Good afternoon, everyone. This is Tirth Patel with Alliance Advisors IR. Welcome to the Myomo Second Quarter 2025 Conference Call. With me on today's call are Myomo's Chief Executive Officer, Paul Gudonis, and Chief Financial Officer, Dave Henry. Before we begin, I'd like to caution listeners that statements made during this 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 risks, uncertainties and other factors that may affect Myomo's business, financial condition and operating results. These risks, uncertainties and other factors are discussed in Myomo's filings with the Securities and Exchange Commission. Actual outcomes and results may differ materially from what's expressed in or implied by these forward-looking statements. Furthermore, 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 today, August 11, 2025. It's now my pleasure to turn the call over to Myomo's CEO, Paul Gudonis. Paul, please go ahead.

Thanks, Tirth. Good afternoon, and thank you all for joining us today. As you've seen in our press release issued earlier today, our second quarter revenues were slightly ahead of our expectations, while several operating metrics were below our plans, and those metrics and trends will impact our near-term performance. We've made a number of adjustments in marketing and operations, and we're already seeing initial signs of success. But before we review our quarterly results, I'd like to briefly address some understandable shareholder concerns. We recognize that our recent stock price performance has been disappointing, and we appreciate your candid feedback. Myomo remains committed to market leadership with our proven MyoPro product line, adjusting our plans to grow the business and managing our financials to sustainable cash flow positive operations. On today's call, we'll dive into this with a transparent discussion of the challenges we faced, highlight tangible progress we're making and outline our plan forward to achieve these goals of sustainable growth and profitability. We appreciate your continued trust and look forward to demonstrating meaningful results. Let me begin with an overview of the dynamics of generating leads and converting qualified leads into our pipeline. Recall that in the first quarter, Meta changed its Facebook algorithm in response to privacy concerns around using someone's health information or browsing history as a means to target advertising. As I discussed during our last call, despite stepping up our advertising spend, the number of new leads did not increase in January and February. So we engaged a new digital ad agency to help us with the workaround and lead flow started increasing significantly in March and April. We are pleased with those results and knowing we need to rapidly add more pipeline, we allocated more dollars to digital media in the second quarter, and it worked. We hit a record level of leads in June with four times as many leads generated as in January earlier this year. And in addition to generating a higher number of leads, our cost per lead returned to historical levels. Consistent with generating a record number of new leads, we expected an even greater number of pipeline adds. To add a prospective patient to our pipeline means we've engaged with the lead on the phone, reviewed their health insurance status and completed a telehealth screening or in-person evaluation to verify that they're medically qualified candidates for the MyoPro. There are three factors that prevented a record number of leads generated in the second quarter from turning into pipeline adds at the historical rates or levels. The first is that the lead quality, particularly the Facebook leads, were not as good as what we've seen in the past. The reasons for that vary, but the fact is the leads were of poor quality. Second, as we analyze past data about our pipeline adds, we discovered that there is a cycle time effect. More specifically, about half of our pipeline adds come from leads generated within the past 30 days, while most of the rest come from patients who contacted us six or 12 months ago, even longer. At our recent Investor Day, we reviewed the patient decision-making process during which stroke survivors will want to get more information, talk to family members and clinicians, and even go back for more rehab therapy before committing themselves to obtaining a MyoPro. Last year, there was a large number of Medicare Part B patients who have been interested in a MyoPro, and they were able to access the device beginning in April 2024 when Medicare coverage began. Currently, we have a large cohort of Part B leads that have expressed interest since the beginning of the year. Based on history, many of them are expected to take the next steps somewhere over the next six to 12 months. The third factor impacting pipeline adds is the patient's clinical presentation. To qualify for our pipeline, a patient must meet our inclusion and exclusion criteria during a telehealth screening or an in-person evaluation by one of our clinicians. We typically exclude over half of the patients that approach us. This year, we've seen that percentage increase somewhat. Proper patient selection is necessary to improve long-term clinical outcomes, which is critical for maintaining reimbursement. But going forward, our assumption is that this percentage of patients we exclude will stabilize, and I'll discuss how we plan to offset this in a bit. The result of these factors, despite achieving a record 816 pipeline additions in the second quarter, cost per pipeline add increased to approximately $2,900. And although this is up from about $1,500 in recent quarters, it's down from nearly $5,000 of pipeline add after Apple's privacy changes a few years ago. To improve our top of the funnel metrics and generate more qualified leads, we redirected advertising