Myomo, Inc. Q3 FY2024 Earnings Call

Good day, and welcome to the Myomo Third Quarter 2024 Financial Results Conference Call. I would now like to turn the conference over to Kim Golodetz. Please go ahead.

Thank you, operator, and good afternoon everyone. This is Kim Golodetz with Alliance Advisors IR. Welcome to the Myomo third quarter 2024 conference call. Earlier this afternoon, Myomo issued a news release announcing financial results for the three and nine months ended September 30, 2024. If you would like to be added to the company's email distribution list to receive future announcements, please register on the company's website at myomo.com or call Alliance Advisors IR at 310-691-7100 and speak with Danny Chertok. With me on today's call from Myomo are Paul Gudonis, Chairman and 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 management other than historical facts are forward looking statements. The words anticipate, believe, estimate, expect, intend, guidance, outlook, confidence, target, project, and other similar expressions are typically 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 Myomo’s business financial condition and operating results. These and additional risks, uncertainties, and other factors are discussed in Myomo’s filings with the Securities and Exchange Commission, including on Forms 10-K and 10-Q. Actual outcomes and results may differ materially from what's expressed in or implied by these forward looking statements. Except as required by law, Myomo undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances after the date of this call. It is now my pleasure to turn the call over to Myomo CEO, Paul Gudonis. Paul, please go ahead.

Thanks, Kim. Well, good afternoon everyone, and thanks for joining us today. We achieved another quarter of strong growth in the third quarter of 2024, building on our momentum since the Medicare fees for the MyoPro powered arm braces went into effect beginning April 1. We're now able to serve the many patients in the U.S. who are covered by standard Medicare Part B, and we've achieved quarterly records in important business metrics, including revenue, revenue units, pipeline ads, border rent pipeline size, insurance authorizations and orders, and MyoPro shipments. With the reclassification of the MyoPro into the brace category and the publication of the Medicare allowable earlier this year, we established three major objectives for the company. First, provide the MyoPro to eligible standard Medicare Part B beneficiaries whom we had to turn away before; second, engage the many orthotics and prosthetics clinics across the country who would now be interested in becoming a distribution channel for us; and third, begin the process of establishing contracts with payers for in-network status for our direct provider business. I'll provide a status report on these initiatives by reviewing the key data points across our revenue cycle, from patient candidates who are interested in MyoPro through to revenue units in the quarter. We added 645 medically qualified candidates to the patient pipeline, which was up 69% from the year-ago quarter as our addressable market has increased to include Medicare Part B patients that did not have access to the MyoPro in the past. Our marketing efficiency also improved, with the cost per pipeline add down 25% from last year to $1,618 per qualified ad. We received insurance authorizations and orders for a record 225 MyoPros in the third quarter, including medically qualified Medicare patients, which was up sequentially and also up 44% year over year. Revenue units based on devices delivered to patients or payments received totaled 161 MyoPros, which is up 35% from a year ago. The average selling price, or ASP, increased to an adjusted $52,700 per unit, as Dave, our CFO, will explain. As a result of more MyoPro volume and a higher ASP, our product revenue is a record $9.2 million, up 83% over the same period in 2023. These revenue units included 87 MyoPros delivered to Medicare Part B beneficiaries, in addition to shipments to Medicare Advantage, VA, orthotics and prosthetics clinics and international customers. With the large number of additions to the patient pipeline, we exited the quarter with 1,263 candidates in the process of obtaining a physician's order and the necessary medical documentation for a MyoPro. With the large number of new orders, our backlog stood at a record 316 units, which represents over $16 million of potential revenue. As we're developing the O&P channel, in September, we attended the American Orthotics and Prosthetics National Association Assembly, which is the largest conference for orthotics and prosthetics, or O&P clinics in the U.S. With clarity on Medicare Part B reimbursement, we're now able to recruit these O&P clinics to provide the MyoPro to stroke survivors, building assistance of patient populations they already serve with ankle foot orthoses and other braces. Our team of business development managers and clinical trainers serving this O&P channel is up and running, and we had a standing room-only crowd of more than 100 clinical professionals attending our manufacturers workshop at the conference. We trained these clinicians on the MyoPro. We've launched the Myomo Academy, which is an online learning platform specifically for O&P professionals. We're also conducting a number of in-person training sessions as part of the certification program for O&P clinics to become a MyoPro center of excellence. These training sessions have included many independent O&P clinic owners and certified prosthetists orthotists, as well as Hangar clinics, which is the largest nationwide operator of O&P clinical facilities. We've set a goal of recruiting and training 100 clinicians by the end of this year, and I'm pleased to report we've already surpassed that goal. These prosthetics and orthotics are now starting to evaluate patients, and after they receive the necessary medical documentation, they'll begin to place orders for custom MyoPro for their patients. We've already seen an uptick in activity from the O&P channel, and we expect that O&P orders will increase in 2025 as their patient pipelines are growing. However, it can take several months for patients to see their primary care or other qualified physician and to obtain all the necessary clinical notes required before a MyoPro order can be placed. While our direct provider business with Medicare, our international operations, and our progress in the O&P channel has been going well, I'm frustrated with some of the Medicare Advantage plans. Rather than following Medicare’s lead and covering the MyoPro for their members, we've seen mixed results from these payers so far. It's been widely reported that some Medicare Advantage payers are making it more difficult for patients and providers to get the care they deserve, which is what we are seeing as well. As a result, more authorization requests are being denied initially, forcing us to file more appeals for pre-authorizations of some plans. On the other hand, some Medicare Advantage plans that did not cover the MyoPro in the past have started to do so, which is a good thing for their members. Additionally, the good news is that we've seen some of the Medicare Advantage plans pay a more appropriate amount now that the Medicare allowable rate has been published. As before, on the third objective of contracts with payers this year's developments with Medicare, our Chief Medical Officers have been working with private payers to begin the contracting process for Myomo to become an in-network provider. While this can be a multi-year process due to the meetings required with medical directors and then the contracting staff, we recently announced we've entered into our first two contracts, one with Blue Cross Blue Shield of Massachusetts and another with Paradigm, which is a leading workers' compensation organization. Together, these two payers represent 3 million covered lives at the Blue Cross Blue Shield plan, plus employees served by Paradigm for workplace injuries. We have ongoing dialogues with other payers, which we believe will lead to additional contracts down the road. With the growth in the pipeline orders and channels, even adding capacity to meet demand, we've gone from about 100 employees at the beginning of the year to 180 now, and we'll be moving to a larger production facility in the Boston area later this year to accommodate the expected growth in shipments this quarter and in the future. As I mentioned, our international operations based in Germany continue to perform well with a record $1.1 million of revenue in the quarter. Also, our China Joint Venture, Jiangxi Myomo, is making progress in obtaining the necessary regulatory approvals from the NMPA, equivalent to a Chinese FDA, to begin sales and production of Myomo units, in addition to undertaking a clinical trial with some key hospital partners as part of their market access plan. We don't expect much in the way of revenue from China at this point, but we're getting well positioned to capitalize on this very large opportunity. With that overview, I'll turn the call over to our CFO, Dave Henry, for a deeper dive into the quarterly financials, and I'll return with some additional comments on our business plans. Dave.

