Full Press Release Details
Good day, and thank you for standing by. Welcome to the Neuronetics Second Quarter 2024 Financial and Operating Results Conference Call. [Operator
Instructions] Please be advised that today s conference is being recorded.
I would now like to hand the conference over to Mark Klausner. Please go
Good morning, and thank you for joining us for the Neuronetics Second Quarter 2024 Conference Call. Joining me on today s call
are Neuronetics President and Chief Executive Officer, Keith Sullivan; and Chief Financial Officer, Steve Furlong. Today s call features a live webcast, which includes a slide presentation. There is a short delay between the audio over the
phone and the slides being shown on the webcast. If you are listening over the phone, we would recommend downloading the slide presentation from our website and following along independently.
Before we begin, I would like to caution listeners that certain information discussed by management during this conference call will include forward-looking
statements covered under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to the proposed transaction with Greenbrook TMS, our business, strategy, financial and revenue guidance, and
other operational issues and metrics. Actual results can differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company s business.
For a discussion of risks and uncertainties associated with Neuronetics business, I encourage you to review the company s filings with the
Securities and Exchange Commission, including the company s Form 10-Q, which will be filed later today, August 12. The company disclaims any obligation to update any forward-looking statements made during
the course of this call, except as required by law.
During the call, we ll also discuss certain information on a
non-GAAP basis, including EBITDA. Management believes that non-GAAP financial information taken in conjunction with U.S. GAAP financial measures provide useful
information for both management and investors by excluding certain noncash and other expenses that are not indicative of trends in our operating results. Management uses non-GAAP financial measures to compare
our performance relative to forecast and strategic plans to benchmark our performance externally against competitors and for certain compensation decisions. Reconciliations between U.S. GAAP and non-GAAP
results are presented in the tables accompanying our press release, which can be viewed on our website.
With that, it s my pleasure to turn the call over to Neuronetics President and Chief Executive
Officer, Keith Sullivan.
President, CEO & Director
for the introduction. Good morning, and thank you all for joining us today. I ll begin by providing an overview of recent performance, followed by an operational update. Steve will then review our financial results, and I ll conclude with
the discussion of our merger with Greenbrook TMS.
I d like to start by saying that our financial performance during the quarter was below our
expectations, with revenue of $16.5 million which was down 7% year-over-year. The impact of Change Healthcare cybersecurity breach still lingers. Our utilization in our local consumables segment was up 18% and would have been higher had there
not been the related bottlenecks impacting prior authorization caused by Change Healthcare.
Despite the positive underlying utilization trends, treatment
session revenue was down 5% as our customers were forced to allocate cash to support their operations rather than purchasing new treatment sessions in line with historical patterns. This redevelopment of cash is a result of continued delays in
payments from Change Healthcare. We believe that the negative headwinds from Change Healthcare are transient, and our revenue patterns will return to normal over the balance of the year.
Based on the trends we are seeing in motor threshold determinations and treatment session utilization, we continue to see strong utilizing underlying demand,
and through the continued execution of our commercial strategy, we will drive sustainable long-term growth once we move past these macro challenges.
the capital side of the business, as noted last quarter, our customers experienced challenging securing financing for capital equipment purchases. The process now takes weeks instead of days. We ve addressed these headwinds head on by adjusting
our NeuroStar Summit timing and engaging the financing companies earlier in the process. As a result of our actions, despite the continuation of high interest rates and increased diligence requirements, we were able to recognize revenue on 50
NeuroStar systems, which is at the high end of our quarterly guidance of 45 to 50 systems. This highlights
the continued demand for NeuroStar and our ability to adjust our strategy to execute regardless of prevailing headwinds.
We continue to be bullish on the
future of Neuronetics based on the results we are seeing from our Better Me program. In July, we fully launched the program nationwide after a tremendously successful pilot. Let me share with you some of the results.
Participating practices improved their 24-hour follow-up rates by 6.4x
compared to nonparticipating providers. Through NeuroStar University, at which attendance is a requirement for customers to participate in the program, providers who received advanced clinical training, on average, treated 61% more patients in need.
