Myomo Inc (MYO) 2019 Q4 法說會逐字稿

Good day, and welcome to the Myomo Inc fourth quarter 2019 earnings conference call. (Operator Instructions) Please note this event is being recorded. I would now like to turn the conference over to Kim Golodetz. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to the Myomo fourth quarter 2019 financial results conference call. This is Kim Golodetz with LHA. Earlier today, Myomo issued a news release announcing financial results for the 2019 fourth quarter and full year.

If you would like to be added to the company's e-mail distribution list to receive future announcements, please register on the company's website at myomo.com, or call LHA in New York at 2128383777 and speak with Carolyn Curran. With me on the call today from Myomo are Paul Gudonis, Chief Executive Officer; and Dave Henry, Chief Financial Officer.

Before we begin, I would 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 include, but are not limited to the risk factors and other qualifications contained in Myomo's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2019, which is expected to be filed today.

Actual outcomes and results may differ materially from what is expressed 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 Paul Gudonis, CEO. Paul, please go ahead.

Thank you, Kim, and good afternoon, everyone, and thanks for joining us today. I'll begin the call by providing a business update. Dave will then review our fourth quarter and full year financial results and discuss our financial outlook. Then following the financial update, I'll give some closing remarks, and then we'll take your questions.

During the fourth quarter of 2019, the strategic actions that we had initiated over the previous 12 to 18 months began to pay off generating important new records for the company, record revenues, record pipeline growth, record gross margin, and record direct billing channel pipeline. More specifically, revenues in the fourth quarter were just over $1.5 million, representing a 71% increase over the same quarter a year ago.

For the year revenues were $3.8 million, representing a 57% year-over-year increase. We've now had three consecutive years of revenue growth of 40% to 60%, and we expect this growth to accelerate as a result of our national rollout of the MyoPro and the success of the continued scaling of marketing and operations that we initiated a year and a half ago. And Dave will discuss these plans in a moment.

Since we launched our direct-to-patient marketing initiatives, our reimbursement pipeline has now expanded six-fold to nearly 600 cases as of December 31, 2019. Recall that our reimbursement pipeline is the number of MyoPro units that are in the process of receiving insurance prior authorization. Patients or family members who see our ads on social media platforms and via search engines are captivated by the opportunity to use their paralyzed arms once again.

As a result, we're adding more than three medically qualified patients into our reimbursement process every day, and presuming insurance approval this represents more than $100,000 of potential revenue each business day. Over the past year, we augmented our orthotics and prosthetics provider channel with our own direct billing channel. Through this channel, we build a patient's health insurance plan directly rather than through an intermediary L&P facility.

Direct billing affords us significantly higher revenue and margin per unit and the higher average payments we receive more than cover the incremental costs that were responsible for, which include the marketing, the clinical and billing costs associated with these patients.

This strategic shift emphasize our direct billing channel, as Dave will detail in a moment, accounts for much of our dramatic expansion in gross margins. Combined with reductions in our cost of goods, our gross margin reached 80.5% in the fourth quarter, well above the 74.6% in the prior year's fourth quarter.

As I indicated on our last conference call, we expected the percentage of direct billing patients in the pipeline to increase, and we ended the year with over 50% of our active reimbursement cases being submitted to payers by the company. And this number is expected to increase even further in 2020 given that 81% of the new patients we evaluated for MyoPro last quarter are being processed in the direct billing channel.

To facilitate patient access to the MyoPro product line we signed an agreement with HomeLink, a national payer network so that Myomo can build our powered orthotics devices as an in-network provider, and HomeLink has contracts with some 1,200 payers covering 30 million lives in the United States. We received two new HCPCS codes from the Centers for Medicare & Medicaid Services, or CMS, that became effective as of January 1, 2019.

And since receiving those codes, a growing number of Medicare Advantage claims have been processed for patients who need a MyoPro. As you may know, 35% of seniors on Medicare have opted for a Medicare Advantage plan, which is managed by companies such as United Healthcare and Humana, and that number is expected to grow over time.