Thank you, Paul, and good afternoon everyone. Let me start my remarks with a review of our third quarter financial results. Revenue for the third quarter of 2024 was a record $9.2 million. This consisted entirely of product revenue and was up 81% over the prior year's quarter, which included a payment under our licensing arrangement with the joint venture company in China. Product revenue was up 83% over last year's third quarter. Product revenue growth was driven by a record 161 MyoPro revenue units, up about 35% year over year. Our average selling price, or ASP, was also a record at approximately $57,200. ASP was favorably impacted by supplemental insurance payments in the third quarter on revenue units recognized in a prior period. This is the result of the transition to recognizing revenue on delivery to Medicare patients, effective July 1, 2024. Excluding these payments, ASP was $52,700 in the third quarter, still a record high. For Medicare Part B and certain commercial payers, we are recognizing revenue at delivery in an amount expected to be paid by both the primary and supplemental insurance payer, with the exception of Medicaid. Note that Medicare Advantage payers are in most cases now reimbursing based on the fees published by CMS. As a result, 94% of third quarter product revenue was recognized at either shipment or delivery, compared with 76% in the year-ago period. Additionally, 55% of product revenue in the third quarter came from Medicare Part B patients, up from 47% in the second quarter, reflecting our success in reaching out to and educating these patients on the benefits of the MyoPro. Revenue from patients with Medicare Advantage Plans represented 24% of third quarter revenue, although Medicare Advantage revenue was down 26% year over year. The challenging reimbursement environment with Medicare Advantage Plans continued in the third quarter, which resulted in fewer first-time authorizations and more denials, leading to more administrative law judge hearings in order to obtain an authorization for the patient. Our success rate with ALJ hearings remains constant at around 40% to 50% of cases. However, as Paul mentioned, we're seeing some good news in that certain Medicare Advantage payers previously not reimbursing for the MyoPro have begun providing pre-authorizations. Of the 161 revenue units in the third quarter, approximately 24% resulted from fill, which is our term for our authorizations on orders received and converted to revenue in the same quarter, driven by revenue from Medicare Part B patients, 81% of our revenue in the third quarter came from the direct billing channel, compared to 69% in the prior year quarter. International revenue was a record $1.1 million in the third quarter, representing 12% of third quarter revenue, primarily from Germany. In the third quarter of 2024, both pipeline additions and total pipeline reached new records. The pipeline was 1,263 patients at the end of the third quarter, an increase of 21% year over year. There were a record 645 additions to the pipeline in the third quarter, an increase of 69% year over year. Of the pipeline additions in the third quarter, 30% were Medicare Part B patients, about 15% of the total pipeline at the end of the third quarter were Medicare Part B patients. This reflects the increased velocity in moving Medicare patients through the process of obtaining a MyoPro compared to payers that require pre-authorization. Reported backlog represents assurance, authorizations, and orders received but not yet converted to revenue and in the case of Medicare Part B patients, those patients from whom we've collected medical records and deemed qualified for delivery based on our inclusion criteria. Our backlog at the end of the third quarter was a record 316 patients, up 71% from our backlog at the end of the third quarter of 2023. The third quarter backlog includes 114 Medicare Part B patients that have either been qualified for delivery with appropriate medical documentation or have received their MyoPro and claims have not been filed. The Medicare portion of the backlog increased 19% sequentially, contributing to our backlog was a record 225 authorizations and orders, an increase of 44% year over year. Gross margin for the third quarter of 2024, coming entirely from product sales, was 75.4% compared to 68.7% for the prior year quarter. The increase was driven primarily by the higher ASP I mentioned earlier and higher fixed cost absorption. Excluding the licensed revenue, gross margin on product sales was 