Q3 2022 Myomo Inc Earnings Call
And welcome to the Myanmar incorporated third quarter 2022 earnings Conference call.
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I would now like to turn the call over to MS. Kim go with it.
Go ahead.
Thank you operator, and good afternoon, everyone. This is Kim Collins L. A today welcome to the Myanmar third quarter of 2022 conference call earlier today, Miami, Michigan News release announcing financial results for the three and nine months ended September 2022.
I would like to be added to the company's email distribution list to receive future announcement. Please register on the company's website at my Yamana dotcom or quality of L. A and New York at 2128383777 and speak with Carolyn Curran.
With me on today's call from my model at Pall, Khatami's, 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 now won't change other than historical facts are forward looking statements.
The words anticipate believe estimate expect intend guidance outlook confidence target project and other similar expressions typically are used to identify such forward looking statements.
These forward looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other factors that may affect my own those business financial condition and operating results, including the impact of COVID-19. These.
Additional risks uncertainties and other factors are discussed in my almost filings with the Securities and Exchange Commission, including the Form 10-Q for the quarter ended September 32022.
Nick one filing.
Actual outcomes and results.
Results may differ materially from what is expressed in or implied by these forward looking statements.
Except as required by law, Myanmar undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this call.
My pleasure to turn the call over to Myanmar, CEO , Paul Kagame. Paul. Please go ahead.
Thank you Kim and good afternoon, everyone. Thanks for joining us.
Our product revenue for the third quarter of 2022 was 4 million up 8% sequentially and compared with $4.4 million last year as al discussed we made continued excellent progress in laying the foundation for solid revenue growth going forward.
During our last quarterly call I highlighted six goals for my almost 2022 that were introduced in my shareholder letter from this past spring today I'll summarize our progress against each one of these goals.
Our first objective was to accelerate pipeline growth and to do so at a lower cost per pipeline add.
In Q3, we had another outstanding quarter of growth and the candidate pipeline with 419 patients moving into the reimbursement process.
Year to date, we've added more than 1200 candidates, resulting in a record number of medically qualified patients interested in obtaining a mile probe to regain motion there paralyzed arms with respect to costs earlier. This year, we shifted some of our direct to consumer marketing activity away from Facebook to other social.
Media platforms, and we introduced television advertising as a result of our cost per pipeline add has been around $2500, which is nearly 50% below the peak from just a few quarters ago.
Our second goal is to broaden the number of insurance plans covering my approach. So far this year. We've added nine new insurance plans, such as Blue Cross Blue Shield of Texas, and Blue Cross Blue Shield of New Jersey and in addition, several Medicare advantage plans covered their first smile pro this year, which facilitates approvals for future requests on behalf of those.
Plans beneficiaries.
In addition, 10, new VA medical centers in order to my approach for veterans and their care, increasing the number of VA hospital customers to nearly 70.
We obtained a total of about 130 insurance authorizations in orders in the quarter and if the Q3 average sales price of approximately 45000 and $600.
That equates to more than $5 9 million of potential revenue upon delivery and payments.
Our orders have increased sequentially each quarter this year.
And with the growth of the candidate pipeline, which has served as a really good leading indicator of future revenue.
Direct billing represented 79% of our revenue in the quarter, which led to the solid ASP you were reporting.
We've had some success in raising the fee charged to payors and in some cases, we've been able to negotiate higher pricing and our single case agreements to help offset some of the higher costs, we have due to inflation.
We had 87 revenue units in the quarter and our backlog is now at a record 184 units representing over $8 million of potential revenue.
Our third goal, but if we can.
Dr. Additional clinical research in order to provide the data to insurers and to CMS if requested in support of a coverage policy well, it's been a very good year, so far for publishing clinical research.
Support of the mile probe with the Cleveland V eight and the Mayo clinic, both publishing outcomes data for patients who have suffered a stroke traumatic brain injury or a brachial plexus injury and several other research projects are underway, including a retrospective review of how Medicare beneficiaries have benefitted from mild pro.
