Q1 2022 Myomo Inc Earnings Call
Good afternoon, and welcome to the <unk> incorporated first quarter 2022 earnings 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.
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I would now like to turn the conference over to Kimco with deaths with L. H a please go ahead.
Thank you operator, and good afternoon, everyone. This is Kim Garland and that's L. A today welcome to the Myanmar fourth quarter 2022 conference call.
Earlier today in Myanmar issued a news release announcing financial results for the three months ended March 31 2022.
If you would like to be added to the company's email distribution list you refuse to receive future announcements. Please register on the company's website at my Yamana Dot com or call <unk> in New York at 21283837, 77 and speak with Carolyn Curran.
With me on today's call from Myanmar, or Paul Galvin, 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 confidant 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 and are subject to certain risks and uncertainties and other factors that may affect my own little business financial condition and operating results, including the impact of COVID-19. These.
These and additional risks uncertainties and other factors discussed in the risk factors and other qualifications contained in my almost filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31st 2021, and subsequent filings actual outcomes and results may differ materially.
So MX expressed in or implied by these forward looking statements.
Except as required by law Miami undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.
It's now my pleasure to turn the call over to my amongst the E O. Paul Good job Paul. Please go ahead.
Thank you Tim good afternoon, everyone and thank you for joining us.
Our first quarter product revenue was right in line with our expectations like revenue growth of 23% year over year reflects the higher number of <unk> units sold particularly strong results in international markets. As we are starting to benefit from our overseas investments the leveling off in ASTM related growth as a percentage of product.
Revenue, we derived from the direct selling channel matures.
I am pleased to report that we successfully addressed the supply chain issues that arose in the latter part of 2021.
Continue the blocking and tackling that's necessary to support our growth trajectory.
As a company my almost focused on two key initiatives.
Pipeline growth and yield improvement, let me summarize our progress with both.
We resumed growth in pipeline additions during the quarter from a combination of new leads generated by our established marketing initiatives from lead to generated by new marketing activities and from a fully staffed team of intake coordinators and clinicians across the country.
At the start of 2022, we enhanced our efforts to diversify our advertising and marketing message and reduce our use of traditional social media.
New efforts and new mediums worked well for us during this quarter.
Further diversification of our marketing efforts has been implemented this quarter, including our first TV ads, which are now running in select markets is another previously mentioned initiatives will be ongoing and will expand or undergoing modifications. We learn what works best for all of the business.
As we continue to adapt our marketing and patient education strategies within this dynamic online and social media environment, the cost effectively introduce the <unk> to more prospective candidates.
Loud of our team's ability to act quickly and thoughtfully to changes in the market and redeploy our marketing budget to maximize our ROI.
To help improve yield we implemented several new ways of engaging with our patient candidates throughout the sometimes lengthy process of obtaining Yamato probe.
Late last year, we created the patient navigator role, which is passed with guiding patients through the authorization process. We're pleased with the initial results from this new function, which we believe help to reduce our pipeline dropout rate in the first quarter compared to the last few quarters.
Optimistic that this rule will make a difference in keeping patients motivated as we worked to get their micro device authorized by insurance and delivered.
Additionally, insurance appeals were emphasizing presentation of the evidence that <unk> is not experimental or investigational and then it is reasonable and necessary, which has increased our reimbursement success rates for these patient cases.
Now, let's drill down into a few of the first quarter metrics.
We added 358, new patients into our pipeline, which is up 62% from the number added in the previous quarter. During Q4, we were affected by higher social media advertising cost competition for audience from holiday sales ads as People's focus on the COVID-19, omicron variance and other concerns.
As we've done in the past we are adapting to this evolving online marketing environment. The changes we implemented in the first quarter contributed to this increase in pipeline adds comp.
A combination of new ads plus improved retention led to a total of 902004 candidates now in the pipeline. This is a good leading indicator of future orders and revenue growth.
Customer acquisition costs were significantly lower in the first quarter as compared to the fourth quarter for a couple of reasons.
First we diversified our advertising and marketing with less emphasis on Facebook, which has become a more costly outlet to advertise on and.