For the rest of the seniors and Part B Medicare, we follow CMS's direction and have submitted the first of several claims for a MyoPro as durable medical equipment or DME rentals, and we're awaiting decisions on coverage criteria and payment amounts.

We also recently announced progress in Germany for coverage of our product line. After reviewing our clinical evidence in the medical necessity for the MyoPro, we were pleased that the statutory health insurance agency issued a ruling that German citizens were medically qualified for MyoPro should be approved on a case-by-case basis.

Our first such claim was processed in January by Barmer which is a leading German payer that covers 8.9 million lives or about 10% of the German population. We've now established Myomo Europe GmbH based in Germany to expand our international revenues with a growing number of O&P providers in selected markets.

And with this overview of our accelerating operational metrics, the strategies we're employing to generate higher revenue and margin per unit and the progress with our reimbursement efforts we'll move on to the financial review of the 2019 fourth quarter and the full year by our CFO, Dave Henry. Dave?

Thank you, Paul. Turning now to our financial review, revenue for the fourth quarter of 2019 was a quarterly record of $1.5 million, an increase of 71% compared with the year-ago quarter. Total revenue for the year ended December 31, 2019, was $3.8 million, an increase of 57% over 2018. Both fourth quarter and full year 2019 revenue growth was achieved through a combination of higher number of units sold and a higher average selling price, reflecting a record amount of direct billing revenues.

More specifically, revenue from direct billing for the fourth quarter was 50% of total revenue, up from 23% of total revenue in the prior year quarter. Direct mailing channel revenue for the year was 33% of total revenue, compared with 15% of total revenue for 2018. We're delighted with the progress we've made to increase our direct billing revenues as these sales have a favorable impact on our gross margin.

We ended the fourth quarter with 331 direct billing units in the MyoPro pipeline or 56% of the total pipeline. We recognized revenue on 43 units in the fourth quarter versus 32 units during the fourth quarter of 2018. Backlog, which represents insurance authorizations received but not yet converted to revenue, was 53 units as of December 31, 2019. This compares with 61 units as of September 30, 2019.

More than 40% of the backlog at the end of the third quarter was converted into revenue during the fourth quarter, and roughly 35% of our fourth quarter revenue units came from orders received in the fourth quarter. The majority of these were from our O&P, VA, and international sales channels.

Turning now to gross margin, our gross margin in the fourth quarter of 2019 was a record quarterly high of 80.5%, up from 74.6% for the prior year's fourth quarter. For the full year 2019 gross margin increased to 76.1%, up from 70.2% in 2018. In addition to our revenue mix favoring the higher margin direct billing revenues, we realized cost reductions on the MyoPro that also had a favorable impact on gross margin. Operating expenses for the fourth quarter of 2019 were $3.8 million, an increase of 12% over the comparable period of 2018. Operating expenses for 2019 were $13.7 million, which was up 11% over 2018. The increases primarily reflect higher compensation costs associated with the addition of personnel as well as higher expenses associated with marketing, product development and securing reimbursement.

The company's operating loss for the fourth quarter of 2019 decreased to $2.6 million from $2.7 million a year ago. The full year 2019 operating loss of $10.8 million compares with $10.5 million in 2018. Myomo reported a net loss for the fourth quarter of 2019 of $2.8 million or $4.81 per share. This compares with a net loss for the fourth quarter of 2018 of $2.7 million or $6.49 per share.

Net loss for 2019 was $10.7 million or $19.35 per share compared with a net loss for 2018 of $10.3 million or $25.18 per share. Please note that all share and per-share amounts have been restated to reflect the company's one-for-thirty reverse stock split that was effected on January 30, 2020. Adjusted EBITDA for the fourth quarter of 2019 improved to a negative $2.4 million from a negative $2.5 million from the corresponding period in 2018.

Adjusted EBITDA for 2019 was a negative $9.8 million compared with a negative $9.6 million for 2018. Please refer to the table reconciling net loss to adjusted EBITDA contained in the press release we issued earlier this afternoon. In February 2020, we completed an underwritten public offering raising net proceeds of approximately $13.7 million.

