And we will continue to be disciplined in our spending emphasizing those areas that produce revenue and increase our competitive position In addition to the challenges in converting leads to pipeline ads We've been experiencing a lower conversion rate from pipeline ads to authorizations, which is impacting backlog growth To address this we're expanding our clinical referral program by increasing education activity at rehab hospitals with our field clinical staff Expansion this program is expected to result in more high quality patients entering our pipeline To date we've trained over 1500 occupational therapists on the myoprobe all across the country And now that Medicare and coverage in place is in place We believe that they will be referring more patients to us and to our own P channel partners number of qualified patients from clinical referrals doubled over the last year and we are organizing screening days at facilities to accelerate this momentum We're creating what amounts to a new sourcing channel for our direct provider business and own P partners participate with us in these clinical events For example, I recently attended a patient evaluation training date But one of our own P partners in Virginia that is becoming my almost certified After our training these clinicians have now fit their first patient with the myoprobe We're eager to introduce the myoprobe to rehab hospitals in the area where they have strong working relationships Which our clinical team participated in just this past week We're actively certifying own P clinics by having them evaluate and fit several patients until they meet our standards and are self-sufficient To provide the devices to their clients We're seeing a growing pipeline of own P patients in the reimbursement process In fact, the number of own P orders doubled from q1 to q2 of this year We're expecting continued order growth from this channel going forward Another factor in impacting the conversion from pipeline ads to authorizations is the behavior of the Medicare Advantage plans Since just over half of seniors are covered by Medicare Advantage plans We are taking steps increase the number of authorizations from these payers We're appealing more denials and taking more appeals all the way to the administrative law judge or ALJ hearing And I'm pleased to report that we're winning a larger percentage of appeals Reflecting the standards we set for patient inclusion and the strength of our legal position as Discussed during our June investor day event We plan to double the number of ALJ hearings in the second half of the year in order to generate more authorizations and put more pressure on these plants This environment the only way to grow Medicare Advantage revenue is to put more shots on goal Since these patients are being unfairly denied access to a myoprobe in violation of the Code of Federal Regulations we intend to escalate our concerns through formal appeals and direct engagement with planned administrators and regulators Reinforcing that Medicare Advantage plans are obligated to follow national Medicare policy As I mentioned a moment ago Medicare Part B patients are critical to our growth plans And we'd like to see more of them in our funnel All we don't control the insurance coverage of prospective patients We proactively engage with those covered by Medicare Part B and their health care providers to accelerate the path to a myopro And roughly half of our fill units in the second quarter represented Medicare Part B patients We're also starting to see more Authorizations for patients covered by the contracts we entered into over the past year and we have additional negotiations underway Increase patient access to the myoprobe We've expanded our contracting to now cover 35 million lives with signed or pending agreements So in summary we're moving as quickly as possible to improve our results in the direct only channel our international and Olympique channels also continue to grow complementing our direct only channel and diversifying our revenue streams a strategy for expanding access Approving conversion efficiency and managing costs position those swell for the second half of 2025 and beyond I'll expect 2025 to be another year of revenue growth Reflecting the number of leads pipeline ads and insurance authorizations here to date in the direct billing channel We are updating our expectations for revenue growth to 23 to 29 percent in 2025 as Dave will discuss With all those who followed myoma over the past several years You've seen us pivot strategically when necessary develop new opportunities such as Medicare coverage and Adjust our operations to support our 10 plus year track record of volume and revenue growth With that overview of our performance and actions. I'll turn the call over to our CFO Dave Henry provide more of the financial details