Secondly, we restructured our customer experience department or our intake coordinators complete phone screens is verify insurance scheduled tele health screenings, and with our clinicians and help clients through the front end of the process.
Now while that seem to work remotely most of the time net transition helped us to grow the team to keep up with the demand during Q1, including identifying patients previously on hold and we're now ready to resume our journey to obtain a myocardial.
During the first quarter, we received authorizations and orders for 94 units, which is up 42% from the same period a year ago.
And we've seen seasonality in our business with Q1, typically being the slowest quarter of the year for authorizations and orders.
Our revenues for the quarter were $3 9 million in total of which $2 9 million came from 71, <unk> unit sales and $1 million was booked from the first payments towards the technology license fee from our joint venture partner in China.
The topic of interest in many of our shareholders as reimbursement from one of our larger insurance company Payors.
Turning to receive payments. After finally, an appeal to the claim after delivery.
Currently the vast majority of the claims for this insurer continually paid although an additional step has been added to the process.
We also continued to receive preauthorizations from this payer.
Sometimes requiring an appeals process by reimbursement specialists obtained the myopia order on behalf of the patient.
We've continued to expand and diversify our payer base with several new Medicare advantage plans.
<unk> to another state Blue Cross Blue Shield plan covering their first <unk> in Q1.
This paves the way for subsequent approvals for patients with these same health plans were.
We're actively expanding the number of payers as we do so we expect that the pathway from lead the payment will be easier and faster over time.
Since many of our patients are seniors with Medicare advantage plans, we continue to work with their physicians and payors to obtain reimbursement other customized approach and expect to be filing claims the JV Max for Medicare part D patients in the coming months.
Also we were recently informed that CMS has added discussion of the my approach to its public meeting agenda in the second week of June .
We intend to take this opportunity to make the case for changing the benefit category determination from dnb rental through custom fabricated race orthosis.
As we've said in the past with respect to CMS, we cant predict the outcome of this meeting as it relates to any coverage and a fee amount for my approach.
We also had several new clinical studies published in the first quarter from the Mayo clinic and Cleveland.
Demonstrating the value of the <unk> for patients who suffered arent paralysis due to a brachial plexus shoulder nerve injury, a stroke or traumatic brain injury. These studies add to the growing body of scientific evidence to support medical use of the <unk> and its reimbursement by government and commercial payers.
As I mentioned earlier the supply chain constraints from the fourth quarter are now behind US we had a smooth startup of internal manufacturing for the <unk> two plus <unk>.
Introduction of the three D printed orthotic shelves for the miles.
<unk> plus has gone very well and we've been shipping devices to patients since early February .
We've seen some increases in material costs in the current inflationary environment, we expect to be able to offset those in the second half of the year as we transition more patients to full remote measurement.
We believe we are at the forefront in the industry with our use of telehealth for initial patient screenings with therapists training and online support and now with the measurement of patients arm and hand done remotely. We can immediately transmit the patient's measurements to our three D component vendor the streamline process and helps us keep some of our costs in check.
Our international operations performed very well in Q1, representing approximately 23% of our overall revenues.
To see strong growth in patient interest, especially in Germany, where we are obtaining reimbursement on a case by case basis, we've added to our international staff and believe that this channel represents fertile ground for continued growth not only in Germany, but in Italy and the UK.
Our joint venture in China is getting closer to becoming operational with receipt of the initial $1 million payment during the first quarter.
We received payment to the remaining license fee before the end of the second quarter after which we'll begin the process of supporting the JV with training and technology.
This training includes working with the staff on how to manufacture and sell the <unk> devices.
However, at the technology transfer is highly selective and retaining key intellectual property in the United States in under our direct control.
Now I'll turn the call over to Dave Henry to review, our financial results in more detail and I'll come back to provide some additional comments before taking your questions Dave Thanks, Paul.
Turning now to our Q1 financial results revenue for the first quarter of 2022 was $3 9 million, which was up 66% over the prior year first quarter and included a $1 million of license revenue from our joint venture partner in China.
