10-Q: Myomo Reports Wider Losses Amid Revenue Growth, Secures New Debt
Quarterly Report
Myomo, Inc. reported increased revenue for Q3 and YTD 2025, but also significantly wider net losses and higher cash burn, while securing $17.5 million in new committed debt capital.
Summary
- Revenue increased by 10% to $10.09 million for the three months ended September 30, 2025, and by 44% to $29.57 million for the nine months ended September 30, 2025, compared to the same periods in 2024.
- Net loss significantly widened to $3.66 million for Q3 2025 (from $0.97 million in Q3 2024) and to $11.76 million for the nine months ended September 30, 2025 (from $5.92 million in YTD 2024).
- Gross margin decreased to 63.8% for Q3 2025 (from 75.4% in Q3 2024) and to 64.6% for YTD 2025 (from 71.1% in YTD 2024), primarily due to higher material costs, increased manufacturing overhead, and unfavorable changes in capitalized overhead.
- Cash used in operating activities more than doubled to $13.37 million for the nine months ended September 30, 2025, compared to $6.66 million in the prior year period.
- The company secured a new Loan and Security Agreement with Avenue Capital Management II, L.P. on November 4, 2025, providing up to $17.5 million in committed capital, with $12.5 million funded at closing.
- A material weakness in internal control over financial reporting persists, related to the design and maintenance of effective information technology general controls.
Sentiment
Score: 3
Explanation: While revenue growth is positive and new financing has been secured, the significant increase in net losses and cash burn, coupled with a notable decline in gross margin, indicates worsening financial performance. The persistence of a material weakness in internal controls and the restrictive covenants of the new debt facility add to the concerns, outweighing the positive aspects.
Positives
- Revenue grew by 10% for the three months ended September 30, 2025, reaching $10.09 million, and by 44% for the nine months ended September 30, 2025, reaching $29.57 million.
- Successfully secured $17.5 million in committed capital through a new Loan and Security Agreement with Avenue Capital, with $12.5 million funded at closing on November 4, 2025.
- Management believes existing cash, cash equivalents, and short-term investments, combined with the new financing, will fund operations for at least the next twelve months.
- CMS reclassified MyoPro products to the brace benefit category, allowing for lump sum reimbursement, with updated fees of approximately $34,300 for MyoPro Motion W and $67,500 for MyoPro Motion G effective January 1, 2025.
- Out of 43 claims selected for pre-payment audit by CMS billing contractors, 31 have been paid, and 7 claims that completed the appeals process have all been paid.
Negatives
- Net loss significantly increased to $3.66 million for the three months ended September 30, 2025, compared to $0.97 million for the same period in 2024.
- Year-to-date net loss more than doubled to $11.76 million for the nine months ended September 30, 2025, from $5.92 million in the prior year period.
- Gross margin declined substantially to 63.8% for Q3 2025 (from 75.4% in Q3 2024) and to 64.6% for YTD 2025 (from 71.1% in YTD 2024).
- Cash used in operating activities increased to $13.37 million for the nine months ended September 30, 2025, from $6.66 million in the prior year period, indicating higher cash burn.
- Cash and cash equivalents decreased from $24.37 million at December 31, 2024, to $12.55 million at September 30, 2025.
- Working capital decreased from $22.62 million at December 31, 2024, to $13.75 million at September 30, 2025.
- Medicare Advantage plans have been reducing or delaying the number of authorizations for MyoPro since the second half of 2024, negatively impacting revenues.
- Changes in social media advertising algorithms in Q1 2025 resulted in decreased lead generation and a higher cost per pipeline add, expected to negatively impact revenue growth in H2 2025.
Risks
- History of operating losses and accumulated deficit of approximately $114.9 million at September 30, 2025, with no assurance of achieving cash flow breakeven.
- Dependence on third-party payer reimbursement, including Medicare, with potential for CMS to amend, restrict, or retract coverage requirements or published fees.
- Medicare Advantage plans are reducing or delaying authorizations, negatively impacting revenues, and continued utilization management efforts could further decrease authorizations.
- Changes by direct-to-consumer advertising companies in how they reach prospective patients could adversely impact lead generation efforts and increase advertising costs.
- Significant political, trade, regulatory developments (e.g., tariffs, changes in U.S. federal administration) could have a material adverse effect on financial condition or results of operations.
- Inability to obtain additional funds on reasonable terms or at all if required beyond current liquidity, potentially leading to delays, modifications, or abandonment of business plans.
- The new Loan and Security Agreement with Avenue Capital includes financial covenants (e.g., maintaining $2.5 million unrestricted cash, achieving 75% of projected revenue, cash burn limits) and restrictions on operations, which could limit flexibility.