Thank You Paul and good afternoon everyone Let me start with a review our second quarter financial results Revenue for the second quarter of 2025 was nine point seven million This represents a 28 percent increase versus the prior year and was driven by a higher number of revenue units and a higher average selling price for ASP He delivered 178 mile pro revenue units during the quarter up 13 percent But 95 of those units from authorizations and orders received in the second quarter This higher velocity is also reflected in the fact that Approximately 91 percent of our second quarter revenue was recorded as either shipment or delivery Our ASP increased 14 percent versus the prior year to approximately $54,200 Medicare part B patients represented 56 percent of revenue in the second quarter Medicare advantage revenue was 20 percent of second quarter revenue and in dollar terms was down slightly from a year ago Medicare advantage revenue remained constrained on a high number of pre-authorization denials Forcing us into an appeals process in order to serve these patients 77 percent of revenue in the second quarter came from the direct billing channel compared with 78 percent in the prior year quarter International revenue is 1.5 million in the quarter representing 15 percent of the total primarily from Germany International revenue was up 41 percent -over-year as of June 30th 2025 the pipeline stood at 1611 patients an increase of 37 percent -over-year 61 percent of the quarter end pipeline for patients with Medicare Advantage or other commercial insurance In the second quarter we added 816 patients to the pipeline which is up 49 percent over the prior year quarter This includes 54 patients who are identified by our OMP centers of excellence as we start to get visibility into their individual pipelines Well the pipeline as we're a record They were lower than we expected given the lead flow and we're also lower than we needed them to be given Medicare Advantage authorization rates and our expectations All analyze the pipeline in detail, so I won't repeat that here other than to point out that there were 213 Medicare Part B patients added in the second quarter or 28% of the total direct billing ads and the total Medicare Part B pipeline was 256 patients at quarter end or 16 percent of the total As a result of a lower lead quality cost per pipeline ad excluding the CoE additions was $2,926 in the second quarter which was up 89 percent -over-year Backlog represents insurance authorizations and orders received but not yet converted to revenue and in the case of Medicare Part B Patients for whom we've collected medical records and being qualified for delivery based on our inclusion criteria We ended the quarter with a backlog of 230 patients including 72 Medicare Part B patients down 19 percent versus the prior year The decrease in the total backlog reflects our higher intra quarter conversion velocity and reduced Medicare Advantage Authorizations and the fact that inter quarter fill units are making up an increasing percentage of our quarterly revenues Indeed 53 percent second quarter revenue units came from fill units We received 207 authorizations and orders during q2 a decrease of 3 percent -over-year gross margin for the second quarter of 2025 was 62.7 percent down from 70.8 percent for the prior quarter the decrease was driven primarily by higher material costs Demo unit bills and overhead spending including payroll and higher lease expense for the new facility Operating expenses for the second quarter of 2025 were 10.6 million up 65 percent over the second quarter of 2024 This increased this increase was driven primarily by higher advertising spending to compensate for lower Conversion of leads to pipeline ads and by higher headcount throughout the organization as we increased capacity in the direct billing channel and spending on R&D efforts Including added headcount and outside engineering services Advertising expense in the second quarter was 2.2 million an increase of 162 percent -over-year As Paul discussed we reduced fixed costs in July the better align operating expenses with revenue and to offset the higher Advertising spent we expect cash savings from this initiative from this initiative via these 2 million over the next 12 months Operating loss for the second quarter of 2025 was 4.6 million compared with an operating loss of 1.1 million in the prior year quarter Net loss for the second quarter of 2025 was 4.6 million for 11 cents per share This compares with the net loss of 1.1 million for 3 cents per share for the second quarter of 2024 During the 2025 quarter Approximately 2.7 million pre-funded warrants were exercised as of June 30th 2025 Approximately 4.4 million pre-funded warrants remain outstanding from our authorings in 2023 and January 2024 These pre-funded warrants are considered common stock equivalents under GAAP accounting and are included in our weighted average share shares outstanding Just to deep it off of the second quarter of 2025 was a negative 4 million Compared with the negative 1.2 million in the second quarter of 2024 Turning now to our balance sheet and cash flows Accounts receivable were 7.1 million as of June 30th up from 4.7 million as of March 31st The decrease was the increase was due to one of the DME max holding payments on claims for the entire quarter Until CMS processed our address change in their systems All age claims have now been paid for that payment hold and affected second quarter cash flow by approximately 1.5 million In addition, there were two other DME max that have been conducting pre-payment audits of our claim since the beginning of the second quarter to date out of the 27 audited claims with determinations 21 have been paid and six were denied and are currently in the appeals process The claim audits take roughly 60 days to complete which has negatively impacted our day sales outstanding We expect that the majority of these claims of these denied claims will be reimbursed after appeals Cash cash equivalents of short-term investments as of June 30th 2025 were 15.5 million During the quarter we drew down 4 million on our credit facility to help finance additional advertising expenses and to offset the growth and receivables Excluding this borrowing cash burn was 10 million in the second quarter Our guidance assumed an elevated cash burn due to a higher sequential operating loss 2024 employee incentive payments and higher capital expenditures for the build out an additional Manufacturing space that will be coming online in the third quarter capitalized software development costs and demo units for clinicians and our OMP channel partners Additional drivers of this elevated burn burn For the payment hold and a higher DSO in the DME Mac regions conducting audits as well as the repayment of approximately 700,000 to ensure to an insurer that overpaid us in a prior period Excluding these additional drivers and the bonus payment due to cash burn was 4.9 million Which is more reflective of our operating performance in the quarter This normalized amount is a close approximation of the total cash burn. We expect in the second half of the year We believe that our cash cash equivalents are sufficient to fund our operations for the next 12 months Looking ahead taking into account our historical cycle time from regeneration to pipeline ads and Factoring in current conversion rates through our revenue cycle The best path forward to sustainable positive cash flow is to continuing to spend on advertising while minimizing fixed costs Despite the lower conversion rates and a higher cost per pipeline ad Direct billing channel still generates meaningfully positive incremental contribution margin Cutting spending that supports the direct billing channel would begin to decrease revenues within a short period of time Which is a step backward on the path to positive cash flows While the recent with the recent with workforce reduction Our headcount is only about 10% above where it was at the start of the year with new hires Primarily supporting capacity in the direct billing channel revenue growth in Germany and R&D We plan to make only a few critical hires during the rest of the year and expect to add to 2025 With a significantly lower headcount than we had planned at the beginning of the year Let me close with our financial guidance Given our backlog entering third quarter and anticipated field units We expect third quarter revenue to be between 9.5 million and 10 million up three to nine percent -over-year For the full year. We now expect revenue to be in the range of 40 to 42 million up 23 to 29 percent versus 2024 This revised guidance assumes recent history continues regarding Medicare Advantage authorization and pipeline conversion rates and moderate improvement in Medicare Part B patient flow That financial overview I'll turn the call back to Paul