Product revenue was $2 9 million, which was up 23% over the first quarter of 2021.
International revenue accounted for 23% of product revenue, which is probably double the contribution of past quarters.
The growth in the international channel the direct bony channel accounted for 65% of product revenue down from 73% in the product revenue in bulk.
Fourth quarter and the first quarter of 2021 with the remaining 12% generated by the OMB and VA channels.
We recognize revenue on 71 <unk> units in the first quarter of 2022, an increase of 9% year over year.
Backlog, which represents insurance authorizations in orders received but not yet converted the revenue was 160 units at quarter end, which is up 36% over the year ago backlog and up slightly from 154 units as of December 31 2021.
Gross margin was 67% in the first quarter, excluding the license fee gross margin on product revenue for the first quarter of 2022 was 55% and this compares with 73, 3% in the year ago quarter.
The decrease reflects a timing difference, resulting from a larger number of deliveries compared with revenue units.
Paul that will record cost of sales upon delivery to the patient, which particularly in the direct selling channel occurs in advance of revenue recognition.
We were able to increase deliveries in the first quarter as we successfully completed our transition to in house fabrication of the <unk> plus.
Gross margin was also impacted by onetime costs of approximately $100000 associated with the contract termination of our third party fabrication partner and by higher material costs.
Operating expenses for the first quarter of 2022 were $5 3 million. This is up 14% compared with the same quarter, a year ago, and primarily reflects higher payroll and advertising costs.
Contrary to our plan entering the quarter, our advertising spending decreased compared with the fourth quarter as we found that our cost per lead decreased on Facebook as we reduced spending.
Advertising expense was approximately $950000 in the quarter.
As Paul mentioned, we are always looking for ways to maximize the ROI of our advertising spend by shifting the allocation of resources.
Television advertising in certain markets now added the social media and other online promotional activities.
These changes are designed to drive pipeline growth.
While operating within our budget and lowering our cost per pipeline at <unk>.
The first quarter, our cost per pipeline add was approximately $2700, which was up 22% from the same quarter, a year ago, which was before the Apple privacy changes implemented down 45% from the prior quarter.
Our operating loss for the first quarter of 2022 decreased to $2 7 million from $2 9 million a year ago net.
Net loss for the quarter was $2 8 million or <unk> 41 per share compared with a net loss for the first quarter of 2021 of 3 million or <unk> 57 per share.
Adjusted EBITDA for the first quarter of 2022 was a negative $2 4 million, which is slightly improved from a negative $2 7 million a year ago.
Turning briefly to our balance sheet cash and cash equivalents as of March 31, 2022 were $12 9 million and this compares with $15 5 million as of December 31 2021.
Cash used by operations was $2 3 million in the quarter.
The cash expected from the payment for the remaining China JV license fee during the second quarter.
We believe that our current cash position is sufficient to fund operations for at least the next 12 months.
Turning to our forward looking commentary, we entered the second quarter, having resolved their supply chain challenges and continuing to manage post delivery denials and a large insurance payer as a result, our revenue recognition practice with this payer remains unchanged.
Assuming receipt of payment the remainder of the China license fee will be recorded as revenue in the second quarter.
Slightly higher backlog compared to the beginning of the first quarter or second quarter product revenue will reflect how much of the roughly $6 million of potential revenue and backlog, we were able to convert along with our ability to generate new fill orders from the VA and international channels.
That financial overview ill turn the call back to Paul.
Thanks, Dave our goal <unk> is to assist more paralyzed individuals regained function of their upper lens with <unk> and to increase our market penetration in this new product category to do that to generate continued revenue growth and to drive operating leverage are key operational focuses for 2022.
So the pipeline of milepost candidates at a reduced cost per pipeline add that's increased the yogurt, Kansas through attitude in the insurance process.
Serve a large and growing market and I recently received a research study from the European stroke organization, a forecast that the number of patients living with stroke will grow over 25% in the next 25 years due to the aging population, which has a higher incidence of stroke.