The offering consisted of 1.66 million shares of common stock and 483,000 pre-funded warrants, together with 2,143,000 investor warrants and a combined offering price of $7 per share. The investor warrants have an exercise price of $7.50 per share. In addition, the underwriters exercised their overallotment option to purchase 321,450 investor warrants. All prefunded warrants issued in the offering have been exercised.

Cash and cash equivalents as of December 31, 2019, were $4.5 million. Pro forma for the proceeds from our offering and net of repaying 50% of the outstanding balance of our term loan, which is required under the terms of the note. The company's cash balance as of December 31, 2019, was approximately $16.2 million. Our cash burn for the fourth quarter of 2019 was $2.7 million.

Cash burn in the fourth quarter was impacted by a deposit made to a contract manufacturing partner to purchase inventory to meet 2020 demand. Given our pro forma cash balance, which includes the proceeds from the equity offering, we believe that we have sufficient cash to meet our operating requirements for at least the next 12 months.

Turning to our near-term expectations. As we're reporting today, we're continuing to grow our pipeline, focusing on direct billing opportunities, which generate higher ASP and gross margin per unit. We're also using the reimbursement data we've collected over the last 18 months or so to target through our digital ads those patients and geographies served by insurers that have reimbursed the MyoPro, including Medicare Advantage and other commercial insurers as well as certain state Medicaid plans.

Given our cycle time from lead to revenue, which varies from 6 to 12 months under direct billing, we expect that these efforts will begin to bear fruit in the second half of 2020. As a result, we expect to reach to achieve significant revenue growth in 2020. That said revenue for the first quarter is expected to be lower sequentially and similar to the same quarter a year ago due to a lower backlog conversion rate in the first quarter compared to the fourth quarter.

Longer term, we are at a rate of patient evaluations today when combined on a go-forward basis with an expected richer mix of candidates with insurance plans [that] regularly reimburse the MyoPro. That puts us on the path toward accelerating the revenue growth and generating the operating leverage necessary to achieve our target of cash flow breakeven on a quarterly basis by the fourth quarter of 2021. Achieving this target assumes we execute on our operating plan and the reimbursement environment remains status quo.

With that overview, I'll turn the call back to Paul.

Thank you, Dave. Well, as you've heard us describe today, Myomo has established a multiyear track record of consistent, strong growth in the business, and the strategic actions we've taken are leading to an acceleration of the key operating metrics, namely increased patient leads, the additions to the reimbursement pipeline, a larger percentage of our business going through the direct billing channel, and higher revenue and gross margin per unit.

We're also demonstrating productivity improvements that provide the foundation for scaling the business. Revenues increased 57% last year, while operating expenses increased just 11%. Deploying the new capital we raised last month, much of which will be used to support our marketing and sales programs, provides us the path to generating the revenue and increasing the operating leverage necessary for us to achieve cash flow breakeven.

Now before we open the call to your questions, I want to say a few words about COVID-19. Like other companies, we're closely monitoring the coronavirus situation. And so far, we've seen minimal impacts to our business at this point. Our O&P distributor in Italy is under lockdown, but we did not expect any near term orders there.

We were supposed to attend a clinical conference to meet with therapists in Boston later this month, which was canceled and an O&P conference in Germany in May, which was also canceled, has now been rescheduled to October.

Our supply-chain has not had any disruptions, and we have inventory on hand to fulfill our orders in the coming months. However, if there is some type of infection among employees at the assembly or fabrication site, we may see some delays as product work needs to be shifted temporarily to backup locations. Our Chief Medical Officer and Quality Executive have provided guidance to our employees and good hygiene, and we're encouraging working remotely when feasible.