Thanks Dave, we're now ready to take your questions up operator

Thank you 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 questions Please press star then two at the same. We will pause momentarily to assemble our roster

Before first question, I just want to thank all of you who attended our June 18th investor and analyst day events either in person or online We posted the materials in a webcast of the day on the IR section of our myomo.com website And members of our senior leadership team continue to be available to discuss our current operations And plans to scale the business significantly over the next few years We will also be attending the HC Wainwright conference virtually on September 8th through the 10th Operator, let's now go ahead and take the first question

Thank you, the first question comes from the line of chase and Nick a booker but Craig hello, please comment

Good afternoon, thanks for taking the questions. Maybe Maybe Dave just to start out. I'm trying to understand key three guidance a little bit more If I look at it in my model, it looks like kind of conversions from backlog Would have to take up, you know fairly meaningfully sequentially and there'd also be kind of meaningful improvement sequentially and kind of backlog ads And so can you kind of you know elucidate what you're seeing so far through July and kind of mid August here? Are you seeing a lot more fill units kind of what would make kind of that elevated conversion from backlog makes sense

And that's exactly what it is who we are seeing more fill units That are being a higher percentage of our backlog. So that's that's precisely what we're seeing but even with that, you know, we are you know, the guides is nine and a half to ten million which is Basically flat with where we were this year in the second quarter

Got it and if I look at q4 kind of what it that implicitly guides to We're talking about you know a decline year of a year and so You know if we also think about some of that own p-volume kind of being there, you know Hopefully again the direct billing channels Is down year over year certainly. So can you kind of help with? You know kind of specifically, you know what you think You know, maybe even outside of kind of some of the advertising woes, you know, it's clear We're not getting kind of -of-mouth benefit I mean, can you just kind of give me some overall thoughts as far as you think? You know some of the challenges may be outside of advertising as well