Fourth one of my objectives was to use digital technologies to reduce the costs and compressed cycle time at the beginning of the year. We introduced the Micropro two plus and brought the custom fabrication process in house, which has given us far more control over the manufacturing process. This new Micropro model uses.
Three D printing for the custom shelves that sit around the patient's arm and we developed a remote and measurement system that uses a digital camera tablet telehealth call to measure the patient's arm in their own home and by shipping a briefcase containing all the electronics directly to the patients our field questions can be far more productive plus.
We also save money on travel costs.
Fifth we have a goal to expand our international business into new markets. Although we're building off of a small base our international business has grown nicely this year, especially in Germany.
With a large population clinicians and patients who are comfortable with high tech devices and with good reimbursement by statutory health insurance payers.
In addition, we provided a my approach our first patients in Austria, and a few patients in Australia and the U K are benefiting from the myopia on a trial basis.
And related news this past summer, we hosted a visit to our Boston headquarters by David Ren Who's the CEO of rise your medical our Chinese joint venture partner, He's working with Chinese government officials to for the remaining $1 7 million dollar license payment to us so that the joint venture can begin operations.
As you may be aware, China has suffered new outbreaks of COVID-19, and that is understandably impacted the timing of the payment approvals. So a community continue to communicate with our joint venture partners are ready to transfer technology and launched the JV upon receipt of the remaining upfront license payments.
And our sixth and final goal is to restart development to the myopia device for pediatric patients next week, we'll conduct another design testing session with several children with upper extremity paralysis due to cerebral palsy stroke and other neurological conditions since birth and will use this and putting our product development planning to finalize the schedule for completing.
The product design work doing all the testing clinical research and then followed by the commercial launch and when we do so the mild Pal will expand both our market and revenue opportunity.
Since last year, we've had a major Medicare advantage plan approved my approach for their beneficiaries and then require us to file an appeal for payment of the claim after the initial post delivery denial. When I'm pleased to report that we've been paid on 120 of these claims and we continue to receive preauthorizations for patients with this health insurance.
Ryan.
I'll now update you on where we stand with the centers for Medicare and Medicaid services or CMS.
Recall that back in June we presented our case at the CMS public hearing to have our benefit category changed from dnb rental to embrace or orthosis, which would make them <unk> to Medicare part b patients.
Cause COSE and coverage requests were made by a number of new high Tech innovators somewhat similar to my approach although for different indications in other parts of the body CMS has stated that they need more time to study these products we.
We are meeting with CMS staff to discuss them Io probe and the associated research and the value of the patients and while I can't predict the outcome or timing of these discussions in the meantime, we're going to continue to focus on the patients that we are serving with Medicare advantage plans certain commercial plans and the veterans covered by the V. Eight.
Now I will turn the call over to Dave Henry to review, our Q3 financial results in more detail and I'll come back and provide some additional comments before taking your questions Dave.
Thank you Paul.
Turning now to our third quarter financial results revenue.
Alright.
Two 4 million.
90%.
Florida.
8%.
2022.
The sequential growth was driven by a higher selling price.
And we will recognize revenue at 87 miles.
Third quarter.
Yeah, 15%.
A year ago.
80 units.
In our last earnings call.
Yeah.
Compared to the last quarter.
The profile of the backhaul and the guest experience.
Third quarter.
Building channel.
Okay.
Revenue.
Compared with third quarter, and 83% revenue in the second quarter of this year.
Despite that decrease or ASC held up well.
At 45000.
Exactly.
$6000.
Okay.
International sales were 14% of revenue in the third quarter with the remainder from the VA.
U S.
With respect to the VA channel third quarter was our highest quarter ever for orders is 20 orders that we see VA hospitals.
Yeah.
Yeah.
Which represents insurance authorization.
<unk>.
You bet.
184 years at.
At quarter end.
Sure.
I just mentioned.
160.
Okay.
This is also up 4% over our previous record.
Yes.
<unk>.
32021.
Gross margin for the third quarter of 2022 was $66.
Okay.
One 7%.