Aging of the population with chronic stroke is happening in many countries around the globe, leading to an even greater need for assistive technology like ours.
This concludes the formal part of our presentation. So operator, we're now ready to open the call for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Before we take the first question I want to mention that were available for virtual and in person investor meetings. So please contact <unk> investor relations to set up a time <unk>.
We'll be attending the Sidoti virtual small cap conference in June .
Okay, operator, we're ready for the first question.
And the first question comes from Scott Henry with Roth Capital. Please go ahead.
Thank you and good afternoon, just a couple of questions.
First the pipeline and I think it was 378, if I recall correctly.
Pretty nice number.
How how should we think about that number going forward do you think that you got that on.
On track to regenerate numbers are up in that range for the rest of the year.
Yes, Scott Thanks for pointing it out so it's 358 pipeline adds in Q1 up from $3 21 in Q4, I think the things we're doing with social media diversifying our advertising for example, one of our ads has been running on Youtube and at over 500000 views so shifting to other.
Media doing more organic content like blogs and other posting plus.
Testing television advertising in a few pilot markets around the country that should lead to continued pipeline growth this year Thats our plan.
Okay. That's great and then I also noted the $6 million in backlog.
How should how does that compare to prior quarters and how should we.
Think of that numerical figure.
As it relates to the next couple of quarters.
And we just took a.
ASP around Neil I think $38000 multiply that times a 160.
Hopefully what we'd like to see is that our focus on growing the pipeline is going to translate into growth in backlog.
Which we.
I think pretty definitively shown us and then translates into revenue growth and so that's really the focus that but it starts with getting the pipeline.
Up to a number that we would like to see that.
Okay. Thank you and the final question just on the CMS meetings in June .
What are the types of outcomes that could come out of those meetings and you know what what sort of timeline are we typically looking at for that to impact the revenues.
Scott CMS has now moved to doing this in a public meeting twice a year. So we've been invited to the June 8th meeting is an agenda item to discuss our benefit category determination and also.
Our recommended pricing based on a variety of analyses.
And so what we'll present there.
Selling some other subject matter experts and then CMS will deliberate market itself.
There are three possible outcomes one.
They could do nothing.
Two they could.
Kick the can down the road or three they could change or benefit category determination to the custom fabricated orthosis at a lump sum basis or just keep it as <unk> rental. So those are the outcomes in W would happen.
Before the end of the calendar year.
Okay, great. Thank you for that color and thank you for taking the questions.
The next question is from Ben Hayner with Alliance Global Partners. Please go ahead.
Hey, good afternoon, gentlemen, thanks for taking the questions.
First off for me good.
See the advertising the customer acquisition costs come down from last quarter.
Kind of curious about the television ads that youre running in select markets is that something where they're kind of test markets and as you see success in those types of market.
You roll it out more broadly or are there areas of the country, where there is more.
Potential patients for you guys.
Those are the kinds of questions. We were trying to answer. So for example, we are testing 30, 60 and 122nd commercials.
Try trying a different a variety of market some larger msas some are smaller markets.
Doesn't right now and based on the results we have a <unk>.
724 call Center now to take these are direct response inquiries and pass them onto our it take coordinators and then our clinical staff. We've also.
See how we're doing based on websites.
Go to to find out more about <unk>. So the whole idea is to engage the patient or their family member and we'll see.
Works for US, we'll certainly be expanding that as the year goes on.
Okay and have you reached any definitive conclusions on that yet.
Advertise on MTV or lifetime or <unk>.
HGTV.
Anything any color on on what's what's working for you.
That has already started about two weeks ago, but it's premature to make any conclusions because we need to have those you get the.
Multiple exposures at the see after we get the phone calls or the web leads that come in to see how quality.
Are the leads in terms of their insurance or medical condition, So still early going but we so.
So far we're pretty optimistic and as you can imagine you just mentioned we just we just started this and you were just mentioning all those various channels.
Yes.
Theres almost infinite permutations of how we could go in the test and so what we're really only in the early stages.
Okay.
Yes, it's fair to say if you only started a couple of weeks ago and it didn't have any impact during Q1, obviously, yes. There was no impact during Q1 okay.