Yeah, and and I think that one of the things that we want to do is that And Paul mentioned it in his remarks, which is the referral program We would like to be less dependent on advertising spending And I think there's a good, you know, and you know, Paul had a good quote in his in his comments earlier that we want to move up into that continuum of patients care and we're going to be Helping our us ourselves and our OMP providers by Doing a lot of the heavy lifting with trying to generate referrals for both of us both our R&P partners and ourselves By looking into that incidence population and not relying so much ourselves on the prevalence population and so we think by doing that that will help with the you know the conversion rate of pipeline ads because there will be these people are closer to when their stroke occurred And they you know that they may not have had some of these other Cold morbidities that might pop up as we might as we currently see with the prevalence population

Got it and you know if I think about the OMP channel the 50 odd leads in the quarter You know, that's a you know, maybe share how many OMP providers you have trained at this point But it's a fairly small number of kind of leads per OMP head Is there kind of any plans to as far as how we can kind of accelerate that contribution to the pipeline? To maybe kind of again diversify away from the direct billing channel and the advertising side

Sure, you know we plan for significant growth in the own P channel. We've got about a hundred CPOs in that process from It's gone through their evaluation training. They've started to do evaluations To become fully certified with us. You know, we have to build a pipeline you have to get the authorizations And then you have to fit three mile pros and our clinical team has been expanded to work with these OMP providers around the country And so we're getting more of them all the way through that process to get certified that pipeline is growing compared to where it was Earlier this year. We're going to be at a open which is the National American Orthopedics Conference Assembly coming up early September to recruit more of these OMP partners to meet with the ones that have already signed up So I'm expecting we're going to continue to see growth in that channel and as I mentioned We want to get more of the incidents population, but there are eight hundred thousand strokes a year you know five hundred thousand or more of those individuals survive the stroke and go to these rehab hospitals and Half of them come out the back end where they've got chronic arm paralysis So we've already engaged with these therapists to train them on the myopro now We're actively seeking to have them refer those patients to us into our own P partners So we can basically have more medically qualified patients earlier in their patient journey So we think that's going to be a really good new source of patient leads for us

They've just two last kind of financial questions for you So first on kind of the advertising spend should we model that continuing to accelerate from a spend perspective kind of? Sequentially and kind of where do you see that going and then as we're shifting to kind of TV a little bit here I mean should we expect that cost per pipeline ad? Stabilizes goes a little bit higher starts to come in a little bit I mean kind of talk to me about kind of that, you know, it's a little bit less focused advertising Modeling cost per pipeline ad, you know, how should we be modeling it?

Yeah, I would I would assume that that advertising dollars are roughly flat in third quarter with second and then in fourth quarter They generally go down, you know, historically they're a bit lower Because we you know, there's competition from holidays and Medicare Advantage plans There are renewing their memberships and things like that. So we generally lower the advertising spending in the fourth quarter As a as I think Paul mentioned in his remarks with the Putting more of the advertising mix into television cost per lead is expected to increase But we do think the cost per pipeline ad will be lower in the third quarter compared to the second quarter You know, I don't I mean it's going to take a while I think to get back to yes, you know, so What a $1,500 was because there's a you know, we have There's conditions that I think are a bit more chronic that we have to overcome like for example you know Medicare Advantage rates and the fact that some of the patients that we see are Are also And we're Disqualifying more of them. And so it's you know, less of the pipeline is converting to you know in the backlog

Thank you Thank you next question comes from the line of Scott Henry with the AGP, please go ahead

Thank you and good afternoon First if I could just for clarity when you were talking about the OMP Channel, I Thought on the second quarter call you noted 300 CPOs Could you give us an update to that number? You know, how many certified certified prosthetic orthotics have been trained?

