Q2 2025 Myomo Inc Earnings Call
Prior year quarter. This.
This includes 54 patients who are identified by our <unk> centers of excellence as we start to get visibility into their individual pipelines.
While the pipeline adds were a record they were lower than we expected given the lead flow and were also lower than we needed to be given Medicare advantage authorization rates and our expectations.
Paul analyze the pipeline in detail, so I won't repeat that here other than to point out that there were 213, Medicare part D patients added in the second quarter or 28% of the total direct billing ads.
And the total Medicare part D pipeline was 256 patients at quarter end were 16% of the total.
As a result of a lower lead quality cost for pipeline that excluding the Coa additions was $2926 in the second quarter, which was up 89% year over year.
Backlog represents insurance authorizations orders received but not yet converted to revenue and in the case of Medicare part D patients for whom we've collected medical records and Dean qualified for delivery based on our inclusion criteria.
We ended the quarter with a backlog of 230 patients, including 72, Medicare part D patients down 19% versus the prior year.
A decrease in the total backlog reflects our higher intra quarter conversion velocity and reduced Medicare advantage authorizations and the fact that intra quarter affiliate units are making up an increasing percentage of our quarterly revenues.
<unk>, 53% second quarter revenue units came from Philly units.
207 authorizations in orders during Q2, a decrease of 3% year over year.
Gross margin for the second quarter of 2025 was 62, 7% down from 78% for the prior year quarter. The decrease was driven primarily by higher material costs demo unit builds in overhead spending, including payroll and higher lease expense from the new facility.
Operating expenses for the second quarter of 2025, or $10 6 million up 65% over the second quarter of 2024.
The increase this increase was driven primarily by higher advertising spending to compensate for lower conversion of leads to pipeline adds and by higher head count throughout the organization as we increased capacity in the direct selling channel and spending on R&D efforts.
<unk> added head count and outside Engineering services.
Advertising expense in the second quarter was $2 2 million, an increase of 162% year over year.
As Paul discussed we reduced fixed cost in the July to better align operating expenses with revenue and to offset the higher advertising spend.
Cash savings from this initiative and this initiative we have.
These $2 million over the next 12 months.
Operating loss for the second quarter of $2025 $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 or <unk> 11 per share. This compares with a net loss of $1 1 million or <unk> <unk> per share for the second quarter of 2024.
During the 2025 quarter approximately $2 7 million pre funded warrants were exercised.
As of June 32025, approximately $4 4 million pre funded warrants remain outstanding from our offerings in 2023 in January 2024 is.
These pre funded warrants are considered common stock equivalents under GAAP accounting and are included in our weighted average share shares outstanding.
Adjusted EBITDA for the second quarter of 2025 was a negative $4 million compared with a 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 30 up from $4 7 million as of March 31 the.
The decrease was the increase was due to one of the DMD Max holding payments on claims for the entire quarter until CMS processed or address change in their systems.
All age claims have now been paid with that payment hold impact that affected second quarter cash flow by approximately $1 5 million.
In addition, there were two other DMD Max that had been conducting prepayment audits of our claims since the beginning of the second quarter.
To date out of the 27th Odyssey claims with determinations 21 had been paid six were denied and are currently in the appeals process.
The claim audits take roughly 60 days to complete which has negatively impacted our days sales outstanding.
We expect that the majority of these claims of these denied claims will be reimbursed after appeals.
Cash cash equivalents and short term investments as of June 32025 were $15 5 million during.
During the quarter, we drew down $4 million on our credit facility to help finance additional advertising expenses and to offset the growth in 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 2020 for employee incentive payments and higher capital expenditures for the build out of additional manufacturing space that will be coming online in the third quarter capitalized software development costs and demo units for our clinicians and our.
<unk> channel partners.
Additional drivers of this elevated Byrne burn for the payment hold and a higher DSO in the <unk> regions conducting audits as well as the repayment of approximately 700000 to insure two and ensure that overpaid us in a prior period.
Excluding these additional drivers and the bonus payment Q2 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 lead generation to pipeline adds and accurate and current <unk> current conversion rates through our revenue cycle.
As forward to sustained at a 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 add.
Billing channel still generates meaningfully positive incremental contribution margin.
Cutting spending that supports the direct billing channel will 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 workforce reduction our head count is only about 10% above where it was at the start of the year with new hires primarily supporting capacity and the direct billing channel revenue growth in Germany in RMB.
We plan to make only a few critical hires during the rest of the year and expect to exit 2025, with a significantly lower head count 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 feel units, we expect third quarter revenue to be between $9 5 million and $10 million up 3% to 9% year over year.
For the full year, we now expect revenue to be in the range of $40 million to $42 million up 23% to 29% versus 2024.
This revised guidance assumes recent history continues regarding Medicare advantage authorization and pipeline conversion rates and moderate improvement in Medicare part D patient flow.
With that financial overview, I will turn the call back to Paul.
Thanks, Dave we're now ready to take your questions operator.
Thank you.
We will now begin the question and answer session.
Ask a question you May press Star then one on your touch tone for if.
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Anytime Youre question has been addressed and you would like to withdraw your question. Please press Star then two.
At the same we will pause momentarily.
Mentally to assemble all of our store.
So before I ask this question I just want to thank all of you who attended our June 18th Investor and Analyst day event, either in person or online.