And in our interactions with patient candidates, we implemented telehealth online screenings last year. So we've been able to use video conferencing to evaluate a growing number of candidates. So our reimbursement pipeline continues to increase at this time. However, no one can predict what other effects on the economy or travel and health this virus may pose, and how it's going to evolve in terms of the numbers of people and locations. So we'll do our best to take precautions and be prepared to adjust our plans accordingly.

Before we take the first question, I want to mention the status of several investor conferences in which we had planned to participate in the coming weeks. Our participation at the ROTH 2020 conference, which was to be held March 16 through 17 in Laguna Niguel California has become a one-on-one virtual conference now. So if any of you had arrange meetings with us at ROTH, we'll keep these meetings but do them virtually.

We also learned today that the Sidoti & Company Spring Investor Conference, which we would have presented on March 26, has been postponed with Sidoti adding a second day to their fall conference now on September 24 and 25. At this time, we still plan to be at an Investor Summit March 25 in New York City, but we're going to wait for any pending news about that. So we would like to speak with you virtually whenever we can to keep you updated.

And now I guess operator, we're ready for the first question.

(Operator Instructions) Scott Henry, Roth Capital.

Thank you, and good afternoon. A couple of questions. First, Dave, I don't know if I heard you right, but did you give me placements for the quarter in last year's fourth quarter? Did I hear that? I don't know if I (multiple speakers)

Yeah, so we had 43 revenue units in the fourth quarter. And I said that of the 40% of those came from our backlog and that 35% of our revenue units came from orders that we took -- and delivered and took revenue on an inside the fourth quarter.

Okay. So the ASP -- and what was it a year ago? It was 32, correct?

It was 32, yes.

Okay. So the ASP went up significantly then to get to the 15 -- or the 1.5 million.

Yes, it did. And as I mentioned because of the higher direct billing mix and direct billing representing 50% of total revenue in the quarter.

Okay. So I guess that's the main takeaway for direct billing as we should think about higher ASP and the higher gross margins along with that?

Yeah, that's right. That's why we're doing this.

Okay. Great. And then you mentioned Q1 '20, it looks like Q1 '19, just to make sure my numbers are correct. I believe you did 35 units in 2019. Is that correct?

Q1 of 2019? (multiple speakers) I got 33.

Okay, I'm sure your number's right. Okay. Then I'll keep that in mind. (inaudible) it seemed like you converted a lot of the backlog in Q4. Was there a reason -- is that just kind of end-of-the-year spending patterns or --

Yeah. I think given my comments about our first quarter backlog conversion being on lower than 4Q I'm wondering -- with direct billing and things like if that increases, I'm wondering if our backlog conversion rate isn't going to be a little bit more lumpy going forward. Because it really does with direct billing, it depends on when we get paid. And because that's when we're able to recognize revenue.

So maybe during the fourth quarter because insurance companies we're trying to clear out claims that were at the end of the year. Who knows? I don't really know for certain. I mean, this is -- [we're] really starting to gather data on backlog conversion under direct billing as we go.

But as of now, like I said, I can't really give you an answer one way or the other as to what caused the higher conversion rate in fourth quarter over third, and why it's particularly going down in first quarter over fourth.

Okay, great. And then I certainly appreciate the target of breakeven by fourth quarter of 2021. I think that's an admirable goal, and I think it's great to have that out there. The question is do you think you can use the current cash runway to get there? Or do you -- you might just top it off a little bit? How should we think about cash in getting to that target?

I mean, current market environment aside, the hope is that we don't have to raise any more capital. I can't say that we won't. I don't -- want to make sure I'm clear. As long as we're able -- we need to execute to our plan, and we need the reimbursement environment to stay where it is. Not get -- don't get worse. We'll take it if it gets better, but don't get worse or remain status quo. And if we do those things and we execute to our plan, we have the opportunity to get there.

But it does require some execution obviously, and whether we need additional capital going forward, we do have the warrants that we issued. I mean, they're underwater right now. Everything's underwater right now. But our stock has demonstrated, particularly during the offering period, pretty significant volatility. Maybe some of these warrants will exercise. Who knows?