Yeah, that's right Scott about 300 have gone through the evaluation training And then there it's up to them to then actively go out and seek their own pipeline Evaluate patients and then move forward through the certification process, you know, where there's three in-person Fittings with us so out of those 300 we've got a hundred active ones in addition to the hanger clinicians

Okay, I think in my notes I show, you know, it was 160 in the fourth quarter 24. It was 300 At the end of the it was 160 at the end of fourth quarter 300 at the end of the first quarter So for this quarter, is it a flat number or is it you know up? We maybe you don't have that number in front of you, but it's it's up some amount

Yeah, that number is probably up. I mean because a lot of people will take our online course about evaluations but our Team is out there working with the active clinicians because not unexpectedly I'm not every clinician that goes through the training is out there marketing this So when the ones we're focusing on are the really active ones is about a hundred of them right now

Now I think we're as Paul mentioned, you know, the 300 relates to Sort of the eval training was the first which is the first step We're focused a bit more downstream now and getting these OMP certified

Okay, all right Yeah, that's helpful. It clarifies Little apples to oranges there, but Let's you know walking through the metrics, you know, obviously a lot's changed It's pretty hard to gate. I mean, it seems like a lot of this information is evolving But you know starting with the pipeline adds of 816 I know you're focused on quality as well now Would you expect that number to be in the 900 plus range in the third quarter? Is it still growing or or as you focus on quality? I don't know if you'll you know that may kind of just flatten out in an effort to get better leads But curious your take on how we should think about that number

Well, we're not giving specific guidance on pipeline ads for third quarter, but the things that we are doing Is meant to grow the number of pipeline ads? over time because We obviously need to do that if we're going to achieve the The top line results that we're that we're looking for. So no, we're not You know, we're not cutting back or anything like that on Trying to grow pipeline ads We're trying to we're trying to you know through various means like the referral program and things like that Try to generate them generate more of them. Maybe let rely less on advertising to do so

Okay, we are working through a record number Scott We are working through a record number of leads though in June and we got from the advertising So even at a lower rate of conversion of lead to pipeline There's still a significant backlog of these leads for our call center and clinicians to work through

Okay, and and just another you know There's a couple metrics that obviously jump out the past couple quarters that authorization rate You know, you may use a different fraction but using my numbers it used to be around 17 to 18 percent In q1 it was 14 percent. It looks like it's around 13 percent in this quarter Would you expect that to get back up to the 17 percent range and over you know, what time period?

No, I think it I think that rate is going to probably continue. Hopefully it stabilizes here But I think it's going to I don't know if it returns to the 17 percent until Medicare Advantage plans start authorizing more because I mentioned we had 1611 patients in the pipeline 61 percent of them or Medicare Advantage and so You know the first time authorization rate for a Medicare Advantage patient is somewhere around 15 percent That means 85 percent of the pipeline ads for Medicare Advantage kind of sit there While we go through an appeals process and try to move them all the way through to an ALJ hearing So that's okay. So that's part of that's that's the head when we face on trying to improve that authorization rate

Okay, and then you know the final number of that model was the percentage of the pipeline that is is lost You know used to be It's been a little higher, you know, it's been as low as 22 percent now it's up kind of around 30 percent Do you think is that number going to start improving? I guess in theory if the leads are better that number should be decreasing but just trying to get a sense of you know What you know what you expect for that? I guess it's an attrition rate would be a

Yeah, one of the things that we're doing now and we and we mentioned that is that there's for some patients There will be a pipeline ad and If they if they successfully pass that initial telehealth screening, but there's some patients that successfully passed that that first free at first screening that we view as Patients that might be more marginal marginal and not and might not be Good candidates. So in order to try to weed out some of those patients More earlier in the process as opposed to waiting until Potentially a fitting when we have the device in the patient's home for doing a second in-person Evaluation for some of those more marginal patients. And so I those and about half the time For those second in-person evaluations That those patients won't continue and then half the time they will move on to the process So for those half of the patients that don't continue that reflects as that as a drop from the pipeline, so I would because we're going to continue to do that in order to Try to get more patients that shouldn't be in a mile per hour out of the process sooner I would expect that drop rate to continue to be in that 30% range that it is now

Okay, and I mean just I would just say in perspective you guys haven't done a great job growing this business I know it's a little tough right now, but if we look back a little further in the rearview mirror It's been considerable growth. So I commend you for that even if it's challenging right now but final question is Do you feel that your confidence is improving in the metrics? I mean, I know at the Analyst day you kind of felt like you had it under control, but this wouldn't necessarily suggest that but now that you've Reset expectations. Are you feeling an increased confidence or you're still trying to figure out, you know how these levers are moving?