We posted the materials and webcast. So today on the IR section of our <unk> Dot Com website.
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 eight through 10.
Let's now go ahead and take the first question.
Thank you.
First question comes from the line of cheese, Knickerbocker, but Craig Hallum. Please go ahead.
Good afternoon, thanks for taking the questions maybe.
Dave just to start out I'm trying to understand Q3 guidance a little bit more.
If I look at it in my model it looks like kind of conversions from backlog.
What have to tick up fairly meaningfully sequentially and there'll also be kind of meaningful improvement sequentially and kind of backlog ads and so can you kind of elucidate what youre seeing so far through July and kind of mid August here or are you seeing a lot more fill units kind of what would make kind of that elevated conversion from backlog makes sense.
And Thats exactly what it is we are seeing more fill units.
Better being a higher percentage of our backlog. So that's precisely what we're seeing but even with that we are the guidance is nine $5 million to $10 million, which is basically flat with where we were this year or in the second quarter.
Got it.
If I look at Q4 kind of put it that implicitly guidance too.
You were talking about.
A decline.
Year over year and so.
If we also think about some of that on P volume kind of being there hopefully again, the direct billing channels is down year over year, certainly so can you kind of help with.
You know kind of specifically what you think maybe.
Or maybe even outside of kind of some of the advertising was clear.
Clear, we're not getting kind of word of mouth benefit.
I mean can you just kind of give me some overall thoughts as far as you think.
The challenges maybe outside of advertising as well.
Yeah.
And I think one of the things that we want to do is that.
Sure.
And Paul mentioned in his remarks, which is the referral program, we would like to be less dependent on advertising spending.
And I think Theres a good.
All had a good quote in.
In his in his comments earlier that we want to move up into that continuum of a patient's care and we're going to be helped.
Helping us ourselves and our own key providers by doing a lot of the heavy lifting with trying to generate referrals for.
Both of US both our R&D partners and ourselves by looking into that incidence population and not relying so much ourselves on the prevalent population and so we think by doing that it will help with the.
The conversion rate of pipeline adds because these people are closer to one their stroke occurred.
And they may not have had some of these other co morbidities that might pop up as we might as we currently see that the prevalent population.
Got it and I.
I think about the OMB channel the 50 odd leads in the quarter.
That's a.
And maybe share how many on P providers you have trained at this point.
But it's a fairly small number of kind of bleeds per one P. Head is there kind of any plants.
How we can kind of accelerate that contribution to the pipeline to maybe kind of diversify away from the direct billing channel on the advertising side.
Sure we.
We plan for significant growth in the <unk> T channel, we've got about 100 <unk> in that process from Thats gone through their evaluation training they've started to do evaluations to become fully certified with us.
To build a pipeline yet to get the authorizations.
And then you have to sit three mile pros and our clinical team has been expanded to work with these LNP providers around the country.
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 Alpha which is the national.
American <unk> Conference Assembly coming up early September to recruit more of these <unk> partners with the ones that have already signed up so I am expecting we're going to continue to see growth in that channel and as I mentioned.
We wanted to get more of the incident population there are 800000 strokes a year.
500000 or more of those individuals survived the stroke and go to these rehab hospitals and half of them come out the back end, where they've got chronic arent paralysis. So we've already engaged with these therapists to train them on the Micropro now we're actively seeking to have them refer those patients to us into our own Pea part.
<unk>.
Can we 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.
Dave just to last kind of financial questions for you.
First on kind of the advertising spend should we model that continuing to accelerate from a spend perspective.
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 the cost per pipeline add stabilizes goes a little bit higher starts to come in a little bit.
Talk to me about kind of that you know, it's a little bit less focused advertising should we modeling cost for pipeline add how should we be modeling it.
Yes, I would I would assume that that advertising dollars are roughly flat.
Third quarter was second and then in fourth quarter. They generally go down historically, there was a bit lower because.
Because we know there.
There is competition from holidays and at.
Medicare advantage plans are renewing their.
Memberships and things like that but we generally lower the advertising spending in the fourth quarter.
Got it.
As I think Paul mentioned in his remarks.
Putting more of the advertising mix in the TV cost per lead is expected to increase but we do think that cost per pipeline that will be.
Lower in the third quarter compared to the second quarter.
I don't I mean, it's going to take a while I think to get back some.
<unk>.
$500 was because there is a.
Yes, we have.
Theres conditions, I think are a bit more chronic.
We have to overcome like for example.
Medicare advantage rates and the fact that some.
Some of the patients that we see are.
Are also now.
We're disqualifying more of them and so it's.
Less of the pipeline is converting to <unk>.
In the backlog.
Thank you.
Okay.
Thank you next question comes from the line of Scott Henry.
Please go ahead.
Thank you and good afternoon.
First if I could just for clarity when you were talking about the OMB channel.
I saw it on the second quarter call you noted 300.
Could you give us an update to that number do you know how many sort of fade certified prosthetics orthotics have.
Have been trained.
Yeah, that's right Scott about 300 have gone through the evaluation training.
And then it's up to them to then actively go out and seek their own pipeline to evaluate patients and then move forward through the certification process, where there is three in person fittings with us so out of those 300, but we've got 100 active ones. In addition to the <unk>.
Clinicians.