dollars from social media to television. Our experience shows that a higher proportion of leads generated by the TV ads engage with us right away to pass the telehealth screening and move forward into the pipeline. Our cost per lead in the third quarter is expected to increase with a higher mix of television advertising, but we expect that the cost per pipeline add will decrease. Early indications so far indicate that this shift has increased pipeline adds, reflecting better patient engagement. Since we increased our ad spend, we reduced costs elsewhere in the organization. In July, we undertook a headcount reduction that impacted about 8% of our U.S. workforce. We also cut back on outside services spending and are limiting new hires until we see a significant uptick in our revenue growth. These actions are expected to save us at least $2 million in operating expenses and capital expenditures over the next 12 months. We will continue to be disciplined in our spending, emphasizing those areas that produce revenue and increase our competitive position. In addition to the challenges in converting leads to pipeline adds, we've been experiencing a lower conversion rate from pipeline adds to authorizations, which is impacting backlog growth. To address this, we're expanding our clinical referral program by increasing education activity at rehab hospitals with our field clinical staff. Expansion of this program is expected to result in more high-quality patients entering our pipeline. To date, we've trained over 1,500 occupational therapists on the MyoPro all across the country. Now that Medicare and the collagen in place are in place, we believe that they will be referring more patients to us and to our O&P channel partners. The number of qualified patients from clinical referrals doubled over the last year, and we are organizing screening days at facilities to accelerate this momentum. We're creating what amounts to a new sourcing channel for our direct provider business and O&P partners to participate with us in these clinical events. For example, I recently attended a patient evaluation training day at one of our O&P partners in Virginia that is becoming Myomo certified. After our training, these clinicians have now fit their first patient with the MyoPro, and we're eager to introduce the MyoPro to rehab hospitals in the area where they have strong working relationships, which our clinical team participated in just this past week. We're actively certifying O&P clinics by having them evaluate and fit several patients until they meet our standards and are self-sufficient to provide the devices to their clients. We're seeing a growing pipeline of O&P patients in the reimbursement process. In fact, the number of O&P orders doubled from Q1 to Q2 of this year, and we're expecting continued order growth from this channel going forward. Another factor impacting the conversion from pipeline adds to authorizations is the behavior of the Medicare Advantage plans. Since just over half of seniors are covered by Medicare Advantage plans, we are taking steps to increase the number of authorizations from these payers. We're appealing more denials and taking more appeals all the way to an administrative law judge, or ALJ hearing, and I'm pleased to report that we're winning a larger percentage of appeals, reflecting the standards we set for patient inclusion and the strength of our legal position. As discussed during our June Investor Day event, we plan to double the number of ALJ hearings in the second half of the year in order to generate more authorizations and put more pressure on these plans. In this environment, the only way to grow Medicare Advantage revenue is to put more shots on goal. Since these patients are being unfairly denied access to MyoPro in violation of the code of federal regulations, we intend to escalate our concerns through formal appeals and direct engagement with plan administrators and regulators, reinforcing that Medicare Advantage plans are obligated to follow national Medicare policy. As I mentioned a moment ago, Medicare Part B patients are critical to our growth plans, and we'd like to see more of them in our funnel. While we don't control the insurance coverage of prospective patients, we proactively engage with those covered by Medicare Part B and their healthcare providers to accelerate the path to MyoPro. Roughly half of our fill units in the second quarter represented Medicare Part B patients. We're also starting to see more authorizations for patients covered by the contracts we entered into over the past year, and we have additional negotiations underway to increase patient access to the MyoPro. We've expanded our contracting to now cover 35 million lives with signed or pending agreements. In summary, we're moving as quickly as possible to improve our results in the direct billing channel. Our international and O&P channels also continue to grow, complementing our direct billing channel and diversifying our revenue streams. Our strategy for expanding access, improving conversion and efficiency, and managing costs positions us well for the second half of 2025 and beyond. While we expect 2025 to be another year of revenue growth, reflecting the number of leads, pipeline adds, and insurance authorizations year-to-date in the direct billing channel, we are updating our expectations for revenue growth to 23% to 29% in 2025, as Dave will discuss. For all those who have followed Myomo over the past several years, you've seen us pivot strategically when necessary, develop new opportunities such as Medicare coverage, and adjust our operations to support our 10-plus year track record of volume and revenue growth. With that overview of our performance and actions, I'll turn the call over to our CFO, Dave Henry, to provide more of the financial details.