The decrease was driven by higher product costs, continuing inflationary pressures.
Partially offset by higher S T.
Operating expenses for the third quarter of 2022.
An increase of 3%.
Third quarter.
Primarily.
And advertising costs.
Advertising cost of 1 million increased 14% over the third.
For 2021.
Prior quarter.
Oh year over year advertising expenses increased agent acquisition cost.
Compared to the end.
And of course, the pipeline was stable.
$2500, which is down 50%.
In the fourth quarter of 2021.
Our experience suggests that advertising will be much more.
Competitive at the fourth quarter.
Holiday Ad placements.
We're experiencing that now.
As a result, we expect to adjust our marketing strategy to try and maximize.
Okay advertising and minimize an expected increase in cost of the pipeline.
Sure.
We don't expect advertising expense to increase in the fourth.
As a result, it would be challenging to increase sequentially a number of pipeline additions.
Despite the more competitive advertising environment at this time of year, our cost per pipeline yet.
Actually below.
We experienced.
Fourth quarter a year ago.
Patient pipeline is expected to be much stronger.
One three.
The pipeline at the beginning of 2022.
Operating loss for the third quarter of 2022 was $2 8 million.
Awesome.
For the third quarter of 2021.
And slightly improved.
And second quarter.
Net loss for the third quarter of 2022 was $2 8 million.
For sure.
Loss of $2 1 million or 36 cents per share for the third quarter.
Sure.
Adjusted EBITDA for the third quarter of 2022 was a negative $2 5 million compared to the.
A negative $1 7 million third quarter of 2021.
Looking at our year to date financial results revenue for the nine months.
Thank you.
That's 11 5 million up 17%.
Same period, a year ago, while year to date product revenue.
It was up 7%.
Year to date gross margin was 66, 2% compared to 73, 2% in the year ago period.
Inflationary cost increases.
I think our year to date gross margin.
Year to date operating expenses were $16 1 million, an increase of 9% same period a year ago.
Operating loss for the first nine months at 28 4 million.
Compared with an operating loss of $7 6 million for the same period a year ago.
Net loss for the first nine months of 2022 was $8 6 million or $1.24 per share.
Seven 6 million 38 cents per share the same period a year ago.
Adjusted EBITDA was a negative $7 4 million for the first nine months of 2022.
$6 6 million for the year ago period.
Right Alex.
Balance sheet cash.
And cash equivalents as of September $38 7 million cash used in operating activities was $2 8 million third quarter of 2022.
That's correct.
Call in early August we entered into a $5 million.
Keystone.
Under the.
Keystone is committed to purchase a minimum of approximately one 4 million shares representing approximately one 6 million minutes.
The current stock price.
Purchasing more than this minimum amount up to the four 5 million.
Another part of other purchases are above market according to NYSE.
Albeit a shareholder.
And the NYSE American exchange.
In order to enhance liquidity the company has called for a special meeting.
2022.
So that purchase shares in excess of these changes.
For the full $5 million.
It should be noted that even though we are asking shareholders to allow us to sell some shares Keystone in excess of the exchange, Canada Keystone has its own beneficial ownership.
99%, meaning that you cannot hold in excess of four 9%.
These shares at any one time.
Circumstances, they can hold up to $9 99.
We view the equity line is one of the least dilutive options available to us to raise additional capital.
Funded while minimizing dilution is our highest priority.
The final topic.
Forward looking commentary.
Sequentially higher backlog, we expect modest sequential product revenue growth in the fourth quarter.
ASP is expected to be lower sequentially.
Our expected revenue in the fourth quarter, resulting from that.
Received.
Our joint venture partner in China, which represented to us that they are actively trying to get government approval.
Given the ongoing delays and can't provide any assurance that the remaining license fee.
The fourth quarter.
As a reminder, and as Paul articulated we have continued to execute on our business plan. This year.
Resolved earlier challenges such as supply chain issues in the transition.
Sure.
Please the execution of our team so far this year.
A record number of landfill candidates in our pipeline at September 32, we believe we've got the capability to deliver stronger product revenue growth in 2023.