Okay.
In my notes I show It was 160 in the fourth quarter 24, It was 300.
Sure.
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 or is it a flat number or is it up maybe you don't have that number in front of you, but it's up some amount.
Yes that number is probably up a bit because a lot of people will take our online course about evaluations.
Medicare advantage revenue was 20% of second quarter revenue and in dollar terms was down slightly from a year ago.
<unk> team is out there working with the active questions because not unexpectedly not every clinician that goes through the training is out there marketing this.
Medicare advantage revenue remained constrained by the high number of Preauthorization denials, forcing us into an appeals process in order to serve these patients.
So one of the ones. We're focusing on are they really active ones is about 100 of them right now I think we are.
77% of revenue in the second quarter came from the direct billing channel compared with 78% in the prior year quarter.
Paul mentioned the.
<unk> 300 relates to.
The Eval training was the first which is the first step, but we're focused a bit more downstream now and getting these <unk> certified.
International revenue was $1 $5 million in the quarter, representing 15% of the total primarily from Germany.
Okay.
Alright.
International revenue was up 41% year over year.
That's helpful. It clarifies.
As of June 32025, with pipeline stood at 1611 patients an increase of 37% year over year six.
Apples to oranges, there but.
Walking through the metrics, obviously, a lot's changed I E, it's pretty hard to gauge.
61% of our quarter end pipeline, where patients with Medicare advantage or other commercial insurance.
It seems like a lot of this information is evolving but starting with the pipeline adds of 816.
In the second quarter, we added 816 patients to the pipeline, which is up 49% over the prior year quarter.
I know you're focused on quality.
Well now would you expect that number to be in the 900 plus range in the third quarter is it still growing or whereas you focus on quality I don't know if you will that may kind of just flat now in an effort to get better leads but.
This includes 54 patients who are identified by our <unk> centers of excellence as we start to get visibility into their individual pipelines.
While the pipeline adds were a record they were lower than we expected given the lead flow and were also lower than we needed to be given Medicare advantage authorization rates and our expectations.
Curious your take on how we should think about that number.
Well, we're not giving specific guidance on pipeline as for third quarter, but the things that we are doing.
Paul analyze the pipeline in detail, so I won't repeat that here other than to point out that there were 213, Medicare part D patients added in the second quarter or 28% of the total direct billing ads.
<unk> is meant to grow the number of pipeline adds over time, because we obviously need to do that if we're going to achieve that.
The top line results that were that were looking for so no we're not.
And the total Medicare part D pipeline was 256 patients at quarter end or 16% of the total.
We're not cutting back or anything like that on trying to grow pipeline adds we're trying to we're trying to through various means like the referral program and things like that trying to generate them generate more of them, maybe let rely less on advertising to do so.
As a result of a lower lead quality cost for pipeline that excluding the Coa additions since $2926 in the second quarter, which was up 89% year over year.
Backlog represents insurance authorizations in orders received but not yet converted the revenue and in the case of Medicare part D patients for whom we've collected medical records and Dean qualified for delivery based on our inclusion criteria.
Okay are working thing a record number Scott we are working through a record number of leads so in June we got from the advertising so even though at a lower rate of conversion of leads a pipeline. There is still a significant backlog of these leads for our call center and clinicians to work through.
We ended the quarter with a backlog of 230 patients, including 72, Medicare part b patients down 19% versus the prior year.
Okay, and just another couple of metrics.
Obviously jump out past couple of quarters that authorization right now you may use a different traction, but using my numbers.
The decrease in the total backlog reflects our higher intra quarter conversion velocity.
Reduced Medicare advantage authorizations, and the fact that intra quarter affiliate units are making up an increasing percentage of our quarterly revenues.
Used to be around 17% to 18% in Q1, it was 14% it looks like it's around 13% in this quarter would you expect that to get back up to the 17% range.
Indeed, 53% second quarter revenue units came from Philly units.
And over what time period.
We received 207 authorizations in orders during Q2, a decrease of 3% year over year.
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% until Medicare advantage plan start authorizing more because.
Gross margin for the second quarter of 2025 was 62, 7% down from 78% for the prior year quarter of.
The decrease was driven primarily by higher material costs demo unit builds in overhead spending, including payroll and higher lease expense from the new facility.
I mentioned, we had 611 patients in the pipeline, 61% of them or Medicare advantage and so.
The first time authorization rate for our Medicare advantage patient is somewhere around 15% that means 85% of the pipeline adds for Medicare advantage kind of sit there while we go through an appeals process and try to move them all the way through.
Operating expenses for the second quarter of 2025, or $10 6 million up 65% over the second quarter of 2024.
This decrease this increase was driven primarily by higher advertising spending to compensate for lower conversion of leads to pipeline adds.
Two an ALJ hearing.
So that's okay.
Higher head count throughout the organization as we increased capacity in the direct selling channel and spending on R&D efforts, including added head count and outside engineering services.
That's part of the headwind, we faced on trying to improve that authorization rate.
Okay and then the final number that model was as a percentage of the pipeline that is lost.
Advertising expense in the second quarter was $2 2 million, an increase of 162% year over year.
Hey, you know it used to be it's been a little higher it's been as low as 22% now it's up kind of around 30% do you think is that number going to start improving.