68.4% in the third quarter of 2023. Operating expenses for the third quarter of 2024 were $7.9 million, an increase of 43% compared with the third quarter of 2023. This increase was driven primarily by the higher headcount throughout the organization to increase capacity and to accelerate completion of certain engineering projects and new product development. In addition, advertising expense of $1 million was up 23% year over year as we successfully undertook efforts to increase the number of patients at the top of the funnel. The cost per pipeline add was $1,618, down 25% compared to the prior year quarter. The operating loss for the third quarter of 2024 was $1 million, which is half a $2 million operating loss for the same period a year ago. The net loss for the third quarter of 2024 was $1 million or $0.03 per share. This compares with a net loss of $2 million or $0.06 per share for the third quarter of 2023. Approximately 7.7 million pre-funded warrants are still outstanding from our offerings in 2023 and in January 2024. These pre-funded warrants are considered common stock equivalents under GAAP and are included in our weighted average shares outstanding. Adjusted EBITDA for the third quarter of 2024 was a negative $600,000 compared to a negative $1.7 million for the third quarter of 2023. Looking at our year-to-date financial results, revenue for the nine months ended September 30, 2024 was $20.5 million, up 41% compared to the same period a year ago, and product revenue increased 61%. Year to date, gross margin was 71.1% compared with 69.6% in the year-ago period, or 65.4% excluding license revenue. Operating expenses for the first nine months of 2024 were $20.5 million, an increase of 29% compared with the same period a year ago. The operating loss for the first nine months of 2024 was $6 million, compared with an operating loss of $5.8 million for the same period a year ago. The net loss for the first nine months of 2024 was $5.9 million or $0.16 per share compared to the net loss of $5.7 million, or $0.21 per share for the same period a year ago. Just a deeper dive with a negative $5.3 million for the first nine months of 2024 compared to a negative $4.9 million for the year-ago period. Turning now to our balance sheet and cash flows, cash, cash equivalents, and restricted cash as of September 30, 2024 were $7 million. Cash used in operating activities was $1.5 million for the third quarter of 2024 compared with $1.7 million for the third quarter of 2023. Operating cash flow in the third quarter was impacted by a payment delay from CMS in the last few weeks of the quarter due to a transition from check payments to electronic payments. Payment hold was mandated by CMS while our bank accounts were being verified; that delay pushed roughly $600,000 of payments into the fourth quarter. As of today, we're being paid electronically by all of the billing regions, and they have caught up and paid the outstanding claims from September. Restricted cash of $375,000 consists of funds held by our bank to collateralize a letter of credit, which represents the security deposit for our new headquarters building. We expect to occupy the building by the end of the year; we have an accounts receivable line of credit with Silicon Valley Bank that provides for borrowing of up to $4 million based on 80% of eligible accounts receivable, as defined in the agreement. As of today, we have not drawn on the credit line. We believe our cash and cash equivalents are sufficient to fund our operations for at least the next 12 months. Turning to our financial guidance, given our backlog, we believe we are positioned for a third consecutive quarter of record revenue. We expect revenue for the fourth quarter to be in the range of $9.5 million to $10.5 million. This represents between 100% and 121% year-over-year growth. As a result, we're raising our full-year revenue guidance to $30 million to $31 million, up from our previous guidance range of $28 million to $30 million. We are also reiterating our expectation that, based on this revenue guidance, operating cash flow break-even is still achievable in the fourth quarter. We also expect to approach adjusted EBITDA break-even in the fourth quarter. However, in order to achieve these targets, we assume no supply chain disruptions, no delays in the receipt of expected payments, including a contractual reimbursement from the landlord of our new facility, and no increase in day sales outstanding. With that financial overview, I'll turn the call back to Paul.