So that could be a source of external cash. We do have the ATM that's been suspended since last year because of the February 2019 offering we did. If we choose to we can put that back up. We could potentially -- we have a partner now that's given some a loan to us. We paid half of it back, and there's a potential to leverage that relationship as call -- as well.

Okay. Great. I appreciate all that color. Final question. Because I think when in the past we talked -- it seems like a key component of the business plan is getting a large contribution coming in from Medicare. Can you talk about that? And what are the data points that I should be focusing on to gauge how progress is going on the Medicare front and reimbursement?

Sure. I can jump in and cover that, Scott. So we got the new codes. And as a result of those codes being effective last January, we're now getting paid for Medicare Advantage claims. And as I pointed out, about 35% of seniors are covered by Medicare Advantage. And from some industry forecasts I've seen they expect that to grow significantly over the coming years.

As far as the Part B Medicare claims, we decided to follow CMS's direction after many discussions over the last 12 months about whether this custom fabricate or doses should be billed as a lump sum, just like other orthotics and prosthetic devices are; or be treated as a DME rental.

So we decided to work with an O&P provider who has now submitted the first claims as DME rentals, which then gets to be repaid over 13 months at which time the patient receives the device and all the payments have been made by Medicare. Those claims have been filed a couple of months ago, and those are still pending.

So when that comes clear, I'd say follow through and put out the coverage criteria and allowable amounts, then that opens up that Medicare population, which would be then covered of DME rental over 13 months. But I don't have any particular dollar values on that until we hear something back from Medicare on this.

And where would you expect to hear back on that?

Well, I thought I'd hear back by now, but now I'm expecting in Q2. I mean the claims have been there. There's been back and forth discussion with provider relations at what's called the [DME Max] as the medical contractors. They've been very helpful in terms of how these O&P providers should be building these rental claims. And so hopefully, we'll hear something up there in the second quarter.

Okay. Great. All right, guys. Thank you for taking the questions.

All right. Thank you, Scott.

Jim Sidoti, Sidoti & Company.

Hi. Good afternoon. Can you hear me?

Yes.

Yes.

Great. I just wanted to go over the units shipped in the quarter again. I know you said you were able to bill for 43 versus 32 a year ago, but is that the actual number of units that were shipped, or is that just the ones that you got paid for?

Those are the revenue units. We don't really talk about units shipped. It's not a not really a relevant number per se. It's more -- because we can't take revenue until we -- in many cases -- under direct billing until we get paid. So 43 revenue units.

Okay. But because it's taking a little longer to get paid now that you're using direct billing, can I assume that the percentage increase in actual units shipped and deployed is higher than what you reported?

We do have direct billing claims that are outstanding, and that is a number that's greater than obviously the units that have been shipped -- under direct bill -- or the number of units billed, I should say. Under direct billing, we're required to deliver to the patient first, and then we bill insurance. So those claims that are open and outstanding, those are part of the backlog.

Okay. But I guess what I'm trying to get at is the number of units that you actually deployed in the quarter I assume was higher than 43, and was the percentage increase of units [some] point in the quarter comparable to the revenue increase, or was it higher?

I don't know the exact number of units that were deployed during the quarter off the top of my head, but I am pretty sure it was greater than 43. But I don't know the exact number. But I'll try to look that up and get you that number.

Okay. All right. And then the relationships that you establish now with HomeLink here in the US and with the German reimbursements that's already -- none of that existed in the fourth quarter. Can you give us some sense on what contribution [they had] in the first quarter, or is that something that will take two or three quarters to really build up?

Yes, it will really be the latter, Jim, because, again, HomeLink does offer the advantage of patients who contact us now. [It's] when we do their insurance verification, if we find out there through the HomeLink payer network, then we will submit those claims through HomeLink and then they will get authorize at some point.

So that might be another three months process. And then we have to fit the device on the patient, send that delivery ticket in to get paid. So that's more second half revenue for any of those patients that may be covered by -- at HomeLink payer network.