As Paul discussed we reduced fixed cost in the July to better align operating expenses with revenue and to offset the higher advertising spend we expect cash savings from this initiative and this initiative via at least $2 million over the next 12 months.
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.
What you expect for that I guess attrition rate would be one of the things that were.
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.
Doing now and we mentioned that is that there is for some patients.
Net loss for the second quarter of 2025 was $4 6 million or <unk> 11 per share.
So there'll be a pipeline add and if they.
They successfully passed that initial telehealth screening, but there are some patients that successfully passed that that first free for screening that we view as.
This compares with a net loss of $1 1 million or <unk> <unk> per share for the second quarter of 2024.
During the 2025 quarter approximately $2 7 million pre funded warrants were exercised.
Patients that might be more marginal marginal.
And might not be good.
Candidate so in order to try to weed out some of those patients.
As of June 32025, approximately $4 4 million pre funded warrants remain outstanding from our offerings in 2023 in January 2024.
More earlier in the process as opposed to waiting until potentially a fitting when we have the device and the patients home.
These pre funded warrants are considered common stock equivalents under GAAP accounting and are included in our weighted average share shares outstanding.
A second in person evaluation for some of those more marginal patients and so those at about half the time.
Adjusted EBITDA for the second quarter of 2025 was a negative $4 million compared with a negative $1 2 million in the second quarter of 2024.
For those second in person devaluations.
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.
Turning now to our balance sheet and cash flows accounts receivable were $7 1 million as of June 30 up from $4 7 million as of March 31.
As a drop.
From the pipeline so.
Because we are going to continue to do that in order to.
The decrease was the increase was due to one of the Dnb Max holding payments on claims for the entire quarter until CMS processed her address change in their systems.
Try to get more patients that shouldnt be <unk> out of the process sooner I would expect that drop right to continue to be in that 30% range that it is now.
All age claims have now been paid that payment hold impact that affected second quarter cash flow by approximately $1 5 million.
Okay.
And I.
I would just say in perspective, you guys have 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 spend considerable growth.
In addition, there were two other <unk> that have been conducting prepayment audits of our claims since the beginning of the second quarter.
To date out of the 27th Odyssey claims with determinations 21 have been paid and six were denied and are currently in the appeals process.
So I commend you for that even if it's challenging right now.
And just 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 or are you feeling an increased confidence or are you still trying to figure out how these levers.
The claim audits take roughly 60 days to complete which has negatively impacted our days sales outstanding.
We expect that the majority of these claims of these denied claims will be reimbursed after appeals.
Cash cash equivalents and short term investments as of June 32025 were $15 5 million.
<unk>.
Yes, I would say we're encouraged by the July results.
During the quarter, we drew down $4 million on our credit facility to help finance additional advertising expenses and to offset the growth in receivables.
The metrics that gives us a sense that.
<unk>.
Our modeling that we do internally.
Excluding this borrowing cash burn was $10 million in the second quarter.
Is is making sense versus what we're seeing and so so I would say the answer to that is.
Our guidance assumed an elevated cash burn due to a higher sequential operating loss 2020 for employee incentive payments and higher capital expenditures for the Buildout of additional manufacturing space that will be coming online in the third quarter capitalized software development costs and demo units for our clinicians.
We have identified I mean theres a.
There's a lot of issues there.
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.
And where there is things like its the leads.
In our <unk> channel partners.
We've put fixes in place or it's things like.
Additional drivers of this elevated Byrne burn for the payment hold and a higher DSO in the <unk> regions conducting audits as well as the repayment of approximately 700000 to ensure two and ensure that overpaid us in a prior period.
The.
Higher percentage of patients being disqualified, we know that and we're dealing with it and we're putting plans in place.
Two.
Assume that that continues.
And deal with it.
Excluding these additional drivers and the bonus payment Q2 cash burn was $4 9 million, which is more reflective of our operating performance in the quarter.
Okay, great. Thank you for taking the questions.
Hmm.
Thank you next question comes from the line of Sean Lee with H C. Wainwright. Please go ahead.
This normalized amount is a close approximation.
Hey, good afternoon, guys. Thanks for taking my questions.
The total cash burn we expect in the second half of the year.
My first one is on reimbursement. So you mentioned, you're seeing a higher percentage of.
We believe that our cash cash equivalents are sufficient to fund our operations for the next 12 months.
All right.
Looking ahead, taking into account our historical cycle time from lead generation to pipeline adds.
Challenges, especially denials, especially from Medicare advantage payers. So I was wondering whether you were seeing the same thing some commercial payers and weather.
Entering in current.
Current conversion rates through our revenue cycle.
This high number of denials as more of an industry trend that youre seeing or more specifics related to the lower quality leads that you've had in Q2 and do you expect this number to improve in the second half.
As forward to sustained at a sustainable positive cash flow, which are continuing to spend on advertising, while minimizing fixed costs.
Despite the lower conversion rates and a higher cost per pipeline to add direct billing channel still generates meaningfully positive incremental contribution margin.
Hello, 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.
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.
And so we're taking more of the hearings.
And we're winning more in fact, our 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 Dakota Federal regulations on our commercial plans.
While the recent with the recent workforce reduction our head count is only about 10% above where it was at the start of the year with new hires primarily supporting capacity and the direct billing channel revenue growth in Germany and R&D.
Some follow the same.