Thanks, Dave. We're looking forward to a strong finish to this transformational year, as the clarity of reimbursement with Medicare coverage and payments has been a significant inflection point for Myomo. In addition to the continued growth in quarterly revenues in Q4, we're continuing to build out the O&P distribution channel. In fact, this week, we're attending a major regional O&P conference in New Jersey that's being attended by several hundred clinicians, and we're scheduling more training classes. We also received a very positive comment from a Hangar clinics executive after participating in one of our recent sessions, telling us that our manufacturers training was among the best clinicians have ever experienced, and I'm really proud of our team. So with that update and overview of our plans for the rest of 2024, we're now ready to take your questions. Operator?

We're now ready to take your questions.

Before we turn to your questions, I want to mention that we've participated in several conferences in the past 60 days, including the HC Wainwright, Lake Street and Maxim Conferences, and we will be attending the 15th Annual Craig Hallam Office Select conference in New York City on November 19. We're also available for virtual and in-person investor meetings. To arrange a meeting, contact the conference organizer or call Alliance Advisors IR, who can assist you to schedule one. Okay. Operator, we're ready for the first question if you are.

Good afternoon. Thanks for taking the questions, and congrats on the great progress here. Just first, around ASP, what percentage of Part B patients is supplemental insurance or Medicaid covering to pay that last 20%? And then I think, backing up, how are you thinking about ASPs? You know, obviously, almost $53,000 is very strong, right around that maximum allowable. Do you think we still have room to go higher on portfolio ASPs? Or should we think about this being pretty close to the ceiling? Thanks.

Yeah, the $52,700 was based on, as I mentioned, the fact that the supplemental payments were received in the third quarter off revenue units in the second quarter. Now, when we recognize revenue going forward, we're recognizing revenue in the amount that is expected to be paid. So there are some supplemental insurance plans that we believe, we've made the assessment that they're going to pay us. So if it's an insurance payment, we will go ahead and recognize roughly $64,000 of revenue at delivery. Now, in the case of Medicaid, where we don't have Medicaid coverage yet, something we're working on, we will only recognize $51,000 whether secondary coverage is Medicaid. So overall, I would say about 20% to 25% of our patients so far have supplemental insurance coverage, or we will take that incremental revenue at delivery. As to whether the $52,700 represents something, you know, could there be ASP growth in the future? I think that mix of whether these patients have supplemental insurance or not will depend on that, and then once the O&P channel kicks in, I think then we might start to see a lowering of the ASP as that mix changes, but that's more of a 2025 issue.

Makes sense, and maybe just kind of going there on the O&P side. Great to hear about the progress thus far and what you kind of have planned through the rest of the year. How do you think, as far as how quickly those O&P providers can start generating revenue? Do you have kind of an idea yet? And then any early thoughts on next year, Paul, as far as what that channel can contribute from a volume standpoint? Thanks.

