8-K: Myomo Achieves Record Revenue and Order Growth in Second Quarter 2024

Myomo reports record revenue of $7.5 million and a 70% increase in orders and authorizations for its MyoPro devices in the second quarter of 2024.

Summary

• Myomo, Inc. announced its financial results for the second quarter ended June 30, 2024, achieving record product revenue of $7.5 million, a 77% increase compared to the same period last year.
• Total revenue for the quarter was $7.5 million, up 26% year-over-year, although this includes a one-off license fee in the prior year.
• The company received orders and insurance authorizations for 213 MyoPro units, a 70% increase year-over-year.
• Myomo added 550 new candidates to its patient pipeline, bringing the total to 1,179, a 22% increase from the previous year.
• The backlog of orders and authorizations not yet converted to revenue reached 282 units, a 58% increase year-over-year.
• Gross margin was 70.8%, a slight decrease of 100 basis points, but gross margin on product revenues increased by 1,030 basis points.
• The cost per pipeline add decreased by 26% to $1,545.
• Operating expenses increased by 20% to $6.4 million, primarily due to increased payroll and incentive compensation.
• The operating loss for the quarter was $1.1 million, similar to the previous year, while the net loss was $1.1 million, or $0.03 per share.
• Adjusted EBITDA for the quarter was $(1.2) million, compared to $(0.8) million in the same quarter last year.
• The company expects third-quarter revenue to be in the range of $8.0 million to $8.5 million and maintains its full-year revenue expectation of $28 million to $30 million.
• Myomo is increasing advertising spending in the second half of 2024 to drive more volume into the patient funnel, which is expected to primarily impact 2025 revenues.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook with strong revenue growth and order increases, but there are concerns about profitability and cash flow. The company is making progress but needs to manage costs and achieve breakeven.

Positives

• Product revenue saw a significant increase of 77% year-over-year, indicating strong demand for MyoPro devices.
• The number of orders and insurance authorizations increased by 70%, demonstrating growing market acceptance and sales momentum.
• The patient pipeline grew by 22%, suggesting a strong future demand for Myomo's products.
• The cost per pipeline add decreased by 26%, indicating improved efficiency in patient acquisition.
• Gross margin on product revenues increased significantly, showing improved profitability on product sales.
• The company is maintaining its full-year revenue guidance, indicating confidence in future performance.

Negatives

• Total revenue growth was lower at 26% due to the absence of a one-time license fee payment from the previous year.
• Overall gross margin decreased slightly by 100 basis points, although product gross margin improved.
• Operating expenses increased by 20%, primarily due to increased payroll and incentive compensation.
• The company reported an operating loss of $1.1 million and a net loss of $1.1 million for the quarter.
• Adjusted EBITDA was negative at $(1.2) million, worse than the $(0.8) million in the same quarter last year.
• Cash used in operating activities increased significantly to $1.9 million compared to $0.3 million in the same quarter last year.

Risks

• The company's ability to obtain sufficient reimbursement from third-party payers is crucial for continued growth.
• Myomo needs to manage its revenue concentration with Medicare and specific insurance payers.
• The company is dependent on external financing if it does not achieve or maintain cash flow breakeven.
• Supply chain disruptions could impact the delivery and fitting of custom-fabricated devices.
• The company faces competition in a highly competitive and evolving industry.
• Increased advertising spending may impact achieving operating cash flow breakeven in the fourth quarter.

Future Outlook

Myomo expects third-quarter revenue to be in the range of $8.0 million to $8.5 million and maintains its full-year revenue expectation of $28 million to $30 million. The company intends to increase advertising spending in the second half of 2024 to drive more volume into the patient funnel, which is expected to primarily impact 2025 revenues. They continue to believe that operating cash flow breakeven is achievable in the fourth quarter, but increased advertising spending may impact this objective.

Management Comments

• I'm proud of our execution during the second quarter, said Paul R. Gudonis, Myomo's chairman and chief executive officer.
• Throughout the organization, we focused on serving a large number of Medicare Part B patients in addition to patients with other insurance, while ensuring we had the clinical, reimbursement and manufacturing capacity to deliver record financial and operating results.
• We are continuing our efforts to position the Company to achieve revenue of $10 million in the fourth quarter and for continued growth in 2025, said David Henry, Myomo's chief financial officer.
• We continue to believe that operating cash flow breakeven is achievable in the fourth quarter. However increasing advertising spending to educate prospective patients in the second half of the year may impact achieving this objective.

Industry Context

Myomo's results reflect a growing demand for wearable medical robotics in the rehabilitation sector, particularly for patients with neurological disorders and upper-limb paralysis. The company's focus on Medicare reimbursement is a key factor in its growth strategy, aligning with broader trends in healthcare towards value-based care and innovative medical technologies.

Comparison to Industry Standards

• Myomo's 77% year-over-year product revenue growth is strong compared to other medical device companies in the rehabilitation space, many of which are seeing growth in the 10-20% range.
• The 70% increase in orders and authorizations is also a positive indicator of market traction, exceeding the growth rates of many competitors.
• The 22% growth in the patient pipeline suggests a healthy future demand, which is a key metric for companies in this sector.
• While the overall gross margin decreased slightly, the significant increase in product gross margin indicates improved pricing and cost management, which is a positive sign compared to industry averages.
• Companies like ReWalk Robotics and Ekso Bionics, which also focus on wearable robotics, have faced challenges in achieving profitability, making Myomo's focus on cash flow breakeven a critical differentiator.

Stakeholder Impact

• Shareholders will likely view the strong revenue growth and order increases positively, but will be concerned about the net loss and cash burn.
• Employees may benefit from the company's growth and increased hiring, but may also face pressure to meet performance targets.
• Customers (patients) will benefit from increased access to MyoPro devices and improved rehabilitation outcomes.
• Suppliers may see increased demand for components and materials.
• Creditors will be monitoring the company's cash flow and progress towards breakeven.

Next Steps

• Myomo will hold a conference call to discuss the results and answer questions.
• The company intends to increase advertising spending in the second half of 2024.
• Myomo aims to achieve revenue of $10 million in the fourth quarter and continued growth in 2025.
• The company is working towards achieving operating cash flow breakeven in the fourth quarter.

Key Dates

Keywords

Myomo, MyoPro, wearable robotics, medical devices, neurological disorders, upper-limb paralysis, rehabilitation, orthosis, Medicare, revenue, patient pipeline, backlog, gross margin, EBITDA