Approach is 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've 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.
We plan to make only a few critical hires during the rest of the year and expect to exit 2025, with a significantly lower head count than we had planned at the beginning of the year.
Let me close with our financial guidance, given our backlog entering the third quarter and anticipated feel units, we expect third quarter revenue to be between $9 5 million and $10 million up 3% to 9% year over year for.
Under contract and that's facilitating the authorizations under those plants.
Oh, great. Thank you for the clarity on that.
My last question is on <unk>.
For the full year, we now expect revenue to be in the range of $40 million to $42 million up 23% to 29% versus 2024.
Supply side, So you mentioned.
Apollo than losing.
Cost of goods was increased supply cost I was wondering whether it's diesel related to the recent tests and if you expect this.
This revised guidance assumes recent history continues regarding Medicare advantage authorization and pipeline conversion rates and moderate improvement in Medicare part D patient flow.
This number to hold steady for the rest of the year. Thank you.
Yes.
To clarify I mentioned higher material costs, but thats not necessarily due to pricing.
With that financial overview, I'll turn the call back to Paul.
Thanks, Dave we're now ready to take your questions operator.
That's due to things like.
Higher material used for like Warranties for example, warranty work higher inventory.
Thank you.
We will now begin the question and answer session.
Inventory adjustments that might happen during the quarter. So for things like that we haven't seen too much in the way of price increases yet.
Ask a question you must have a star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys.
As it relates to tariffs and we've only had I think.
Anytime Youre question has been addressed and you would like to withdraw your questions. Please press Star then two at.
A couple of vendors actually start to actually place price increases on us for that so it's not meaningful.
At the same level.
Was momentarily to assemble I don't know its Tom.
Meaningful right now.
And we put out.
We analyze this a few months ago, and we still expect that the impact from tariffs might be only about 100 basis points on gross margin this year.
But before I ask my question I just want to thank all of you who attended our June 18th Investor and analyst day events, either in person or online.
Posted materials and webcast. So today on the IR section of our <unk> Dot Com website.
Got it thank you for the clarity on that and that's all I have.
Alright.
<unk>, 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.
Thank you next question comes from the line of Jeremy Pearlman with Maxim Group. Please go ahead.
We will also be attending the HC Wainwright conference virtually on September eight through 10.
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 than what have you. What have 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 TV.
Let's now go ahead and take the first question.
Thank you.
First question comes from the line of cheese Knickerbocker with Craig Hallum. Please comment.
Good afternoon.
Thanks for taking the questions maybe.
Is there do you think that these lower quality Facebook social media leads or something that's what's going be in the future or is there a way to get that back to the higher quality leads that <unk> had in the past.
Dave just to start out I'm trying to understand Q3 guidance a little bit more.
If I look at it in my model it looks like kind of conversions from backlog.
While metal, which owns Facebook implemented some new privacy policies around healthcare earlier in the year similar to what Apple did with its iOS operating system a couple of years ago.
What have the tick up fairly meaningfully sequentially and there would also be kind of meaningful improvements sequentially and kind of backlog ads and so can you kind of listen to what youre 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.
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 I'd call lookalike groups and so on and we just found that the leads that we're getting from Facebook, while the volume was increasing they weren't as high quality meeting.
And Thats exactly what it is we are seeing more.
Phil units.
Better being a higher percentage of our backlog. So that's precisely what we're seeing.
But even with that we are the guidance is nine $5 million to $10 million, which is basically flat with where we were this year or in the second quarter.
The patients that I, just or whoever was responding to the leads are just been curious.
Got it.
Or are they werent responsive to our call center, we make thousands of calls back to leads every month and we just found that.
And if I look at Q4 kind of put it that implicitly guidance too.
You were talking about you know.
A decline.
It werent as engaged as in the past, but we just said as Dave mentioned, we're shifting our dollars to what works and so in our case.
Year over year, and so you know.
If we also think about some of that on P volume kind of being there hopefully again, the direct billing channels.
Target TV advertising, we use has worked we get more response to our call center and the ads there and then.
It is down year over year, certainly so can you kind of help with.
You know kind of specifically what you think maybe.
Change with Facebook.
I don't know where.
Or maybe even outside of kind of some of the advertising was it's clear we're not getting kind of word of mouth benefit.
We're kind of expecting it did.
The status quo.
See you.
We still put some of our advertising dollars into Facebook, we've also diversified the Youtube.
Can you just kind of give me some overall thoughts as far as you think some of the challenges maybe outside of advertising as well.
Google ads and so on so I can't tell if it's going to improve at Facebook or not.
Yeah.
And I think that one of the things that we want to do is that.
Okay understood and then I know you mentioned that roughly half of your pipeline had come from leads within the past 30 days and then the rest six to 12 months is there any is there any thing you can do to maybe shorten that six to 12 month timeframe, just I mean again I might just.
Uh huh.
And Paul mentioned it in his remarks, which is the referral program, we would like to be less dependent on advertising spending.
I think theres a good.
My assumption that a patient who is engaged initially might be more it might be a high quality the stomach or it comes back.
Paul had a good quote.
In his in his comments earlier that you want to move up into that continuum of a patient's care and we're going to be held.
Six to 12 months down the line is there any way to shorten that timeframe.
Well, we engage with the patient we follow up with them, we'll send them information either online or by mail.