We ve also significantly reduced the time from initial patient interest to first treatment, leading to a 3.7x more motor threshold determinations.
These improvements are making our life-changing NeuroStar treatment more accessible to millions of suffering patients from MDD, OCD and anxious depression.
Despite these outstanding results, we believe there is still room for improvement. With the expansion of the BMP program, we now have a critical mass of participating customers within many of our key markets throughout the U.S. This increases our
confidence that providers will respond in a timely manner to focused investments in growing patient awareness and education for NeuroStar.
second half of this year, we will be piloting a TV advertising campaign in Tampa, Florida. This TV campaign will supplement our existing digital advertising campaigns that have proven to be highly effective. We chose Tampa because it has a high
concentration of BMP accounts. And we are confident this group of providers will be representative of the other BMP accounts across the country. This campaign seeks to test the effectiveness of using TV as a medium to increase awareness of NeuroStar
TMS and facilitates new patients to connect with BMP practices in a specific market. We held a kickoff event in Tampa earlier this month for our BMP providers and other customers wanting to get into the program. They came out of the event very
excited to participate in this pilot as we seek to deliver even more value to BMP practices and help even more patients receive the life-changing benefits of NeuroStar.
Another highlight in the quarter was the launch of the NeuroStar TMS therapy for adolescents. Physicians are responding positively to this new option,
recognizing the critical need for effective treatments in this age group. We re seeing encouraging adoption rates and positive feedback from providers highlighted by over 425 adolescent patients having been treated since April.
With an estimated 4.3 million adolescents in the U.S. impacted by depression, many of whom are poorly
served by the limited number of approved antidepressants, our FDA-cleared treatment for ages 15 to 21 represents a paradigm shift in addressing this growing mental health crisis.
Following our FDA clearance, we ve made significant strides in expanding insurance coverage for adolescents ages 15 to 21. Major providers, including
Blue Cross Blue Shield of Michigan, Cambia Health Solutions, Premera Blue Cross Blue Shield, California Medicaid, and Aetna, covering over 27.4 million lives nationwide combined, have updated their policies to include adolescents as young as
15. Our dedicated health policy team continues to advocate for further policy updates and providers with providers and payers.
only TMS company with FDA clearance for adolescent treatment, we re at the forefront of expanding access to this vital therapy for a particularly at-risk and underserved patient population. To highlight
the benefits of NeuroStar can have on adolescent patients, I wanted to share a note we received from a patient who recently completed a course of treatment. And I quote, I started TMS when I was 16.5. Before then, I felt hopeless. I have been
on too many medications to count and none of them worked for my depression or anxiety. I had no hopes or dreams in life or for my future. My depression was so bad, I dropped out of high school, stopped socializing, lost friends and isolated myself.
At first, I was scared about starting TMS. I didn t want to get my hopes up because nothing else had worked for my depression. It was hard at first.
But over the span of a few weeks, I started to feel less anxious all the time and happier. It became easier to do the things I used to love. Towards the end of TMS, even other people started to notice how happy I was. I could finally laugh, make
jokes and enjoy every moment. I am so much happier now, and I am making plans for my future and have real ambitions and goals in my life. TMS helped me truly realize that things can get better, end quote.
It is because of patient results like this that we work so hard at NeuroStar to bring this therapy to patients suffering from mental health conditions.
I would now like to turn the call over to Steve to provide an update on our financial performance.
Executive VP, CFO & Treasurer
Keith. Unless otherwise noted, all performance comparisons are being made for the second quarter of 2025 2024 versus the second quarter of 2023. Total revenue was $16.5 million, a decrease of 7%, primarily impacted by lower treatment
session revenue in the quarter. U.S. NeuroStar Advanced Therapy System revenue was $4 million. In the quarter, we recognized revenue on 50 systems, in line with our expectations. U.S. treatment session revenue was $11.7 million, a decrease
of 5% year-over-year.
Revenue per active site was approximately $10,000 in the quarter, compared to approximately $11,400 in the prior year quarter, due
to the unfavorable impacts on treatment session ordering patterns that Keith discussed. Gross margin was 74%, an increase of approximately 150 basis points from the second quarter of 2023 gross margin of 72.5%, due in part to the positive impact of
our shift to a new contract manufacturer.