And over in Germany, we do have a robust pipeline there in Europe, because we have a number of these O&P providers that we have recruited directly. And so they have claims pending in front of different insurance companies.

And it's very helpful now to be able to point to the statutory health insurance directive that says, hey, if the patient is medically qualified and there is medical necessity, each of these insurance companies should fairly evaluate these cases on an individual patient basis. So hopefully, that will lead into again revenue -- in this -- the rest of 2020.

Okay. So then if we look at the quarterly revenue for the year, looking at 2019, the fourth quarter was almost double the first quarter's revenue. It sounds to me like for 2020 that fourth quarter could be even a larger increase than it was in 2020. Because of all these things that should be kicking in in the back of the year. (multiple speakers)

(inaudible) much larger pipeline starting the year, about 600 patients compared to about 300 a year ago. And at the pace at which we're adding -- in Q4 we were adding 60 patients a month into the pipeline, and that number we expect is going to be increasing here in 2020.

So it sounds like you agree with what I said, that by the fourth quarter you should be even higher than you were -- that difference should be even higher in 2020 than it was in 2019.

I'll turn it over to our CFO for a [different] exploration or [view].

You're talking about the revenue in absolute dollars or in percentage?

Both.

So I mean --

Because it sounds like in absolute dollars, they are going to be pretty close. So Q1 '20 versus Q1 '19.

Yeah, but you're more interested in Q4 '20 versus Q4 '19, right?

Right -- I guess I'm trying to understand with all these things going on that in 2019 you were basically able to double revenue by the fourth quarter. In 2020, it sounds like you should be able to do even better than that.

So I mean, we haven't given guidance by quarter, but what I will say is that we are guiding as we did last year to significant revenue growth in 2020. And if we are to be executing to our plans to get to the cash flow breakeven -- and remember, we've talked about our breakeven point in the past at $25 million to $30 million of revenue or roughly 85 units a quarter if you use a $30,000 ASP. That's our ultimate end objective.

And so if we're to get there -- that's a quarterly run rate of, call it, somewhere in the seven-ish kind of a number per quarter, maybe a little bit less. So to get there if we'd be in a position to be at that kind of a number by fourth quarter, we need to be well on our way by the fourth quarter of 2020.

Yeah, okay. I think we're saying the same things.

Yeah.

Okay. Thank you.

Ed Woo, Ascendiant Capital.

Yeah, thank you for taking my question. My question -- I know, you mentioned about some of the impacts to your investor schedule and also to some of the academic conferences. But have you consider changing your marketing plan this year, either in Europe or in the US?

At this point, most of our marketing is the direct-to-patient online advertising. And so that's generating continued lead flow. Because I look at all the leads that come in every day, and that number continues to increase as we keep targeting people with stroke, brachial plexus injuries, and so on. And then as I mentioned, we initiated online patient evaluation.

So in the past, we used to do screening days at rehab hospitals and O&P clinics around the country. And we had to gather people together and then spend a day maybe evaluating four to eight patients. We're now able to do it much more quickly. So if a lead comes in today, I could arrange for a telehealth evaluation within the next 24 hours or maybe the next few days and no one has to travel to do it.

And then that puts that patient into the insurance pipeline. We do online collection of their medical documents with their permission, and then submit them to the insurance company. So we haven't really changed our marketing plan at this point because of the whole COVID-19 situation.

Great. And then touching a little bit about your continued move towards direct billing and higher ASPs. Should we see continued improvement in ASPs as we move through the year?

Well, we are adding a greater percentage. As Dave mentioned, in Q4 about 50% of our revenue was direct billing, in Q4 [as of] last year. In this quarter, 81% of our new patients that we added into the pipeline are direct billing cases. So depending -- as there's no change on the ASP that we're getting paid by the various payers, then we should see again more direct billing percentage of the units that are sold. More units during the year and a higher percentage of those being direct billing.

That sounds good. Well, thanks for answering my questions, and wish you guys good luck.

Thanks.

Thank you.

Kyle Bauser, Dougherty & Company.