Thank you, Paul, and good afternoon, everyone. Let me start with a review of our second quarter financial results. Revenue for the second quarter of 2025 was $9.7 million. This represents a 28% increase versus the prior year and was driven by a higher number of revenue units and a higher average selling price or ASP. We delivered 178 MyoPro revenue units during the quarter, up 13% with 95 of those units from authorizations and orders received in the second quarter. This higher velocity is also reflected in the fact that approximately 91% of our second quarter revenue was recorded at either shipment or delivery. Our ASP increased 14% versus the prior year to approximately $54,200. Medicare Part B patients represented 56% of revenue in the second quarter. Medicare Advantage revenue was 20% of second quarter revenue and in dollar terms was down slightly from a year ago. Medicare Advantage revenue remained constrained on the high number of pre-authorization denials forcing us into an appeals process in order to serve these patients. 77% of revenue in the second quarter came from the direct billing channel compared with 78% in the prior year quarter. International revenue was $1.5 million in the quarter, representing 15% of the total, primarily from Germany. International revenue was up 41% year-over-year. As of June 30, 2025, the pipeline stood at 1,611 patients, an increase of 37% year-over-year. 61% of the quarter-end pipeline were patients with Medicare Advantage or other commercial insurance. In the second quarter, we added 816 patients to the pipeline, which is up 49% over the prior year quarter. This includes 54 patients who are identified by our O&P 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 them to be given Medicare Advantage authorization rates and our expectations. Paul analyzed the pipeline in detail, so I won't repeat that here other than to point out that there were 213 Medicare Part B patients added in the second quarter or 28% of the total direct billing adds, and the total Medicare Part B pipeline was 256 patients at quarter end or 16% of the total. As a result of the lower lead quality, cost per pipeline add, excluding the COE additions, was $2,926 in the second quarter, which was up 89% year-over-year. Backlog represents insurance authorizations and orders received but not yet converted to revenue, and in the case of Medicare Part B patients for whom we've collected medical records and deemed qualified for delivery based on our inclusion criteria. We ended the quarter with a backlog of 230 patients, including 72 Medicare Part B patients, down 19% versus the prior year. The decrease in the total backlog reflects our higher intra-quarter conversion velocity and reduced Medicare Advantage authorizations and the fact that intra-quarter fill units are making up an increasing percentage of our quarterly revenues. Indeed, 53% of second quarter revenue units came from fill units. We received 207 authorizations and orders during Q2, a decrease of 3% year-over-year. Gross margin for the second quarter of 2025 was 62.7%, down from 70.8% for the prior year quarter. The decrease was driven primarily by higher material costs, demo unit builds, and overhead spending, including payroll and higher lease expense for the new facility. Operating expenses for the second quarter of 2025 were $10.6 million, up 65% over the second quarter of 2024. This increase was driven primarily by higher advertising spending to compensate for lower conversion of leads to pipeline adds and by higher headcount throughout the organization as we increased capacity in the direct billing channel and spending on R&D efforts, including added headcount 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 costs in July to better align operating expenses with revenue and to offset the higher advertising spend. We expect cash savings from this initiative to be at least $2 million over the next 12 months. 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. Net loss for the second quarter of 2025 was $4.6 million or $0.11 per share. This compares with a net loss of $1.1 million or $0.03 per share for the second quarter of 2024. During the 2025 quarter, approximately 2.7 million prefunded warrants were exercised. As of June 30, 2025, approximately 4.4 million prefunded warrants remain outstanding from our offerings in 2023 and January 2024. These prefunded warrants are considered common stock equivalents under GAAP accounting and are included in our weighted average shares outstanding. Adjusted EBITDA for the second quarter of 2025 was a negative $4 million compared with a negative $1.2 million for 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 increase was due to one of the DME MACs holding payments on claims for the entire quarter until CMS processed or addressed changes in their systems. All aged claims have now been paid, but that payment hold affected second quarter cash flow by approximately $1.5 million. In addition, there were two other DME MACs that have been conducting prepayment audits of our claims since the beginning of the second quarter. To date, out of the 27 audited claims with determinations, 21 have been paid and 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 denied claims will be reimbursed after appeals. Cash, cash equivalents, and short-term investments as of June 30, 2025, were $15.5 million. 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, 2024 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 O&P channel partners. Additional drivers of this elevated burn were the payment hold and a higher DSO in the DME MAC regions conducting audits, as well as the repayment of approximately $700,000 to an insurer 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 factoring in current conversion rates through our revenue cycle, the best path forward to sustainable positive cash flow is to continue spending on advertising while minimizing fixed costs. Despite the lower conversion rates and a higher cost per pipeline add, the direct billing channel still generates meaningful positive incremental contribution margin. 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. While the recent workforce reduction, our headcount is only about 10% above where it was at the start of the year, with new hires primarily supporting capacity in the direct billing channel, revenue growth in Germany, and R&D. We plan to make only a few critical hires during the rest of the year and expect to exit 2025 with a significantly lower headcount 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 fill 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 B patient flow. With that financial overview, I'll turn the call back to Paul.