With that.
I'll turn the call back.
Thank you Dave what was our results demonstrate we are able to provide a mile pro to a growing number of individuals with upper limb paralysis, we've been expanding our pipeline through cost effective marketing programs. We continue to innovate in product developments and also innovations with product process improvements by utilizing digital.
Technologies well. This concludes the formal part of our presentation. Operator, so now we're ready to open the call to questions.
At this time, we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
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At this time, we will pause momentarily to assemble the roster.
And before we take the first question I just wanted to mention that we are available for virtual and in person Investor meetings. Please go ahead and please contact Deli Shay Investor relations to set up a time.
Okay, operator, we're ready for the first question whenever you are.
Alright.
Our first question comes from Ben Hayner of Hawaiian Global Partners. Please go ahead.
Good afternoon, gentlemen, thanks for taking the questions.
First off for me on the benefit category change in CMS, saying that they're going to provide more information in the near future. I was just kind of wondering if you have any one within the company or.
Any consultants or other folks that you rely upon that have a sense on when is that you know what.
What's the definition of near future is and what you can hear from them.
We do have regulatory and.
Reimbursement Council here in Washington, D C, where I am today, so diet in my meeting with a member of CMS staff and we are going to have a continued dialogue ongoing dialogue to provide them what other information they need to basically cover us as embraced so those meetings are going on Ben I, just don't have a timetable.
From a from them in terms of what when and what type of decision they would make.
And on those media as they're ongoing.
You've already had them or do you have more.
You know scheduled in the near future.
How would you characterize that yeah. So we've had some and we are planning to have more with them because the dialogue has to continue to make sure that they fully understand our position. We presented a really good case, that's a June 8th meeting as they pointed out and there are September publication they said.
It's a complex issue now with these new technologies and they want more time to study them and so.
We will follow up and give them whatever data they need to make that type of decision.
Okay.
And have they asked you for it.
Sort of data thus far.
Yeah.
No. We are in the process of setting up a meeting with the right staff. So that we can find out exactly what theyre looking for.
Okay. That's helpful. I appreciate the color there and then.
On the adjustment of the marketing strategy to deal with the elections that just taken place in the holiday season.
What is the what do those adjustments and tail I mean can you give us. An example, okay well we're shifting over to do more.
Television advertising or what have you what were.
Where does the marketing spend go.
On the adjustments that you've made for planned out well.
Well, we've been tuning our advertising strategy you know every week, our teammates with various agencies, yeah, we shifted from some local marketing advertising on TV, where we specific targeted specific metro markets to do more national cable channels. That's been really helpful. Now that the election is over I think that.
It reduces the cost per AD also opens up more slots. So again, it's a very dynamic between this election and this holiday season, but we learned a lot from last year and as Dave said, we've really tuned our approach here to do to grow that pipeline, but do it in a cost effective way.
Okay.
That makes sense.
Thanks for taking the questions.
That's on a good quarter.
Great. Thanks, Dan.
Yeah.
Our next question comes from Jim Sidoti of Sidoti and company. Please go ahead.
Good afternoon, and thanks for taking the question.
If you do get reimbursement from CMS.
As a reminder, what would what would be.
Your preferred.
<unk> classification, and how would it affect yourself to a to the insurance company or Youre your negotiations with the insurance companies.
So you know our preference Jim would be to be reclassified.
Is it brace or an orthosis, rather than durable medical equipment rental which is typically sort of off the shelf items that are standard there.
They're used for a short period of time, they're brought back cleaned up and then a refurbished and sent back out in the market by the supplier in our case. These are custom fabricated for long term use very similar to a custom fabricated prosthesis for in App. Your teeth. So the evidence we presented is that we do meet the brace.
Definition.
In the program integrity manual and in the statutes and so therefore, there should be covered net brace category.
And then it also it should be paid on a lump sum basis, rather than a monthly rental in fact CMS was very transparent in the way. They said they are going to be pricing products going forward as the semi payment amounts is by using a set of existing codes and so in our June presentation. We laid out how are you.