In our experience with these O&P clinicians, they'll first go through the initial training to evaluate patients, then maybe over the next month or two, they'll have the right patients come into their clinic for evaluation, and they may be MyoPro candidates. They will send that patient to their physician to get the written order to obtain all the medical documentation. Our experience with that process is typically six to eight weeks for patients to get appointments, come back with the documentation, and that O&P provider has to arrange to do the measurement of that patient's arm, to send us the order. So it's a three to four month process after getting that initial training, before we will see those initial orders. After that, we expect an uptick in orders, especially in the first quarter of 2025.

Got it, and then, you know, kind of following up on those comments, going to the manufacturing side. Can you confirm that you're still at about 80 units a month as far as production capacity, what you're churning out in your current facility? And then how quickly do you think you can get up and running in the new facility? How quickly do you think you'll need that expanded capacity from the new facility? And what do you think you can get out of one shift at this new facility? Thanks.

Well, the good news is, our manufacturing team has worked really well to get more efficient, and we are even exceeding that 80 units per month right now during our Boston facility. We've got a very good plan to start a parallel facility set up in a new Burlington workspace. We'll start manufacturing there, in addition to what we've got here in Boston, and then we'll finally migrate all of it by the end of the year. So I expect, over the next six months, we ought to be able to double capacity based on all the workstations we're putting in place. After that, we can either add more first shift workstations or consider a second shift. This new space gives us plenty of flexibility to keep expanding capacity to meet the growing demand.

And one other thing too, sorry, we'll also get initially we're going to move in and occupy about 27,500 square feet for office and manufacturing. Then come June, around June of 2025, we will get another 7,500 square feet of manufacturing space. I think we'll have plenty to meet our needs here as we go to 2025 and beyond.

And we've got a total of 13,500 here in Boston, so we're basically tripling the space with most of that expansion for manufacturing.

Congratulations on continued strong momentum. I'll start at the top of the funnel. New candidate adds, 645 is obviously a very large number. Do you think you can grow it much from there, or are you just trying to get a sense of what capacity is for the top of the funnel?

The answer is yes, and our plan is to keep growing it through advertising expenditures. We did spend more in advertising in Q3, as Dave mentioned, but we typically cut back on advertising in Q4 just because we're competing with the election advertising from various Medicare Advantage plans. So we can scale back some of our spending, but we will continue to grow that pipeline. We've added in our own direct billing operation with more certified prosthetists orthotists. We have a dedicated team to evaluate patients online for initial screening. So, Scott, we’re planning to continue growing because we’re in a very early stage of market penetration given the huge number of people that need this MyoPro.

Fantastic. And then thinking about 2025, if you annualize your fourth quarter number, you're already at $40 million. Any thoughts as to what kind of growth we could see from '24 to '25? Also for Dave, should we factor in that Q1 tends to be seasonally a little weaker for a multitude of reasons? Just trying to get your thoughts on that year.

Yeah, part of what we did with spending the money we did on advertising was to try to mitigate some of that first quarter seasonality by getting patients into the pipeline so that we can overcome what we typically see. So it’s a little bit early to tell in terms of what we can achieve, but I think we’d be disappointed if we had less than $40 million of revenue in 2025.

Thanks, I appreciate that color. Final question just on the O&P channel. I think Medicare is viewed as kind of a degree of magnitude relative to your base business, almost doubling it. How should we think about the peak impact of that O&P channel?

You see the peak impact, meaning over time it could be a large business, because most orthotic prosthetics products are delivered through the O&P channel. We're very optimistic about building this channel over time. In the meantime, though, we're going to continue investing in our own direct provider business, because we've built a strong commercial engine over the last five years that is becoming more and more efficient all the time.

This question reminds me of a comment you made regarding Hangar, because I think you had a conversation that they mentioned how many AFOs they might deliver in a year. There could be a sizable number of people who receive AFOs from Hangar that may be candidates for a MyoPro. I think that could be in the thousands per year just from Hangar.

You have 316 units in backlog as of September 30, which is up 71%, which is great. Can you talk about the value of that backlog and then when it should be recognized approximately over what time period?

Yes, so the backlog of 316, some of those patients will drop out of backlog. It always happens; typically that percentage is around 15% to 20%. So, conservatively, if you take 20%, maybe 250 will remain, and if the value of that backlog at the ASP is just say $50,000, you have the net value of over $10 million. Typically, about 35% to 40% will turn into revenue one quarter out and then the percentage decreases from there.

Usually, that backlog gets realized over the next month.

Okay, no, that's helpful. As you've been ramping up, how many direct sales people do you have now, and how many do you hope to have by the end of this year?