- A material weakness in internal control over financial reporting persists, related to the lack of design and maintenance of effective information technology general controls, which could allow for inappropriate financial transactions to be recorded and not detected.
Future Outlook
The company anticipates continued net losses and negative cash flows from operations for all of 2025. The plan for the remainder of 2025 is to invest in increasing demand through paid advertising, the U.S. O&P channel, and referral sources, while minimizing expenditures to reduce cash burn. Research and development costs are expected to increase annually but at a lower rate in the second half of 2025, with a focus on funding a randomized control trial. Selling, clinical, and marketing expenses are expected to increase in 2025 to support revenue growth, and general and administrative expenses are also expected to increase, albeit at a lower rate in the second half of the year. Management believes existing cash, cash equivalents, and short-term investments, along with the recently secured debt financing, will fund operations for at least the next twelve months from the report's issuance date.
Management Comments
- We have been growing revenues while incurring net losses and negative cash flows from operations since inception and anticipate this to continue for all of 2025.
- Our plan for the remainder of 2025 is to invest in increasing demand through paid advertising, the U.S. O&P channel and referral sources, while minimizing expenditures in order to reduce the cash burn.
- We intend to invest in enhancing our existing products in 2025 and expect R&D costs to increase on an annual basis, but at a lower rate of growth in the second half of the year as we focus on limiting the growth in operating expenses in general, while funding a randomized control trial to add to the existing body of research demonstrating the efficacy of the MyoPro for patients suffering from upper extremity impairment.
- Going forward, we intend to implement alternative sources for lead generation, such as referrals under our MyoConnect program.
- We believe that our existing cash, cash equivalents, short-term investments and restricted cash at September 30, 2025 will be sufficient to fund our operations for the twelve months from the issuance date of this Quarterly Report on Form 10-Q.
Industry Context
Myomo operates in the specialized wearable medical robotics industry, focusing on myoelectric orthotics for neuromuscular disorders. The company's performance is heavily influenced by the complex and evolving landscape of third-party payer reimbursement, particularly from government programs like Medicare and commercial Medicare Advantage plans. Recent trends show Medicare Advantage plans reducing or delaying authorizations, indicating increased scrutiny and cost management within the healthcare reimbursement sector. The reliance on direct-to-consumer advertising also exposes the company to risks from changes in digital advertising algorithms and privacy regulations, a common challenge for companies in patient-facing medical device markets.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Material Weakness in Internal Control | Identified a material weakness in the design and maintenance of effective information technology general controls, including privileged access rights, lack of formal processes for user provisioning, periodic user access review, change management for financial reporting systems, and formal reviews of key third-party service provider SOC reports. | 2024-12-31 | Could allow for inappropriate financial transactions to be recorded that would not be detected by other manual controls, rendering them ineffective. Management has concluded that internal control over financial reporting was not effective at the reasonable assurance level as of September 30, 2025. |
| Remediation Plan | Implemented new and modified controls around provisioning of access rights and change management processes, including giving rights to provision access to the financial reporting system to an individual outside the finance organization, and formalizing change management processes and review of key third-party service provider SOC reports. | 2025-09-30 | The material weakness will not be considered fully remediated until the design of these controls operates for a sufficient period and management concludes, through testing, that they are effective. |
Legal Proceedings
- No material claims, assessments, or litigation against the company as of September 30, 2025.
Stakeholder Impact
- Shareholders face potential dilution from the conversion rights of the new debt lender and the exercise of warrants, as well as the ongoing risk of declining share value due to increased losses and cash burn.
- Employees in clinical functions and reimbursement capacity may see increased headcount and activity to support expected sales volume and revenue growth.
- Customers (patients) may experience continued challenges with insurance authorizations, particularly from Medicare Advantage plans, which could affect access to MyoPro products.
- Creditors, specifically Avenue Capital, now hold a senior secured lien on all company assets and have significant financial covenants and conversion rights, which could impact the company's financial flexibility and future capital structure.
Next Steps
- Invest in increasing demand through paid advertising, the U.S. O&P channel, and referral sources.
- Minimize expenditures to reduce cash burn.
- Invest in enhancing existing products and accelerating product development efforts.
- Fund a randomized control trial to further demonstrate MyoPro efficacy.
- Implement alternative sources for lead generation, such as the MyoConnect program.
- Continue remediation efforts for the material weakness in internal control over financial reporting by formalizing processes and testing control effectiveness.