Thanks, Dave. We're now ready to take your questions. Operator?

Thanks, Dave. We're now ready to take your questions.

Before having the first question, I want to thank all of you who attended our June 18 Investor and Analyst Day event, either in person or online. We posted materials and a webcast of the day on the IR section of our myomo.com website, and 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 H.C. Wainwright Conference virtually on September 8 through the 10th. Operator, let's now go ahead and take the first question.

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 conversion from backlog would have to tick up fairly meaningfully sequentially, and there'll also be kind of meaningful improvement sequentially in kind of backlog adds. Can you kind of elucidate what you're seeing so far through July and kind of mid-August here? Are you seeing a lot more fill units that would make kind of that elevated conversion from backlog makes sense?

We are seeing more fill units making up a higher percentage of our backlog. That is exactly what we are experiencing. However, even with this increase, our guidance remains flat at $9.5 million to $10 million, similar to what we reported in the second quarter.

Got it. And if I look at Q4, kind of what that implicitly guides to, you were talking about a decline year-over-year. And so if we also think about some of that O&P volume kind of being there, hopefully, again, the direct billing channel is down year-over-year, certainly. Can you kind of help with kind of specifically what you think maybe even outside of kind of some of the advertising wells? It's clear we're not getting kind of word-of-mouth benefits. Can you just kind of give me some overall thoughts as far as you think some of the challenges may be outside of advertising as well?

