Myomo (MYO) Q3 2025: O&P Channel Revenue Jumps 154% as Recurring Referral Strategy Gains Traction

2025-11-10 | By EarningsIQ Research

Myomo’s Q3 marked a pivotal shift toward recurring, lower-cost patient acquisition, with the O&P channel and MyoConnect program both accelerating. International growth, especially in Germany, outpaced expectations, while U.S. Medicare Advantage headwinds continued to pressure margins and backlog. Management’s focus on operational leverage and channel diversification signals a deliberate move to reduce reliance on direct advertising and drive sustainable growth into 2026.

Summary

• O&P Channel Expansion: Revenue from orthotics and prosthetics partners more than doubled, underlining a scalable new growth vector.
• Shift to Recurring Referrals: MyoConnect and clinician-driven leads are now central to lowering acquisition costs and improving pipeline quality.
• Margin and Cash Burn Pressures: Operating expenses and gross margin compression remain key hurdles as the company invests for future leverage.

Performance Analysis

Myomo delivered $10.1 million in Q3 revenue, at the high end of guidance, as international and O&P channel sales offset U.S. Medicare Advantage weakness. International revenue, led by Germany, surged 63% year-over-year to $1.8 million and now represents 18% of total revenue. The O&P channel, orthotics and prosthetics clinic partners who refer and fit patients, posted a 154% year-over-year increase to $900,000, accounting for 9% of total revenue. Direct billing remains the largest channel at 73% of revenue, but its share is declining as new channels scale.

Unit volume rose 16%, but average selling price (ASP) declined 5% due to mix and a prior-year accounting change; normalized, ASP was up 3%. Gross margin contracted to 63.8%, pressured by higher labor, material costs, and facility investments. Operating expenses grew 26% year-over-year, reflecting increased payroll, advertising, and R&D for pipeline and product initiatives. The operating loss widened to $3.5 million, with a net loss of $3.7 million and negative adjusted EBITDA of $2.7 million. Cash burn was $2.9 million, but the recent $17.5 million Avenue Capital loan bolstered liquidity for ongoing scaling.

• Channel Diversification: O&P and international now comprise 27% of revenue, diluting direct channel dependency.
• Pipeline Quality: Sequential growth in pipeline ads and authorizations signals improving lead quality, not just quantity.
• Backlog Dynamics: Backlog fell 34% year-over-year, but faster intra-quarter conversion is reducing reliance on backlog carryover.

While topline growth remains solid, margin compression and rising opex underscore the importance of execution on channel productivity and cost discipline to reach breakeven targets.

Executive Commentary

Strategic Positioning

1. O&P Channel Scaling

The O&P channel, partnerships with orthotics and prosthetics clinics, is emerging as a high-quality, lower-cost growth engine. Quarterly revenue from this segment more than doubled to $900,000, with about 30 units shipped domestically and record order flow from Germany. Management is investing in clinician training and certification to further expand this network, aiming for a “recurring source” of patient referrals that bypasses costly direct-to-consumer advertising.

2. MyoConnect Referral Program

MyoConnect, a clinician referral initiative, is designed to generate high-quality, recurring patient leads without direct advertising spend. Myomo’s field clinical team engages therapists and physicians to expand awareness and drive referrals. Over 80 to 100 new therapists are trained monthly, and management expects this channel to deliver both pipeline growth and improved conversion rates, as referred patients tend to be more recently affected and medically qualified.

3. Insurance and Payer Access

Expanding insurance coverage remains a top priority, particularly with Medicare Advantage and commercial payers. Myomo added a new in-network contract in Q3, bringing total private payer coverage to 35 million lives. The company continues to face high preauthorization denial rates in Medicare Advantage, but is actively working appeals and leveraging published clinical data to improve payer acceptance. A secular shift of patients from Medicare Advantage to traditional Medicare could benefit future MyoPro adoption.

4. International Growth Focused on Germany

Germany is now a core international growth market, benefiting from streamlined statutory insurance coverage and a robust O&P partner network. Myomo is deprioritizing investment in other international markets where reimbursement is less accessible, while the China JV remains in regulatory trial phase with no near-term revenue impact.

5. Operating Leverage and Cost Structure

Management is targeting improved operating leverage as volumes scale, but Q3 saw significant opex and margin pressure. Manufacturing changes and headcount reductions are expected to support future margin recovery, while capital from the new term loan provides runway to pursue growth initiatives without immediate equity dilution.

Key Considerations

This quarter demonstrated Myomo’s pivot from one-time, advertising-driven patient acquisition toward scalable, recurring referral channels, but execution risk remains as the company juggles growth, cost containment, and payer dynamics.

Key Considerations:

• O&P Channel Penetration: Sustained double-digit growth in partner referrals will be critical to offsetting direct channel headwinds and improving patient acquisition economics.
• Pipeline Quality Over Quantity: MyoConnect and clinician-driven leads offer higher conversion rates, but require ongoing investment in education and support.
• Margin Recovery Path: Gross margin compression from labor, materials, and facility investments must reverse as scale and channel mix improve.
• Cash Burn and Leverage: New debt provides needed liquidity, but increases pressure to achieve breakeven before principal repayments begin in 18 months.
• Payer Policy Shifts: Changes in Medicare Advantage enrollment and payer coverage will materially affect revenue mix and patient access.

Risks

Myomo faces elevated risks from payer preauthorization denials, especially within Medicare Advantage, as well as cost inflation and execution risk on channel scaling. The recent term loan increases leverage, raising the stakes for achieving breakeven before repayments commence. International growth is concentrated in Germany, with limited diversification outside this market.

Forward Outlook

For Q4, Myomo guided to:

• Continued revenue growth driven by intra-quarter fill units and new authorizations, despite a lower starting backlog.
• Further expansion of O&P channel and MyoConnect referrals to support pipeline growth.

For full-year 2025, management reiterated guidance:

• $40 million to $42 million in revenue, representing over 23% growth year-over-year.

Management highlighted several factors that will drive results:

• Acceleration of recurring referral channels to reduce acquisition costs and improve conversion.
• Maintaining cost discipline while investing in R&D and clinician engagement.

Takeaways

Myomo’s Q3 results reinforce a decisive shift toward scalable, recurring patient acquisition channels, but margin and cost challenges remain pivotal.

• Channel Transformation: O&P and MyoConnect are now central to the growth strategy, reducing dependence on costly advertising and improving lead quality.
• Margin Watch: Significant gross margin compression and rising opex highlight the urgency of achieving operating leverage as revenue scales.
• Execution Required: Investors should monitor the pace of O&P channel expansion, payer dynamics, and cost control as the company works toward breakeven and debt service milestones.

Conclusion

Q3 marked a strategic inflection for Myomo, with recurring referral channels and international growth offsetting payer and margin headwinds. Sustained execution on channel development and cost leverage will determine the company’s trajectory as it seeks to balance growth with a path to profitability.

Industry Read-Through

Myomo’s channel shift and international success in Germany provide a playbook for other medtech firms seeking to reduce acquisition costs and diversify revenue streams. The growing role of clinician-driven referrals and payer coverage expansion highlights the importance of recurring, high-quality lead sources in durable medical equipment. Margin pressure from inflation and facility investments is a sector-wide challenge, reinforcing the need for operational leverage as companies scale. Meanwhile, payer policy shifts and reimbursement hurdles remain a critical gating factor for all patient-facing device businesses.

MYO Healthcare Medical Devices Referral Channels O&P Medicare International Margin