Well, remember, as a clinical services provider ourselves, we don't really have direct sales people. We have clinicians. These are licensed certified prosthetists orthotists who will evaluate interested patients. We generate patient demand primarily through social media, television advertising, and clinical referrals. On the O&P channel side, we've got two business development representatives whose job is to get O&P providers to become certified Centers of Excellence.

So you have two of those on the O&P side. How many clinical specialists?

We've got 10, plus we just hired a couple more, so call it a dozen right now in the field across the country.

Excellent. You have a huge opportunity in the U.S. Can you talk about your international plans, whether that's something you're looking at ramping now or sometime in '25, or is that more like a '26 plan?

We're planning to ramp up operations in Germany, because we are succeeding there; it's a good-sized market with good reimbursement from the statutory health insurance companies. We're also looking at other markets. It's typically a two to three year process with a new market, like France or Italy, to meet with regulators face-to-face with insurance companies. So I think we’re going to defer that until we are in a better position revenue-wise.

Okay, so the focus, because you've been in Germany, will be to continue to build that out in the U.S., and then it sounds like maybe France and Italy would be next, but that's a two to three year process to get that built out and ready to go.

Right. Meanwhile, we're cheering on our China joint venture partners—they're starting to get the necessary NMPA approval, so hopefully they'll start generating revenue in 2025, and we expect associated license fees back to us.

Last question on the R&D front, any particular developments or improvements or modifications to the current brace that's out there?

Yes, we've been expanding our R&D staff, and we've been working on new enhancements in MyoPro. We've taken them out in at-home trials with patients and received some good feedback on changes to make. Rather than introducing product enhancements right now, let's push that out a bit, because I'd rather put in those additional features. This also broadens the number of people who might be qualified for MyoPro. So you'll see some announcements for that probably in Q1 of 2025.

First off, congrats on getting the 100 O&P clinicians trained up. Can you talk about what the demand looks like for more O&P clinicians to get trained? How quickly can you train the next 100 and beyond? Any thoughts would be helpful.

Sure. One of the reasons we invested in creating the Myomo Academy as an online learning platform is to allow clinicians interested in working with us to sign a contract and access training. They can start to learn online, and we also do online classes. Our team is in New Jersey at this conference; if there's more demand, we can keep growing the team associated with the O&P channel because I want to develop it.

What goes into them ultimately becoming the center of excellence? What's the procedure and what happens after that to achieve that certification?

It's an important investment from them, as it takes three days for one of these certified prosthetists orthotists to become qualified to deliver a MyoPro. They learn about the evaluation process, medical documentation required by Medicare or other payers, and perform a shape capture to measure the arm and hand. After they place their order, we assist them in terms of product delivery and hands-on training with the patient as well. So, it's a three-day program, and they understand that investment is necessary for the potential return of earning Medicare allowable for every Medicare patient they treat with a MyoPro.

For the Q4 guidance, does that have anything factored in from the O&P channel, or would that be kind of pure upside?

Yes, the assumption is that typical rate we see—the O&P channel was only 3% of revenue in the third quarter. So we've considered this more of a 2025 opportunity, and that's what's reflected in the fourth quarter guidance.

Congratulations on the quarter. As you move into the new facility, how much more operating leverage can you get in your business?

I think we will have to pay a higher rental, of course, and we’ll need to absorb that before we get leverage. However, if we double the capacity, we believe we should generate good incremental operating income from what we're doing, particularly as we look to see that O&P channel grow. There will be more leverage, even though the ASP will decrease. We shouldn't need to spend as much on OpEx to serve that channel, so it could be beneficial in terms of operating margins going forward.

We are out of time, and therefore this concludes our question and answer session. I would like to turn the conference back over to Paul Gudonis, Chairman and CEO, for any closing remarks.

Well, thank you, Operator. In closing, I'd like to remind you that we are in the business of patient care. There's no better proof of that than success stories. One of our recent MyoPro recipients is a 50-year-old female who suffered a stroke in 2020. She lost the ability to use her dominant right arm and hand and was evaluated for MyoPro back in August 2023. After receiving an insurance denial, our patient advocacy team successfully appealed this decision, and she was fitted with the MyoPro this past August. In just two months, she's become a skilled user of the device, performing many activities of daily living, such as cooking, feeding herself, and doing laundry, thanks to her MyoPro. By continuing to assist more individuals like her, we're building a growing and profitable company. Thanks again for joining our call today, and have a nice evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.