Yes. One of the things we want to accomplish, as Paul mentioned, is our referral program. We aim to reduce our reliance on advertising spending. Paul made a great point earlier about wanting to progress in patient care, and we're going to support ourselves and our O&P providers by taking on much of the work in generating referrals for both our R&D partners and ourselves. We're focusing on the incidence population rather than depending too heavily on the prevalence population. We believe that this approach will improve the conversion rate of new additions to our pipeline because these individuals are closer in time to their stroke, and they may not have developed some of the other comorbidities that we often see with the prevalence population.

Got it. And if I think about the O&P channel, the 50-odd leads in the quarter, maybe share how many O&P providers you have trained at this point, but it's a fairly small number of leads per O&P head. Is there any plans as far as how we can kind of accelerate that contribution to the pipeline to maybe kind of, again, diversify away from the direct billing channel on the advertising side?

We are anticipating significant growth in the O&P channel. Currently, we have about 100 CPOs who have gone through their evaluation training and are beginning the process to become fully certified with us. The steps involved include building a pipeline, obtaining authorizations, and fitting three MyoPros. Our clinical team has been expanded to collaborate with these O&P providers nationwide, and we are progressing with more of them towards certification. The pipeline is growing compared to earlier this year. We will be attending EIOPA, the National American Orthotics Prosthetics Conference, in early September to recruit additional O&P partners and connect with those already committed. I expect continued growth in that channel. As I mentioned, we aim to reach a larger segment of the incidence population. There are 800,000 strokes annually, with over 500,000 individuals surviving and going to rehab hospitals, and half of them are left with chronic arm paralysis. We have engaged therapists to train them on the MyoPro and are now actively encouraging referrals of these patients to us and our O&P partners to gain more medically qualified patients earlier in their journey. We believe this will serve as a strong new source of patient leads for us.

Dave, just two last kind of financial questions for you. So first on kind of the advertising spend. Should we model that continuing to accelerate from a spend perspective kind of sequentially? And 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 stabilizes, goes a little bit higher, starts to come in a little bit? I mean, kind of talk to me about kind of that it's a little bit less focused advertising. Should we be modeling cost per pipeline add? How should we be modeling it?

I would expect advertising dollars to remain about the same in the third quarter compared to the second quarter. In the fourth quarter, they typically decrease due to competition from holidays and the renewal of Medicare Advantage plans. We usually cut back on advertising spending during this time. As Paul mentioned, as we allocate more advertising to television, the cost per lead is likely to rise, but we anticipate that the cost per pipeline addition will be lower in the third quarter than in the second. It may take some time to return to previous levels, like $1,500, due to ongoing challenges, such as changes in Medicare Advantage rates and a higher rate of disqualifying patients, which is affecting our pipeline conversion.

Next question comes from the line of Scott Henry with AGP.

First, if I could just for clarity, when you were talking about the O&P channel, I thought on the second quarter call, you noted 300 CPOs. Could you give us an update to that number, how many certified prosthetic orthotists have been trained?

Yes. That's right, Scott. About 300 have gone through the evaluation training. It's up to them to actively go out and seek their own pipeline, evaluate patients, and then move forward through the certification process, where there are three in-person fittings with us. So out of those 300, we've got 100 active ones in addition to the hanger clinicians.

I think, as Paul mentioned, the 300 refers to the evaluation training, which is the initial step. However, we are currently focusing more on getting these orthotists and prosthetists certified.

Okay. I think my notes indicate it was 160 in the fourth quarter of '24 and 300 at the end of the first quarter. So for this quarter, is it a flat number, or has it increased? Maybe you don't have that number available, but it has increased by some amount.

Yes. That number is likely increasing because many individuals are enrolling in our online course about evaluations. However, our O&P team is actively engaging with the clinicians, as not every clinician who completes the training is actively marketing this. We are currently focusing on around 100 of the most active clinicians.

I believe, as Paul mentioned, the 300 pertains to the evaluation training, which is the first step. However, we are currently concentrating more on getting these O&P certified.