Okay.
Fair enough and then.
The international number.
What.
How should we be thinking about international.
Going forward there.
The rest of the year.
Our goal is to grow our all of our revenues in 2022 and international will be a big part of that we haven't given any specific guidance, but.
We have added to our.
Two our head count that are in Germany, we've got.
And we're trying to grow that business as rapidly as we can but we don't have we haven't put out any guidance on what that number we expect for this year.
Okay.
I mean would it be fair to say, it's going to be a bigger proportion of revenue than it was.
Last year.
Is that.
That's helpful.
And the.
The intent of what we're trying to do is not as to not grow the proportion of what we're looking to grow everything.
The percentage is almost sort of a.
Is the end result of what we do but not not the driving driving force behind what we're doing.
Okay Fair enough and then lastly for me I apologize if I missed this more of a housekeeping question did you give the number of fill orders during the quarter.
It was about 17 fill orders of the 71 revenue units 2017 were still about 50 54 ish came out of the out of the backlog.
Okay great.
Thank you for taking the questions gentlemen.
Mhm.
The next question is from Jim Sidoti with Sidoti <unk> Company. Please go ahead.
Hi, good afternoon, thanks for taking the question can.
Can you say again, what was the percentage of direct billing units in the quarter.
65% of the product revenue was direct billing.
Okay and part of that is because you had strong international growth in the quarter, but.
As you look out you know over the next.
Seven eight quarters, where do you think that that.
That number of Cogs.
I still think that direct billing is going to be in the seventies.
Longer term as we as we progress forward here, our intention is to grow revenues in all geographies.
We obviously most of our focus is in the U S and I would expect that that will continue to be that kind of a number here in the near future.
And you are becoming quite a marketing company.
I believe some other calls and heard that caused for social media.
It's definitely gone up.
Last couple of months, who switch to Tel.
Television, but are there other options you have to reach out to patients Besides TV advertising.
While we diversify what we're doing online as I mentioned in his Youtube Instagram.
We're also doing more why content.
Got other Influencers, who for example, <unk> getting the word out there so.
So between that plus organic search and then you have <unk>.
<unk>, which we are piloting that broadened our app.
Channels to the patient and switch and their families which used to be primarily just Facebook and Google AD network. We are.
Also have I mean I think.
Our first quarter.
<unk> demonstrated that we have a valuable asset ourselves, which is the database of patients that we have collected over the over these many quarters.
We've been doing now direct billing and numbers of them went on hold at various points.
We're always able now to go and resurrect some of those patients because they have changed insurance or what have you and they are in a better position to move forward in the process itself.
That's a cost free way of.
Generating pipeline adds as well.
Okay Alright.
Can you I don't know.
No if you mentioned it or not but could you say how many units you actually shipped in the quarter not happening that you got paid for.
We did.
Delivered number to what we delivered was 99.
So there were <unk>.
Approximately 20 units delivered that.
Sorry, 30 units delivered that you were not paid for in this quarter.
That's right.
So we took out cost.
Oh, okay.
And we have to wait for the insurance payments to recognize the revenue on those units Jim.
So I did.
There's the possibility that in the second quarter, you could actually get paid for more units than you.
Than you.
That happens in various quarters.
I wouldn't say that it's going to happen in the second quarter.
It will happen.
Relationship flips yet.
When that does happen, we will see the gross margin swing the other way.
That's right.
Okay alright, thank you.
Again, if you have a question. Please press Star then one.
The next question is from <unk> with <unk> capital markets. Please go ahead.
Hi, Good afternoon. This is with a on behalf of Petrochina ascending.
Ascending capital.
Are there any changes on the competitive landscape.
Yes.
No we have not seen anybody else have a comparable product of ours, we're still the only commercially available upper extremity myoelectric or doses that enables you to move your arm in your hand.
Registered with the FDA CE Mark in Europe .
There are a variety of.
Sort of a small niche the rehab oriented products like gloves and things like that but nothing that is a device like this to restore arm function.