Key Dates
| Date | Description |
|---|---|
| 2004-09-01 | Myomo, Inc. incorporated in Delaware. |
| 2012 | Introduced the MyoPro product line. |
| 2015 | Introduced MyoPro Motion W and MyoPro Motion G. |
| 2017-06-09 | Completed initial public offering (IPO). |
| 2017-07-31 | Met criteria to apply CE Mark for MyoPro. |
| 2018-11 | CMS published new HCPCS codes (L8701, L8702) for MyoPro, effective early 2019. |
| 2019 | Transitioned business to become a direct provider of MyoPro to patients and bill insurance companies directly. |
| 2021-07 | Became accredited as a Medicare provider. |
| 2022-01 | Introduced MyoPro 2+ and began in-house fabrication. |
| 2023-11-01 | CMS issued a final rule reclassifying MyoPro products to a brace benefit category, allowing lump sum reimbursement, effective January 1, 2024. |
| 2023-12-31 | Balance sheet date for prior fiscal year. |
| 2024-01-01 | CMS rule reclassifying MyoPro became effective. |
| 2024-01-19 | Completed a registered direct equity offering, generating net proceeds of approximately $5.4 million. |
| 2024-02-29 | CMS published final payment determinations for MyoPro HCPCS codes (L8701, L8702), effective April 1, 2024. |
| 2024-04-01 | CMS final payment determinations for MyoPro became effective. |
| 2024-07-11 | Entered into a Loan and Security Agreement with Silicon Valley Bank for a revolving line of credit up to $4.0 million. |
| 2024-08 | Entered into a lease agreement for a new corporate headquarters and manufacturing facility in Burlington, Massachusetts. |
| 2024-12 | Began relocating operations to new headquarters. |
| 2024-12-06 | Completed a public offering, selling 3,450,000 shares of common stock for net proceeds of approximately $15.8 million. |
| 2025-01-01 | Updated CMS fees for MyoPro Motion W ($34,300) and MyoPro Motion G ($67,500) became effective. |
| 2025-01 | Completed relocation to new headquarters. |
| 2025-01 | Social media advertising company made an algorithm change impacting lead generation. |
| 2025-02-01 | U.S. imposed a 25% tariff on imports from Canada and Mexico (subsequently suspended for one month). |
| 2025-02-18 | Entered into a First Amendment to the Loan Agreement with Silicon Valley Bank, providing a $3.0 million term loan facility available until February 28, 2026. |
| 2025-04-30 | Introduced an enhanced version of the flagship product, MyoPro 2x, in the United States. |
| 2025-05-11 | Rent commencement date for the new corporate headquarters and manufacturing facility lease. |
| 2025-06-30 | Drew $2.5 million on Silicon Valley Bank line of credit and $1.5 million under its term loan facility. |
| 2025-07-04 | President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law. |
| 2025-07-15 | Paid down $1.5 million on Silicon Valley Bank line of credit and drew $1.5 million under its term loan facility. |
| 2025-09-30 | End of the quarterly reporting period. |
| 2025-11-04 | Entered into a new Loan and Security Agreement with Avenue Capital Management II, L.P., with $12.5 million funded at closing. |
| 2025-11-10 | Date of filing of the 10-Q report. |
| 2026-02-28 | Expiration date for drawing on the Silicon Valley Bank term loan facility. |
| 2026-03-01 | Commencement of 36 equal monthly principal plus interest installments for the Silicon Valley Bank term loan. |
| 2026-05-04 | Latest date for funding of Tranche 2 ($5.0 million) under the Avenue Capital Loan Agreement. |
| 2026-06-30 | Latest date for the exercise price of the Avenue Capital warrant to be determined by the next equity financing price. |
| 2027-01-01 | Earliest date for funding of Discretionary Tranche 3 ($10.0 million) under the Avenue Capital Loan Agreement. |
| 2027-12-31 | Latest date for funding of Discretionary Tranche 3 ($10.0 million) under the Avenue Capital Loan Agreement. |
| 2029-02-01 | Maturity date for the Silicon Valley Bank term loan facility. |
| 2029-06-01 | Maturity date for the Avenue Capital term loans. |
| 2030-11-04 | Expiration date for the warrant issued to Avenue Capital. |
Recommendation
holdWhile Myomo demonstrated strong revenue growth and successfully secured new debt financing to bolster liquidity, the significant increase in net losses and cash burn, coupled with a notable decline in gross margin, raises concerns about profitability and operational efficiency. The persistence of a material weakness in internal controls adds a layer of risk. The new debt, while providing necessary capital, comes with restrictive covenants and potential for future dilution. A seasoned investor would likely maintain a 'hold' position to observe if management can effectively execute its plan to reduce cash burn, improve gross margins, and remediate internal control deficiencies, thereby demonstrating a clear path to sustainable profitability.
Keywords
MyoPro, myoelectric orthotics, wearable medical robotics, neuromuscular disorders, SEC filing, 10-Q, financial results, net loss, revenue growth, cash flow, liquidity, debt financing, Medicare reimbursement, Medicare Advantage, internal controls, risk factors, medical devices
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