Okay. Let’s go through the metrics. A lot has changed, and it seems like much of this information is evolving. Starting with the pipeline additions of 816, I know you’re focused on quality now as well. Would you expect that number to be in the 900-plus range in the third quarter? Is it still growing? Or as you shift your focus to quality, might that number level off as you aim to get better leads? I’m curious about your thoughts on how we should view that number.

We're not providing specific guidance on the number of pipeline additions for the third quarter, but our initiatives are designed to increase these additions over time, as achieving our desired revenue results relies on that. We are not reducing efforts to grow pipeline additions. Instead, we are exploring various methods, like the referral program, to generate more additions while possibly relying less on advertising.

We are working through a record number of leads in June that we received from advertising. Even with a lower conversion rate of lead to pipeline, there remains a significant backlog of these leads for our call center and clinicians to handle.

Okay. There are a few metrics that have stood out over the last couple of quarters. The authorization rate may vary depending on the source, but based on my calculations, it was around 17% to 18% previously. In the first quarter, it dropped to 14%, and it appears to be about 13% this quarter. Do you anticipate it will return to the 17% range, and over what timeframe?

No, I think that rate is likely to continue. Hopefully, it stabilizes here, but I don't know if it will return to the 17% until Medicare Advantage plans start authorizing more. As I mentioned, we had 1,611 patients in the pipeline, 61% of them were Medicare Advantage. The first-time authorization rate for a Medicare Advantage patient is about 15%. This means that 85% of the pipeline for Medicare Advantage remains pending while we go through the appeals process and try to move them all the way through to an ALJ hearing. That's the challenge we face in trying to improve that authorization rate.

The final number in that model was the percentage of the pipeline that is lost. It used to be higher, as low as 22%, and now it's around 30%. Do you think that number will start to improve? In theory, if the leads are better, that number should decrease. I'm trying to understand what you expect for that. I suppose it's an attrition rate.

Yes. One of the things we are currently doing, as we mentioned, is that for certain patients there will be a pipeline addition if they successfully pass the initial telehealth screening. However, there are patients who pass that first screening that we consider to be more marginal and may not be ideal candidates. To address this, we are conducting a second in-person evaluation for some of these marginal patients earlier in the process rather than waiting until a fitting when the device is in their home. About half the time, those patients do not continue after the second evaluation, while the other half do proceed with the process. For those patients who do not continue, it results in a drop from the pipeline. We plan to keep doing this to identify patients who should not be in a MyoPro sooner, and I expect that the drop rate will continue to remain around 30%.

I just want to acknowledge that you've done a great job growing this business. Although it's a bit tough right now, looking back shows significant growth, which I commend you for despite the current challenges. My final question is whether you feel your confidence in the metrics is improving. At the Analyst Day, you seemed to feel you had things under control, but the current situation might not suggest that. Now that you've reset expectations, are you feeling more confident, or are you still trying to understand how these factors are influencing the situation?

Yes, we are encouraged by the July results, which indicate that our internal modeling aligns with what we're observing. We have identified most of the issues discussed during the call and have implemented plans to address them. For example, we have made fixes regarding leads and are aware of the higher percentage of disqualified patients. We are actively managing these challenges and have strategies in place to continue addressing them as they arise.

My first one is on reimbursement. So you mentioned you're seeing a higher percentage of challenges, denials, especially from Medicare Advantage payers. I was wondering whether you're seeing the same thing from commercial payers and whether this high number of denials is more of an industry trend that you're seeing or more specifically related to the lower quality leads that you've had in Q2? Do you expect this number to improve in the second half?

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. We are taking more to 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 a strong legal case based on the code of federal regulations. On the 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. As I 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 under contract, and that's facilitating authorizations under those plans.

Yes. To clarify, I mentioned higher material costs, but that's not necessarily due to pricing increases. That's due to factors like increased material used for warranty work and higher inventory adjustments that may occur during the quarter. We haven't seen significant price increases related to tariffs yet, and only a couple of vendors have started to implement price increases on us, which is not substantial at this time. We analyzed this a few months ago, and we still anticipate that the impact from tariffs could be around 100 basis points on gross margin this year.

