Third Quarter 2026 Financial Results - MYOMO INC

Financial Performance:

• Q3 2026 revenue reached a record $12.3 million, a 22% year-over-year increase.
• Gross margin improved to 71.3% from 63.8% in Q3 2025, driven by a 2% rise in average selling price (ASP) to ~$55,500, material cost reductions, and operating leverage.
• Adjusted EBITDA achieved break-even status, a significant improvement from a $2.7 million loss in the prior year period.
• Operating expenses grew only 6% to $10.5 million, resulting in an operating loss narrowing to $1.7 million from $3.5 million.
• Net loss was $4.2 million ($0.10 per share), negatively impacted by a $1.8 million non-cash charge related to derivative liability valuation.
• Cash and cash equivalents totaled $11.9 million as of September 30, 2026; cash burn was $1.3 million in Q3, down from $2.2 million in Q3 2025.
• Backlog stood at 217 patients, down slightly from Q2 but reflecting high operational efficiency converting orders to revenue.
• Recurring revenue sources (hospitals, VA, O&P) accounted for 54% of total revenue, up from 33% in the prior year.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance narrowed to $46 million – $47 million, reflecting confidence in hitting the upper end of the previous $45M–$47M range.
• Q4 2026 gross margin is expected to see a modest sequential increase due to manufacturing cost reductions.
• Q4 2026 operating expenses are projected to rise modestly due to new Chief Commercial Officer transition costs and increased headcount for MyoConnect.
• Management maintains the 2026 target of growing revenue at least twice the rate of operating expense growth.
• Cash burn for the second half of 2026 is expected to be less than $2 million, with Q4 specifically projected under $500,000.
• Outlook for 2027 emphasizes continued revenue growth and the potential for sustained operating leverage, pending final planning.

Business Segments and Product Lines:

• MyoPro (US): Record 258 orders in Q3 (up 13% YoY); average selling price (ASP) increased 2% YoY.
• MyoConnect Program: Now active at over 500 facilities (added 200+ in Q3); contributes 27% of total revenue. 30% of recent referrals originated from existing sites ("same-store sales").
• MyoPro3 & Hand-Only Device: Development continues; hand-only product for the German market scheduled for 2027 release to capture patients with elbow mobility but no hand function.
• International (Germany): Revenue remained strong with record growth; strategy focuses on doubling down in Germany rather than immediate EU expansion.
• Payer Access: Added coverage for an additional 35 million lives via new commercial/Medicare Advantage contracts and enrolled in Medicaid in seven states (including PA, MI, WI).
• New Leadership: Appointed Katie McClure as Chief Commercial Officer in September to scale referral partnerships and sales operations.

Market and Competitive Landscape:

• Market Penetration: Estimated 1% penetration of the addressable US market (3 million chronic arm paralysis cases, 800k annual strokes).
• Competitive Position: Myomo identified as the market leader with over 4,000 devices provided.
• Referral Channel Growth: 54% of revenue now comes from recurring sources (rehab hospitals, stroke clinics, VA, O&P), shifting away from reliance on direct-to-patient marketing.
• Clinical Validation: RCT at University of Utah progressing with 35/50 subjects enrolled; published clinical research driving increased physician/therapist referrals.

Risks and Challenges:

• Seasonality: Q3 pipeline ads were impacted by summer vacations among referring sources and temporary internal staffing constraints in the MyoConnect program.
• Direct-to-Consumer (DTC) Efficiency: Lead generation inefficiencies and lower conversion rates in Q3 resulted in fewer DTC-driven pipeline ads; management is testing new targeting methodologies.
• Reimbursement Variability: While Medicare Part B authorization is stable, commercial and Medicaid reimbursement rates and authorization processes vary by payer and contract status.
• Cash Management: Stock-based compensation expenses spiked in Q3 due to stock incentive payments; expense is expected to normalize in Q4.
• Regulatory Environment: Pricing is heavily influenced by CMS allowable fees ($68,800 for MyoPro-G) and payer contracts, limiting pricing flexibility.

Management Commentary and Tone:

• Tone: Confident and optimistic, emphasizing execution on "four success pillars" (recurring sources, payer access, operating leverage, R&D).
• Strategic Shift: Management highlights the transition from DTC-heavy marketing to a durable, referral-based business model driven by MyoConnect.
• Operational Focus: Strong emphasis on cost efficiency, including headcount reduction while increasing volumes and the upcoming insourcing of 3D printing for shelves.
• Future Vision: Leadership expressed commitment to addressing the large unmet need in chronic arm paralysis and expanding clinical evidence to support market growth.

Analyst Questions and Answers:

• Pipeline Quality: Management confirmed that MyoConnect referrals yield significantly higher conversion rates (medical and reimbursement qualification) compared to DTC, though total pipeline ad volume may grow at a slower rate due to higher quality ("hit rate").
• Seasonality: Q3 pipeline dip was attributed to summer seasonality in scheduling screening days; October showed a 30% increase in direct billing pipeline ads after constraints were resolved.
• 2027 Outlook: No specific revenue guidance provided for 2027, but management anticipates continued high revenue growth and is finalizing the operating leverage target for the year.
• Germany Expansion: No immediate plans to expand beyond Germany; focus remains on deepening market share and launching the new hand-only device there in 2027.
• Pricing Environment: Pricing is largely dictated by CMS rates and statutory insurers; no planned price increases independent of CMS adjustments.

Other Key Points:

• Upcoming Events: CEO Paul Godonis, CFO Dave Henry, and new CIO Katie McClure will attend the Craig Hallam Alpha Select Conference on November 17, 2026.
• Clinical Milestone: The University of Utah RCT has enrolled 35 of 50 planned subjects, showing steady progress.
• MyoConnect Growth: Referring locations increased by over 200 in Q3 alone, reaching 500+ total, with a trend of increasing referrals per facility as clinical outcomes become apparent.
• Cost Reductions: 3D printing for custom-fabricated shelves is scheduled to go online by year-end to further boost margins.