Helping us ourselves and our own feet providers by doing a lot of the heavy lifting with trying to generate referrals for.
And some people have been waiting for this it sounds like yes that would be screened I'm going into my Doctor and so on but then we've seen a number of people. This is not Mike.
Both of US both our R&D partners and ourselves.
Looking into that incidence population and not relying so much ourselves on the prevalent population and so we think by doing that it will help with the.
I E.
On an 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 go talk to the rehab hospital now theres only so much we can do because theres a good part of our presentation during the Investor Analyst day that talks about the steps in that patient journey. So we stay in touch with them there and our CRM system. We've got thousands of these people who have expressed an initial interest and we find that they do come back.
The conversion rate of pipeline adds because these people are closer to one their stroke occurred.
And then they may not have had some of these other comorbidities that might pop up as we might as we currently see with the prevalent population.
And when they come back they are engaged because they say, okay. Now I've thought about it I want to move ahead.
Got it and if.
If I think about the A&P channel the 50 odd leads in the quarter you know that's.
Okay understood and then just last question from Us.
That's.
You mentioned I think you said roughly 8% of the workforce was that was cut to help lower expenses reduced expenses.
Maybe share how many on P providers you have trained at this point.
But it's a fairly small number of kind of bleeds per one P. Head is there kind of any plans as far as how we can kind of accelerate that contribution to the pipeline to maybe kind of diversify away from the direct billing channel on the advertising side.
Is there any part of the business that you're.
Golar plans that you had that are being pushed off now and delayed until 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.
Sure.
Cuts that are not affecting you really the day to day in any of the your plan for your pet.
Plan for significant growth in the one P channel, we've got about 100 <unk> in.
Well, it's always tough to do a RIF, we looked at how can we not impact the company's operations, both from a revenue perspective, as well as quality of operations.
In that process from that it has gone through their evaluation training they've started to do evaluations to become fully certified with us.
All you have to build a pipeline yet to get the authorizations.
Basically pretty much across the board, except in a few critical areas which are.
And then you have to ship three my approach and our clinical team has been expanded to work with these LNP providers around the country.
Absolutely critical to the companies and the patient success.
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.
It took down some head count there.
They pointed out.
Not adding any head count because until we see that revenue growth and were 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 about revenue units.
Going to be at <unk>, which is the National America.
America <unk> Conference Assembly coming up early September to recruit more of these <unk> partners 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 won.
Okay understood. Thank you for taking my question.
Have a good evening.
Thank you next question comes from the line of Edward Woo with <unk>.
Let me get more.
And its population there are 800000 strokes a year.
<unk> capital. Please go ahead.
Yes. Thanks for taking my question. It looks like you had another strong quarter in international, particularly Germany is there whats working over there and is there any plans to accelerate growth even more than you have.
500000 or more of those individuals survived the stroke and go to these rehab hospitals and half of them come out the back end, where they've got chronic arent paralysis. So we've already engaged with the surface to train them on the Micropro now we're actively seeking to have them refer those patients to us into our own partner.
Well in Germany, you're right, it's our strongest growing segments here year to date.
So we can 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 reach for us.
And they've done a good job with recruiting training one P providers.
If we got over 100 locations now that are certified on the Micropro.
And they also.
Dave just to last kind of financial questions for you.
Have a whole clinical team that is goes out to the rehab clinics and our sources patients from those clinics attends a lot of medical conferences I've been to some like OTT world.
So first on <unk>.
Advertising essentially.
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 add Steve.
And that's been a good source of patient candidates, who are actually replicating some of that success here in the U S now going forward.
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 should we modeling cost per pipeline add you know how should we be modeling it.
Great is there any plans for you to maybe step on the gas in Germany.
We are continuing to add a few more people in Germany, it's about hiring more business development managers and hiring more clinical staff.
Yes, I would I would assume that that advertising dollars are roughly flat in the third quarter was second and then in fourth quarter. They generally go down historically, there was a bit lower.
Doug <unk>, our head of international I'll tell you that the unemployment rate for occupational therapist is <unk>, 6%.
Because we.
Competition from holidays, and Medicare advantage plans are renewing their memberships and things like that but we generally lower the advertising spending in the fourth quarter.
Our challenge there is recruiting quality therapists.
We wanted to leave the rehab hospital in come joining us, but we've been successful in doing that and the team is very motivated once they joined the company.
Okay.
Yeah.
As I think Paul mentioned in his remarks.
Great well, thanks for answering my questions and I wish you guys. Good luck. Thank you.
Putting more of the advertising mix in the TV cost per lead is expected to increase but we do think the cost per pipeline that will.
Thanks, Ed.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Paul.
We will be lower in the third quarter compared to the second quarter.
As for closing remarks.
Yes.
I don't I mean, it's going to take a while I think to get back yes.
I will thank you all for your questions and for your ongoing interest in <unk> and 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 of our shareholders and the board as we drive the business forward these goals.
Uh huh.
$100 was because there is a we have.
Conditions, I think are a bit more chronic you have.
To overcome like for example.
Medicare advantage rates and the fact that.
Some of the patients that we see are.
Penetrating this large market to serve many more patients with chronic arm paralysis and building sustainable profitable business here at <unk> will speak to you again in about three months when we report out on our Q3 financial results have a nice evening everyone. Thank you.
