Q3 2024 Summary
Published Jan 16, 2025, 9:08 AM UTC- Significant and growing backlog poised to convert into revenue in the near term: Myomo's backlog stands at 316 units as of September 30, up 71% year-over-year, representing over $10 million in potential revenue, which is expected to be realized over the next 3 to 6 months.
- Expansion of the O&P channel offers substantial growth potential with operating leverage: By recruiting and training over 100 clinicians in the orthotics and prosthetics (O&P) channel, including partnerships with major providers like Hanger Clinics, Myomo anticipates increased orders starting in the first quarter of 2025. This channel can contribute significantly to revenue growth with lower incremental operating expenses, leading to potential operating margin improvement.
- Improved operational capacity and efficiency to support growth: With the move to a new facility, Myomo is doubling capacity, which, combined with increased volume, is expected to provide operating leverage. Although there may be higher rental costs and potential gross margin dilution due to lower ASPs in the O&P channel, the overall effect is expected to be operating margin accretive.
- High backlog drop-out rate: The company anticipates that approximately 15% to 20% of patients in the backlog will drop out, which could reduce the effective backlog conversion and impact future revenues.
- Delayed revenue from O&P channel expansion: The ramp-up of the Orthotics and Prosthetics (O&P) channel is expected to take 3 to 6 months before initial orders are received from newly trained clinicians, potentially delaying significant revenue contributions from this channel. Furthermore, there are only two business development representatives dedicated to recruiting O&P providers, which may slow down the growth of this channel.
- Potential gross margin dilution from O&P channel: As the O&P channel becomes a larger part of the revenue mix, the company expects that gross margins may decline below 70%, due to lower average selling prices in this channel, which could impact overall profitability despite potential operating margin improvements.
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2025 Revenue Expectations
Q: What growth can we expect from '24 to '25?
A: Management expects strong growth in 2025, aiming for over $40 million in revenue, especially if they exit Q4 at $10 million ( ). Formal guidance will be provided in March, but they'd be disappointed with less than $40 million next year ( ). -
O&P Channel Impact
Q: How significant will the O&P channel be?
A: The O&P channel could become a very large percentage of total business over time, as most orthotic and prosthetic products are delivered through this channel ( ). Initial orders from O&P providers are expected to increase, especially in the first quarter of 2025 ( ). The O&P channel was 3% of revenue in Q3 and is anticipated to be more impactful in 2025 ( ). -
Backlog Value and Recognition
Q: What is the value of the backlog and when will it be recognized?
A: The backlog consists of over 316 units, valued at more than $10 million after accounting for an estimated 20% drop-out rate ( ). Approximately 35–40% will turn into revenue one quarter out, with the remainder realized over the next 3 to 6 months ( ). -
Manufacturing Capacity Expansion
Q: How will the new facility affect production capacity?
A: The new facility will triple manufacturing space, allowing capacity to double over the next six months ( ). Initially occupying 27,500 sq ft, with an additional 7,500 sq ft available in mid-2025, providing flexibility to meet growing demand ( ). -
Average Selling Price (ASP) Trends
Q: Is there room to increase ASPs further?
A: The current ASP of $52,700 may change depending on the mix of patients with supplemental insurance ( ). About 20–25% of patients have supplemental coverage, which can increase revenue recognized at delivery ( ). Once the O&P channel grows, ASPs may lower due to mix changes, which is more of a 2025 issue ( ). -
Pipeline Growth Potential
Q: Can new candidate adds grow further?
A: Yes, management plans to continue growing new candidate adds through increased advertising and additional certified clinicians ( ). They added 645 new candidates, a very large number, and believe they are at an early stage of market penetration ( ). -
Operating Leverage and Margins
Q: Will expanding capacity improve operating leverage?
A: While the new facility increases rental costs, doubling capacity should generate incremental operating income ( ). As the O&P channel grows, gross margins may decrease below 70% due to lower ASPs, but operating margins could improve due to lower incremental operating expenses ( ). -
International Expansion Plans
Q: What are the plans for international growth?
A: The focus is on expanding in Germany, with over 100 O&P providers trained and favorable reimbursement ( ). Entry into other markets like France and Italy is deferred until revenues are higher, as it's a 2–3 year investment ( , ). China joint venture partners are expected to start generating revenue in 2025 after obtaining necessary approvals ( ). -
R&D and Product Enhancements
Q: Any developments on the R&D front?
A: The R&D team is working on enhancements to the MyoPro 2+, incorporating feedback from at-home trials ( ). Announcements of new features that broaden the number of qualified patients are expected in Q1 of 2025 ( ). -
Clinician Network Expansion
Q: How many clinicians are on staff and plans to expand?
A: There are currently about 12 clinicians in the field across the country, with plans to continue expanding to meet demand ( ). Additionally, over 100 O&P clinicians have been trained through the Myomo Academy, facilitating further growth ( , ).