Third Quarter 2026 Financial Results - MYOMO INC

Explicit Guidance:

• Full-Year 2026 Revenue: Narrowed guidance to $46 million – $47 million (previously $45–47 million), positioned at the upper end of the prior range.
• Q4 2026 Gross Margin: Expected to see a modest sequential increase in gross margin driven by manufacturing cost reduction initiatives.
• Q4 2026 Operating Expenses: Expected to increase sequentially due to one-time costs associated with the Chief Commercial Officer transition and higher headcount supporting the MyoConnect program.
• Cash Flow: Total cash burn for the second half of 2026 expected to be less than $2 million; Q4 2026 burn specifically targeted at less than $500,000.
• Stock-Based Compensation (SBC): SBC expense expected to return to its typical run rate in Q4 2026 following a third-quarter spike due to stock-based incentive payments.
• Operating Leverage Target: Management maintains the 2026 objective to limit operating expense growth to 50% of the revenue growth rate.

Business-Segment Outlook:

• MyoConnect Program (Recurring Revenue): Expects continued growth in referral volume per facility as therapists and physicians observe patient outcomes; anticipates "same-store sales growth" where existing sites increase referral frequency beyond initial adoption.
• Pipeline Quality: Anticipates that as the revenue mix shifts toward MyoConnect (currently 54% of revenue), the conversion rate of pipeline ads to revenue will improve significantly (cited as ~10x better than direct-to-patient), though total pipeline ad volume may not grow at the same rate as in previous years due to higher quality/qualification.
• Germany Market: Will double down on the German market in the near term rather than expanding to other EU countries; expects a new "hand-only" product for Germany to launch in 2027, addressing a segment of patients with elbow movement but no hand function, further expanding market potential.
• Product Development: Randomized control trial at the University of Utah (target 50 subjects; 35 enrolled as of Q3) continues steady progress; development ongoing on the MyoPro3.
• Operational Efficiency: In-sourcing of 3D printing for custom-fabricated shelves expected to go online by the end of 2026; headcount reduction efforts over the past two years are expected to continue supporting margin expansion.

Market and Competitive Outlook:

• Market Penetration: Current penetration of the U.S. addressable market (3 million chronic arm paralysis patients) estimated at ~1%; significant long-term growth opportunity remaining.
• Payer Access: Plan to continue entering into payer agreements; recently added coverage for an additional 35 million lives and enrolled with seven state Medicaid agencies (e.g., PA, MI, WI).
• Reimbursement Environment: Medicare Part B reimbursement rates are set by CMS (e.g., $68,800 for MyoPro-G); commercial pricing benchmarks to CMS fees. Management expects continued small, incremental price increases (approx. 2–2.5%) aligned with CMS cost-of-living adjustments.
• Go-to-Market Evolution: Shift from direct-to-patient marketing to a physician/therapist-led referral model is expected to drive more durable business growth and higher authorization rates compared to out-of-network models.

Macro / Industry Outlook:

• Economic/Regulatory: Pricing environment remains heavily dependent on CMS allowable fees and statutory health insurers (e.g., TK in Germany) rather than company-driven pricing changes.
• Competition: Management views Myomo as the clear market leader with >4,000 devices installed, leveraging clinical evidence and proprietary technology as a moat.

Strategic Initiatives:

• Leadership Transition: New Chief Commercial Officer (Katie McClure) joined in September; expected to drive further field clinical staff additions and optimize compensation plans to capture the large unmet need.
• International Expansion: Specific focus on scaling clinical and business development staff in Germany and the U.S. to deepen O&P partner engagement.
• Manufacturing: In-sourcing 3D printing to reduce material costs and improve gross margins by end of 2026.

Risks and Headwinds to Outlook:

• Seasonality: Q4 pipeline ads are historically lower than Q3 due to summer vacation seasonality among referring sources; Q3 pipeline ads were also impacted by temporary staffing constraints (now alleviated).
• Q4 Cost Pressures: Sequential increase in operating expenses in Q4 is expected to be modest but present due to CCO transition costs and headcount support for MyoConnect.
• Patient Acquisition Inefficiencies: Previous quarter saw inefficiencies in direct-to-patient lead generation and lower conversion rates; management notes ongoing testing to maximize spend effectiveness.
• Payer Reimbursement Variability: Medicaid coverage is subject to individual medical coverage policies; authorization rates for non-Medicare Part B payers are lower than the 100% rate seen with Part B.
• Supply Chain/Operational: 3D printing transition and new product launches (MyoPro3, German hand product) carry execution risk, though no specific timeline beyond "end of 2026" or "2027" is guaranteed.

Management Tone on the Future:

• Confidence Level: High confidence in meeting or exceeding 2026 financial and operating objectives; expresses pleasure with the "path to profitability and sustainable positive cash flow."
• Strategic Focus: Emphasis on executing the "four success pillars" to build a durable business; management is "keenly focused on operating leverage" and minimizing cash burn.
• 2027 Outlook: No specific revenue guidance provided for 2027; management states they are currently in the planning phase but intend to continue the transition toward recurring revenue sources and maintain operating leverage.
• Conservative vs. Aggressive: Guidance appears conservative regarding Q4 pipeline activity given historical seasonality; however, they highlight a 30% increase in direct billing pipeline ads in October as a positive leading indicator.

Miscellaneous:

• Upcoming Events: CEO, CFO, and new CCO to attend the Craig Hallum's 17th Annual Alpha Select Conference on November 17, 2026, in New York.
• Backlog: Ended Q3 with a backlog of 217 patients; efficiency improvements turned record orders into a record number of revenue units.
• Stock-Based Compensation: Portion of Q3 adjusted EBITDA break-even improvement was attributable to higher SBC expense related to cash management initiatives.