Yeah, I would say we're encouraged by the July results on the metrics that gives us a sense that you know the that the Modeling that we do internally Is is making sense versus what we're seeing and so so I would say the answer to that is I think we have identified I mean there's a there's a lot of issues there and That we've talked about in the call, but I think we've identified most of them and we have Put plans in place to deal with those things and we you know, and where there's things like it's the leads you know, we've put fixes in place or it's things like You know the you know higher percentage of patients being disqualified We know that and we're dealing with it. We're putting plans in place to Assume that that continues and deal with it

Okay, great. Thank you for taking

the questions

Thank you next question comes from the line of Sean Lee with HCEV and right please go back

Hey, good afternoon guys and thanks for taking my questions My first one is on reimbursement. So you mentioned you've seen a higher percentage of Challenges especially denials, especially from Medicare Advantage payers so I was wondering whether you were seeing the same thing from commercial payers and whether this high number of denials is more of an industry trend that you're seeing or More specifically related to the lower quality leads that you've had in q2 and do you expect this number to improve? in the second half

Oh Sean, so what we've seen is I think what the whole health care provider industry is seeing Is that these Medicare Advantage plans are trying to deny to delay? Approvals and so we are taking more to hearings and we're winning more In fact, the winning percentage has increased over the last two months Because we have a strong medical case and we have a strong legal case based on the code of federal regulations commercial plans some follow the same Approaches Medicare Advantage However, I can tell you that we are getting authorizations with commercial plans such as some of the Blue Cross Blue Shield plans Where we've entered into contracts and as I mentioned on previous calls and as dr. Coleman presented at the analyst day We're getting more and more state Blue Cross Blue Shield plans Under contract and that's up to facilitating authorizations under those plans

Great thank you for the clarity on that my last question is on the Supply side so you mentioned a part of the reason for the higher cost of goods was the increased supply cost Whether these were related to the more recent tariffs and If you expect this number to hold steady for the rest of the year, thank you

Yeah To clarify I mentioned higher material cost but that's not necessarily due to pricing that's that's due to things like Higher material used for like warranties for example warranty work higher Inventory adjustments that might happen during the quarter so for things like that We haven't seen too too much in the way of price increases yet as it relates to tariffs And we've only had I think a couple of vendors actually start to actually place price increases on us for that so it's not meaningful right now and we put out We analyze this you know a few months ago And we still expect that the impact from tariffs might be only about a hundred basis points on gross margin this year

Got it. Thank you for the clarity on that. That's all I have

Thank

you next question comes on the line of Jeremy Pullman with Maxim group, please go by it

Thank you for taking my question good evening first question related to you mentioned earlier on the call that leads from Facebook or Of a lower quality then what have you what are you experienced in the past? Maybe do you have any reason why you think that was and you did say you were shifting some of your the ad spend into? Television is there do you think that these lower quality Facebook social media leads are something that that's what's going to be in the future Or is there a way to get that back to the higher quality leads that you've had in the past?