First question related to the leads from Facebook being of lower quality than in the past. Do you have any insight into why that might be? You mentioned shifting some of your advertising budget to television. Do you believe these lower quality Facebook leads are indicative of a trend we should expect in the future, or is there a way to regain the higher quality leads you previously had?

While Meta, which owns Facebook, implemented new privacy policies around health care earlier this year, similar to changes Apple made with its iOS operating system a couple of years ago, we had previously received a more targeted group of people interested in stroke or rehabilitation. This was very successful for us over the years. However, with the change at the start of the year, we had to develop workarounds and focus on what I call lookalike groups. We noticed that although the volume of leads from Facebook was increasing, their quality was lower, meaning that the patients or respondents were often just curious and not responsive to our call center. We make thousands of calls back to leads every month and found they were less engaged than before. As Dave mentioned, we're reallocating our budget towards what is working. In our case, targeted TV advertising has been effective, yielding a better response rate to our call center and ads. I can't predict if things will improve with Facebook in the future; we're anticipating it to remain the same. We may still invest some of our advertising dollars into Facebook, but we have also diversified into YouTube, Google ads, and similar platforms. I cannot determine if the situation will improve on Facebook.

Okay. I understand. You mentioned that about half of your pipeline additions come from leads generated within the past 30 days, while the remainder comes from leads that are six to twelve months old. Is there anything you can do to potentially reduce that six- to twelve-month time frame? I assume that a patient who engages initially may be of higher quality than someone who returns after six to twelve months. Is there any way to shorten that time frame?

We engage with patients and follow up with them by sending information online or by mail. Some individuals have been eager for this and have expressed their desire to be screened and to consult their doctors. We have seen many people approach this thoughtfully rather than impulsively; they tend to discuss it with their families, consider going back to their doctors, or consulting others, such as those at rehab hospitals. Our ability to influence this is somewhat limited, as outlined during our Investor Analyst Day, where we discussed the patient journey steps and emphasized that we maintain communication with them through our CRM system. We have a significant number of individuals who initially showed interest and we find that they do return. When they do, they are more engaged, indicating that they have reflected on the information and are ready to proceed.

Okay. Understood. And just one last question from us. You mentioned that approximately 8% of the workforce was reduced to help lower expenses. Are there any aspects of the business or plans that you had that are being postponed until revenue meets expectations? Or will it be business as usual since you were able to implement cuts that do not affect your day-to-day operations and existing plans?

It's always tough to do a riff. We looked at how can we not impact the company's operations, both from a revenue perspective as well as the quality of operations. We took down some headcount. We're not adding any headcount because until we see that revenue growth, we're staffed up right now to build 80 to 120 devices a month. That's kind of our target: let's get to that level of revenue units.

It seems like you had another strong quarter internationally, especially in Germany. What's contributing to that success? Are there any plans to boost growth even further?

In Germany, you're right, it's our strongest growing segment year-to-date. They've done a good job with recruiting and training O&P providers, and they've got over 100 locations now that are certified on the MyoPro. They also have a whole clinical team that goes out to the rehab clinics and sources patients from those clinics, attends a lot of medical conferences. I've been to some like OT World. That's been a good source of patient candidates. We're 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. John Frijters, our Head of International, will tell you that the unemployment rate for occupational therapists is 0.6%. Our challenge there is recruiting quality therapists who want to leave the rehab hospital and come join us. But we've been successful in doing that, and the team is very motivated once they join the company.

This concludes our question-and-answer session. I would like to turn the conference back over to Paul Gudonis for closing remarks.

Thank you all for your questions and for your ongoing interest in Myomo. 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 a sustainable, profitable business here at Myomo. We'll speak to you again in about three months when we report out our Q3 financial results. Have a nice evening, everyone. Thank you.

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