Okay, Great and can you talk about the impact is inflation have any impact on the business or the supply chain.
I don't have.
Quantifiable number to give you, but I mean, it is having somewhat of an impact we're seeing it.
In material costs.
Things like that.
Laptop computers for example that are provided to each patient.
Also things like when we go and visit a patient.
There are there is cost that we add to the cost of goods sold for the cost to fit that patient was travel costs are going up and so.
This kind of thing.
Without the business I wouldn't say, it's had a material impact on the business, but it does have.
It has had somewhat of an impact and we would hope that as we get into the.
The second half of this year, we'll be able to offset some of that and realize some savings as we move to <unk>.
More fully believing the remote measurement of patients patients arms that will cut out.
And in person visit.
And reduce costs.
Okay, great. Thank you very much.
Mhm.
The next question is from Paul Nori with Noble equity. Please go ahead.
Hi are you expecting a rebound in gross margin in the.
The coming quarters or is that being a longer term.
So as I mentioned early in the call you know gross margin was impacted it was probably somewhere in the neighborhood.
Pushing.
<unk> thousand basis points 10 percentage points from the from the just the timing difference of of deliveries in advance of revenue units and so.
That timing difference will happen from time to time.
As it happened in the first quarter.
But I still think the nature of the business overall is still.
We still are.
More likely than not to have gross margins on a on a more routine basis going forward.
The 70 ish kind of a number. So this was just a unique quarter given.
And the one time charges that we had and also just the timing difference on deliveries.
Substantial number of deliveries in excess of revenue units.
Okay and then.
I guess it is a concern and internet advertising have you noticed any change in conversion rates once you.
Get people on the site.
In terms of whether they go through and actually try to make a purchase and I guess I'm thinking more over the past month or so with <unk>.
Alcoa end market place.
Placement.
Well I can look back to Q4, where we had a number of leads come in as patients were interested but let's say they saw an AD on Thanksgiving day, they would tell us and interested.
Let's have a follow up telehealth evaluation after the first of the year. So we saw some of that I can't tell you that it's <unk>.
<unk> much it was.
Very positive in terms of Q1 I haven't seen any decrease in that here in the last couple of weeks with <unk>.
Macro environment that we're in.
Okay and.
As we've done well in the.
Direct channel as it resulted in a pick up of.
I guess, the doctors notice thing and maybe more.
More orders from the <unk> channel.
It's actually been more referrals from the rehab hospitals and clinics because when we.
A patient with a device we send them to one of the rehab hospitals in their area, sometimes theres a trained therapist already there because.
You have to go through a training protocol to learn how to reuse their arm again for the first time, let's say 10 years and knows therapist.
<unk> as they see the results of these patients.
Hey, I've got another patient here, so we're starting to see more of that as we've broadened our base overtime.
Okay and any.
Any update on <unk> progress Youre, making there.
Yes, while we have restarted our development of the <unk>.
We've been we've got an occupational therapist panel that is assisting us with this I've seen some early prototypes of this in terms of really interesting redesigned to make it very lightweight miniaturized.
We've got.
Project plan here, where we've got next month, we're going to be tested on some kids and then will continue for.
The plan that we have is that commercial sometime in 2023. After we do all the required clinical testing electronics testing ISO certification and the like but I am pleased that that is moving forward.
Okay and then last question do you think that.
We will inform the street, whether through a press release or an 8-K.
Whatever Medicare aside from the open meeting with or nothing.
I think it would be a material event.
If there is something to announce something other than.
We're doing nothing.
Then I would expect that we would say something because I think that would be material.
Okay. Thank you.
Showing no further questions. This concludes our question and answer session I would now.
Let's turn the conference back over to Paul <unk> for any closing remarks.
Well, thank you and just in closing I would remind everyone. We provide an essential product for people suffering from neurological disorders and upper limb paralysis, we're confident in our ability to continue to reach patients received by <unk> from a greater number of Payors and ultimately from Medicare part B and additional state Medicaid plans as well so once again, thanks for your time.
<unk> and interest in myeloma have a good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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