Well meta which owns Facebook you know implemented some new privacy policies around health care earlier in the year Similar to what Apple did with its iOS operating system a couple years ago In that they used to be able to provide you with a more targeted group of people who might have been interested in Stroke or rehab and so on and that was very successful for us for the last several years With this change at the beginning of the year We had to do some workarounds to look at what are called look-alike groups and so on and we just found that the leads We were getting from Facebook while the volume was increasing They weren't this high quality meaning the patients might just or that whoever was responding to the leads I just been very curious or they weren't responsive to our call center You know we make thousands of calls back to leads every month We just found that they weren't as engaged as in the past so we just said as Dave mentioned You know we're shifting our dollars to what works and so in our case The targeted TV advertising we use has worked We get more response to our call center and the ads there and then not will it change with Facebook. I don't know We're kind of expecting it to be status quo. We'll see if you know we still put some of our advertising dollars into Facebook We've also diversified it the YouTube Google ads and so on so I can't tell if it's going to improve at Facebook or not

Okay understood and then I know you mentioned that you know roughly half of your pipeline has come from Leads within the past 30 days and the rest six to 12 months Is there any is there anything you could do to maybe you know sure in that six to 12 month time frame just I mean again I might just my assumption that a patient who's engaged initially might be more Might be a higher quality than someone who cut or it comes back, you know Six to twelve months down the line. Is there any way to shorten that time frame?

Well, we engage with the patients, you know, we follow up with them. We'll send them information either online or by mail And some people have been like waiting for this and so it's like yes get me screened I'm going to my doctor and so on but then we've seen a number of people. This is not like buying a Impulse item they say this looks interesting. Let me talk to my family about it. Maybe I'll go back to my doctor Go talk to other people. I'll go talk to the rehab hospital now there's only so much we can do because and there's a good part of our presentation during the Investor analyst day that talks about the steps in that patient journey and we stay in touch with them They're in our CRM system We've got thousands of these people who've expressed an initial interest We find that they do come back and when they come back they are engaged because they say okay now I thought about it I want to move ahead

Okay, understood and just last question from us you mentioned I think said eight roughly 8% of the workforce was Was cut to help lower expenses reduce expenses. Is there any part of the business that you're you know? Go or plans that you had that are being pushed off now and delayed until you know, let's say revenue comes back up to Expectations or it's going to be business as usual on this you were able to find You know cuts that didn't are not affecting you really the -to-day and any of your plans that you had

Well, well, it's always tough to do a riff now. We looked at you know How can we not impact the company's operations both from a revenue perspective as well as? quality of operations now we basically pretty much across the board except in a few clinical areas, which are Absolutely critical to the companies and the patient success We took down some headcount there and as they point out You know, we're not adding any headcount because you know until we see that revenue growth You know, we're staffed up right now to build 80 to 120 devices a month So that's kind of our target is let's get to that level of our revenue units

Okay, understood, thank you for taking my question. Have a good evening

Thank you next question comes to the line of Edward with ascending capital peace

Yeah, thanks for taking my question it looks like yet another strong quarter in international particularly Germany Is there what's working over there? And is there any plans to accelerate growth even more than you have?

Well in Germany, you're right, it's our strongest growing segment here here today And they've done a good job with recruiting training own key providers And they've got over a hundred locations now that are certified on the myopro and they also have a whole clinical team that has goes out to the rehab clinics and Sources patients from those clinics attend a lot of medical conferences, you know, I've been to some like OT world And that's been a good source of patient candidates who are actually replicating some of that success here in the US now going forward

Great is there any plans for you to maybe step on the gas in Germany

We are continue not add a few more people in Germany It's about hiring more business development managers and hiring more clinical staff John Freuders our head of international tell you that the unemployment rate for Occupational therapists is 0.6 percent So our challenge there is recruiting quality Therapists who want to leave the rehab hospital and come joining us But we've been successful in doing and the team is very motivated once they join the company

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

Thanks Ed

Thank you This concludes our question and answer session I would like to turn the conference back over to Paul Koudonis for closing remarks.

I Will thank you all for your questions and for your ongoing interest in my own Well, there was a lot to unpack in today's release and I hope we've conveyed that we are making the adjustments that will lead to continued revenue growth and greater efficiency in our operations And we appreciate the support our shareholders in the board as we drive the process Forward these goals of penetrating this large market to serve many more patients with chronic arm paralysis And building sustainable profitable business here at my own Well, we'll speak to you again in about three months when we report out our Q3 financial results. Have a nice evening everyone. Thank you

Thank you the conference has now concluded thank you for attending today's presentation you may now disconnect