Of ice it has certain brace codes and also certain myoelectric prosthetic coda attributes and therefore, we are presented.
A recommended payment amounts to CMS as well, so that'd be our preference that goes that way and they accept that logic then it really helps us with.
The commercial payer.
Universe, because many of them as you know, we will often sort of cut and paste what Medicare does for its part b patients. So that's why this is such a critical.
Decision.
In an effort, we're putting a lot of work into here, So and you know what.
Presenting a very good case for that coverage.
And the other thing.
Being able to serve Medicare patients is that the revenue cycle is much more it's much quicker.
Because we don't have to.
We may have to do so in the beginning but oftentimes you don't have to get prior authorization.
To ship to them to a Medicare beneficiaries.
And.
Yeah.
Since youre talking about CNS here.
The revenue in terms of when you recognize it in terms of waiting for payment versus now goes away as well so you're talking about a government.
So that revenue cycle decreases substantially.
One other benefit too Jim is that our marketing costs should go down because right now yes.
We get thousands of people contact us after seeing the social media.
Advertising or T V or other social media posts, they contact us and if their Medicare part B. All we can do is say.
Well just hold onto your name your contact information and be in touch in the future, but right now I can't serve you. So there are many more patients that are really could use a mile problem that we can serve that around on part B Medicare right now.
Right.
And as far as the timing goes it sounds like you know that that's kind of a T V. D type thing it could be relatively soon or it could take several months is that right.
Yes, I mean, they have no specific timetable that they have to follow.
And as you know there are busy with a lot of projects and.
And we just continue to stay in front of them because they understand that outlook. This has been in the marketplace for a number of years a lot of other plans Medicare advantage plans commercial plans are covering this on a case by case basis, and we made the point in our journey is hearing this.
Health equity issue, which is also very important to the binding administration beneficiaries, who have these other plans are getting access to this technology part B Medicare patients are not at this point so from a health equity perspective, it's important to get this coverage for these patients.
And then any update on the supply chain or any of these issues starting to improve or do you think this will still be a headwind for 2023.
Right.
Dave.
I think the status quo.
I mean, we're still living with cost increases, we're not seeing any cost.
Yeah.
Cost increases that have occurred in the past.
Costs arent really materially continuing to increase.
Lead times are still stretched out in a number of cases, we're not really seeing anything.
Improving their materially so let's say.
Yes.
Why chain SaaS Hall.
These to be manageable.
Okay. Thank you.
Hi.
Pardon me.
Again, if you have a question. Please press Star then one.
Our next question from Edward Woo <unk> capital. Please go ahead.
Yeah. Thanks for taking my question. My question is how much has the strong dollar impacted your European business and how to gauge what kind of impact it next year.
Yes.
Has had an impact.
The euro is down.
15% compared to the dollar so when.
When we sell in.
<unk> LNP provider in Germany, we do it in Europe .
Yeah, that's where the contracting occur so.
Value of those euro sales.
Less and less in dollar terms this year.
I think in terms of what will happen in 2018, it really we're not expecting that changed the way we do business, we will continue to sell to German LNP providers in euro.
And we'll see what happens with exchange rates.
Here going forward, but I think that depends on how how much the.
<unk> continues to ratchet down the ratchet up I should say the interest rates.
You guys have very many costs in euros.
Payroll.
Payroll and that may be associated travel costs.
That is a natural hedge.
But.
Anything else, we do intercompany, we do in U S dollars.
Alright, great well, thanks for answering my question and I wish you guys. Good luck. Thank you.
Thank you.
Oh sure.
Time.
This concludes our question and answer session I would now like to turn the call back over to Mr. Paul Gardner for any closing remarks.
Well. Thank you operator, while in closing my oil provides an essential products to people suffering from neurological disorders, and upper limb paralysis, and we look forward to serving more patients in the U S and overseas to expand the coverage by health insurance plans and ultimately for Medicare part B and then an additional state Medicaid plans as well so.
Once again, thanks for your time and your interest in my Amo and have a good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
[music].
Okay.