Hi, this is actually [Jacob Barry] calling in for Kyle. Thanks for taking my question though. First off, can you guys talk about how your backlog is showing? We've seen a nice ramp up in the pipeline. So perhaps you can speak to how you've been able to accomplish this, and the actual size of the current backlog?

Well, let me talk about the -- how we fill up the pipeline and backlog. And then Dave can talk about how we convert that to revenue. So what happens is, these patients are coming in; they're getting evaluated online. We're submitting their medical necessity cases to insurance companies through our reimbursement team, headed by our Chief Medical Officer, Dr. Green. Upon getting an authorization that goes into our backlog. And then, Dave, you can take it from there in terms of converting the backlog to revenue.

Yes. So as I had mentioned in the call, we had 53 units in backlog at the end of the quarter. And the backlog begins when something exits the pipeline. So we get an insurance authorization. That's when a candidate will enter the backlog, and then they leave the backlog, obviously, when it's sold. And we delivered and we collect from the insurance company. So there was 53 units of backlog at the end of the fourth quarter. That compared to 61 units at the end of the third.

Right. Okay. Thank you for that. We've heard a little bit about direct billing and your expanded reimbursement staff to drive increased insurance authorizations. To that end can you provide any more color on the progress in this area, and any new updates as they relate to CMS and the Medicare opportunity?

Well, we continue with our own reimbursement team, which is -- continue to grow by a couple of additional headcount because the volume is just increasing so significantly. We've [filed] those with the commercial payers with Medicare Advantage plans, workers' compensation. We also are approved by the VA. So some of that mix is veterans. And then for the Part B Medicare patients, again we have been waiting and working with CMS, and what's the coverage criteria and payment allowable would be under DME rental because that's a different payment model.

Up till now, all of the Medicare Advantage and the commercial payer and VA orders have been paid for as a onetime payment amount -- lumped it with called lump sum in the [L&P] industry, which is way other -- orthotics and prosthetics are paid for. We're waiting to hear what that rental amount will be. And then now that opens up the market for those other Part B Medicare patients.

But I can't tell you what the timetable for that would be or guarantee that there would be -- that they will have -- if they will actually cover this device, in which case we can appeal and continued discussions there with CMS. But it was a good sign that they did issue new codes for us which went into effect a little over a year ago.

Right. Yeah, awesome. Thank you. And then just lastly, having closed the recent $15 million financing, what are the primary uses for the cash? And how far out does that capital get the company?

So yeah. The first thing we did with the cash is we were required to repay 50% of the outstanding balance of our term loan. So that was about $1.9 million that we repaid and that included a 15% success fee for the lender. So that was done with that. So when you -- that leaves a -- call it a little over $12 million of net proceeds that are being added to the existing cash that we had at the end of the year. And that cash is going toward continuing to scale up.

Primarily is going to be for working capital and general corporate purposes to continued to fund the digital advertising, to grow the leads, to fund increases in headcount, to evaluate patients, and to seek reimbursement on a case-by-case basis with insurers. And then hopefully, along the way, we can get some help from like CMS, for example, which will make things a whole lot easier on the reimbursement front because we don't have to seek approval to be able to bill and get paid.

All we need as a written order from a physician. And assuming that we're accredited or we have an O&P provider that builds on our behalf, we can then collect revenue and start building a -- presumably it's going to be a rental DME reimbursement from Medicare.

All right. Perfect. Thank you. That's all the questions I had. Thanks for all the other responses.

All right, thank you.

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

Thank you, operator. So in closing, we remain confident in our outlook for growth as we continue to improve the metrics that relate to our reimbursement pipeline, the insurance authorizations, and the product orders.

Our focus is, you've heard today about increasing direct billing. It's driving our revenue per unit and our gross margins higher, and will allow us to begin to benefit from operating leverage as we continue down the path to achieving our next major milestone of cash flow breakeven. So once again, thank you for your time this afternoon, and goodbye, everyone.

This concludes our conference. Thank you for attending today's presentation. You may now disconnect.