Our also.
Yes.
We're disqualifying more of them and so it's.
Less of the pipeline is converting to <unk>.
In the backlog.
Thank you.
Thank you.
Okay.
<unk> has now concluded. Thank you for attending today's presentation you may now disconnect.
Thank you next question comes from the line of Scott Henry.
Please go ahead.
Thank you and good afternoon.
Okay.
First if I could just for clarity when you were talking about the OMB channel.
[music].
I saw it on the second quarter call you noted 300.
<unk>.
Could you give us an update to that number you know how many sort of fade certified prosthetics 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, whether in person or savings.
Savings with us so out of those 300, but we've got 100 active ones.
Vision to the hangar clinicians.
Okay I think in my notes I show. 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 maybe you don't have that number in front of you, but it's up some amount.
Yeah that number is probably up a bit because a lot of people take our online course about evaluations of our Ot team is out there working with the active questions because none of unexpectedly.
Every clinician that goes through the training is out there marketing this.
So one of the ones, we're focusing on are they really active ones. It was about 100 of them right now.
I think we are.
As Paul mentioned.
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 getting <unk> certified.
Okay Alright.
Yeah, that's helpful and clarifies.
A little apples to oranges, there but.
Yeah.
Walking through the metrics you know, obviously, a lot's changed I E. It's pretty hard to gauge I mean, it seems like a lot of this information is evolving but starting with the pipeline adds of 816.
I know you're focused on quality as.
As well now would you expect that number to be in the 900 plus range in the third quarter is it still growing or whereas you focus on quality I don't know if you will you know that may kind of just flat now 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 adds for third quarter, but the things that we are doing.
<unk> is meant to grow the number of pipeline adds.
Over time, because you obviously need to do that if we're going to achieve that.
The topline results that we're looking for so no we're not.
We're not cutting back or anything like that on trying.
Trying to grow pipeline adds we're trying to we're trying to through various means like the referral program and things like that trying to generate them generate more of them, maybe let rely less on advertising to yourself.
Okay are working thing a record number of Scott we are working through a record number of leads so in June.
We got from the advertising so even though at a lower rate of conversion of leads a pipeline. There is still a significant backlog of these leads for our call center and clinicians to work through.
Okay.
And just another you know there's a couple of metrics that obviously jump out past couple of quarters that authorization right. Now you may use a different traction, but using my numbers you used to be around 17% to 18% in Q1. It was 14% it looks like it's around 13% in this quarter would you expect that to get.
Back up to the 17% range and over what time period.
No I think it I think that radio is kind of probably continue hopefully it stabilizes here, but I think it's gonna.
Don't know if it returns to the 17% until Medicare advantage plans start authorizing more because as I mentioned, we had 611 patients in the pipeline, 61% of our Medicare advantage and so the.
The first time authorization array for a Medicare advantage patient somewhere around 15% that means 85% of the pipeline adds for Medicare advantage kind of sit there while we go through an appeals process and try to move them all the way through.
Two an ALJ hearing.
So that's okay.
That's part of that's the headwind we faced on trying to improve that authorization rate.
Okay, and then you know the final number that model was the percentage of the pipeline that is lost.
Hey, you know it used to be it's been a little higher you know its been as low as 22% now it's up kind of around 30% do you think is that number going to start improving.
I guess in theory. The leads are better that number should be decreasing but just trying to get a sense of.
You know what you expect for that I guess, it's an attrition rate would be.
One of the things that we're doing now and we mentioned that is that there is for some patients.
There'll be a pipeline add and if they if they successfully passed that initial telehealth screening, but theres. Some patients at successfully passed that that first free for screening that we view as well.
Patients that might be more marginal marginal.
And might not be.
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.
We have the device in the patient's home, we're doing a second in person evaluation for some of those more marginal patients and so those at about half the time.
For those second in person devaluations.
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 that.
As a drop.
From the pipeline so because we're going to continue to do that in order to.
Try to get more patients that shouldnt be a mile throw out of the process sooner I would expect that drop rate continued to be in that 30% range that it is now.
Okay.
And I mean, just.
I would just say in perspective, you guys have 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 rear view mirror spend considerable growth.
So I commend you for that even if it's challenging right now.
But just final question.
Yes.
Do you feel that your confidence is improving in the metrics.
I know at the Analyst day, you kind of felt like he had it under control, but this wouldn't necessarily suggest that but now that you've reset expectations or are you feeling an increased confidence or are you still trying to figure out you know how these levers are moving.
Yeah, I would say we're encouraged by the July results.
The metrics that gives us a sense that.
The.
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 theres a.
There's a lot of issues there.
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 and where theres things like its the leads.
We've put fixes in place or it's things like.
Yeah.
Higher percentage of patients being disqualified, we know that and we're dealing with it we're putting plans in place.
Two.
I assume that that continues.
Deal with it.
Okay, great. Thank you for taking the questions.
Hmm.
Thank you next question comes from the line of Sean Lee with H C. Wainright. Please go ahead.
Hey, good afternoon, guys. Thanks for taking my questions.
My first one is on reimbursement. So you mentioned, you're seeing a higher percentage of.
All right.
Challenges, especially denials, especially from Medicare advantage payers. So I was wondering whether you are seeing the same thing from commercial payers and weather.
This high number of denials as more of an industry trend that youre seeing or more specifics related to the lower quality leads that you've had in Q2 and do you expect this number to improve in the second half.
Hello, Sean So what we've seen is I think what the whole health care provider industry seen is that these Medicare advantage plans are trying to deny to delay approval.
Approvals.
So we're taking more of the hearings.
And we're winning more in fact, our 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 Dakota Federal regulations.
Commercial plans.
Some follow the same approach as 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've 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.
Their contract and that's off the shelf and the authorizations under those plants.
Oh, great. Thank you for the clarity on that.
And last question is on <unk>.
The supply side, So you mentioned.
Part of the reason for the higher cost of goods.
Increased supply cost I was wondering whether these were related to the recent tests and if you expect this number to hold steady for the rest of the year. Thank you.
Yeah.
To clarify I mentioned higher material costs, but that's not necessarily due to pricing.
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 much in the way of price increases yet.
As it relates to tariffs and we've only had it.
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 in a few months ago, and we still expect the.
The impact from tariffs might be only about 100 basis points on gross margin this year.
Got it thank you for the clarity on that and that's all I have.
Right.
Thank you next question comes from the line of Jeremy Coleman.
Please go ahead.
Thank you for taking my question. Good evening first question related to you mentioned earlier on the call that the leads from Facebook or of a lower quality than what have you what have 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 or something but 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.
While metal, which owns Facebook implemented some new privacy policies around health care earlier in the year similar to what Apple did with its iOS operating system couple of 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 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 work around so look at what I'd call lookalike groups and so on and we just found that the leads that we're getting from Facebook, while the volume was increasing.
They weren't as high quality meeting.
Patients, but I, just or whoever it was responding to the leads.
Just been sort of curious.
Or are they werent responsive to our call center, we make thousands of calls back to lease every month and we just found it.
Werent as engaged as in the past, but we just said as Dave mentioned, we're shifting our dollars what works and so in our case.
The television advertising, we use is work we get more response to our call center and the ads. There then.
Change with Facebook.
No.
Kind of expecting it to be status quo, we will see ya.
So put some of our advertising dollars into Facebook, we've also diversified 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 roughly half of your pipeline had come from leads within the past 30 days and then the rest six to 12 months is there any is there any thing you can do to maybe.
Sure in that six to 12 month timeframe, just I mean again I might just my assumption that a patient who's engaged initially might be more it might be a high quality that somebody power comes back.
Six to 12 months down the line is there any way to shorten that timeframe.
Well, we engaged with the patients we follow up with them, we'll send them information either online or by mail.
And some people like waiting for this it sounds like yes.
Screen I'm going to my Doctor and so on.
We've seen a number of people this is not like.
I E.
On an impulse item. They say this looks interesting let me talk to my family about it maybe I'll go back to my Doctor.
<unk> talked to other people and 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 that we stay in touch with them.
They're in our CRM system, we've got thousands of these people who have expressed an initial interest we find that they do come back and wonder.
They come back they are engaged because they say, okay now I've thought about it I want to move ahead.
Okay understood and then just last question from US you mentioned I think I said roughly 8% of the workforce was let's cut to help lower expenses reduced expenses.
Is there any part of the business that you're you know Golar plans that you had that are being pushed off now and delayed until let's say revenue comes back up to expectations or it's going to be business as usual on this you were able to fine cuts that they don't are not affecting you really the day to day in any of the your plan to do that.
Well, it's always tough to do or if we looked at how can we not impact the company's operations, both from a revenue perspective, as well as quality of operations.
We basically pretty much across the board except in a few critical areas, which are oh.
Absolutely critical to the companies and the patient success.
Took down some head count there.
They pointed out.
Not adding any headcount because until we see that revenue growth and were 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 about revenue units.
Okay understood. Thank you for taking my questions I.
Have a good evening.
Thank you next question comes from the line of Edward Woo with <unk>.
<unk> capital. Please go ahead.
Yeah. Thanks for taking my question. It looks like you had another strong quarter in international, particularly Germany is there whats 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 segments here year to date.
And they've done a good job with our recruiting training Oh D providers.
They forgot over 100 locations now that are certified on the Micropro.
And they also.
Have a whole clinical team that is goes out to the rehab clinics and our sources patients from those clinics attends a lot of medical conferences, you know I've been to some like Oh T World.
And that's been a good source of patient candidates, who are actually replicating some of that success here in the U S now going forward.
Great is there any plans for you to maybe step on the gas in Germany.
We are continuing to add a few more people in Germany, it's about hiring more business development managers and hiring more clinical staff.
For years, our head of international I'll tell you that the unemployment rate for occupational therapists is <unk>, 6%.
The challenge there is recruiting quality surface.
We want to leave the rehab hospital income joining us, but we've been successful in doing that and the team is very motivated once they joined the company.
Yeah.
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.
As for closing remarks.
Well. Thank you all for your questions and for your ongoing interest in <unk> and 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.
We appreciate the support of our shareholders and the board as we drive the business forward. These goals of penetrating this large market to serve many more patients with chronic arm paralysis and building sustainable profitable business here at <unk> will speak to you again in about three months. When we report our Q3 financial results have a nice evening everyone. Thank you.
Thank you.
<unk> has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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