Operating expenses were $20.7 million, an increase of $600,000 or 3%, compared to $20.1 million in
the second quarter of 2023. The slight increase was primarily due to expenses related to the expanded utilization of NeuroStar University. During the quarter, we incurred approximately $1.6 million of noncash stock-based compensation expense.
Net loss for the quarter was $9.8 million or $0.33 per share, as compared to a net loss of $4.9 million or $0.17 per share in the prior year quarter.
During the second quarter of 2023, we benefited from a $3.6 million employee retention credit, which did not recur in 2024. EBITDA for the second quarter
of 2024 was negative $8.0 million, as compared to the second quarter of 2023 EBITDA of negative $3.3 million, which similarly benefited from the ERC credit in 2023.
Turning to the balance sheet. As of June 30, 2024, cash and cash equivalents were $42.6 million. In late July, we entered into a new debt facility
of up to $90 million with Perceptive Advisors, a leading health care investment fund. The agreement provided an initial tranche of $50 million at closing, with 2 additional tranches of $15 million and $25 million available upon
meeting certain conditions. This new facility allowed us to pay off in full the existing SLR capital term loan, reducing our total debt and also providing additional financial flexibility. This additional funding is available to support
Neuronetics ongoing investments in commercial initiatives, clinical indication expansion and efforts to drive adoption of NeuroStar. We continue to remain confident in our path to profitability, and we continue to expect to be cash flow
positive in the fourth quarter of 2024.
Now turning to guidance. For the third quarter, we expect revenue of $18.5 million to $19.5 million. We
continue to expect full year revenue in the range of $78 million to $80 million. Revenue guidance for the third quarter and full year assumes a return to normalized treatment session ordering patterns and customer inventory management
during the back half of the year. We continue to expect total operating expenses for the full year to be in the range of $78 million to $80 million.
I would now like to turn the call back over to Keith.
Thanks, Steve. As mentioned in our press release earlier today, we are excited to announce that we have signed a definitive agreement to
acquire Greenbrook TMS. If you have followed Neuronetics in the past, you will be aware that Greenbrook is the nation s largest TMS provider and the largest user of NeuroStar systems. This acquisition brings together 2 of the leaders in the
mental health industry, creating a unique vertically integrated company with a significant footprint to bring the benefits of cutting-edge mental health therapies to as many patients as possible.
Before diving into the transaction, we wanted to review the significant opportunities that exist for innovative solutions for the treatment of mental health
conditions within the U.S. There are currently over 29 million patients, including adults and adolescents, who suffer from depression, anxious depression and OCD. Within that massive patient population, more than 4.4 million people are
being treated with medication and are poorly served as they are not finding the relief they desperately seek. This represents a large opportunity for businesses like Neuronetics and Greenbrook as just a fraction of patients who qualify for TMS are
currently being treated with nondrug alternatives.
Let me walk you through some key points of the transaction. Prior to the merger, all of
Greenbrook s existing long-term debt will be converted to Greenbrook TMS common shares. On a pro forma basis, Neuronetics shareholders will own approximately 57% of the combined entity, with Greenbrook owning the remaining 43%. Each share of
Greenbrook is expected to convert into 0.01149 shares of Neuronetics common stock, subject to adjustment prior to closing.
Our existing Neuronetics
management team will remain in their leadership roles, and key members of Greenbrook TMS management team, including Bill Leonard, Greenbrook s President and Chief Executive Officer; Peter Willett, Greenbrook Chief Financial Officer; and
Dr. Geoffrey Grammer, Greenbrook s Chief Medical Officer, among others, will join the Neuronetics management team. The combined company will continue to operate as Neuronetics, Inc. and will maintain its listing on NASDAQ under the ticker
As with any merger of this scale, the deal is subject to customary closing conditions. This includes approval by shareholders of both
Neuronetics and Greenbrook TMS. We anticipate the closing to take place in the fourth quarter of 2024.
Now for an overview of Greenbrook TMS. They are the largest provider of TMS therapy in the United States,
operating approximately 120 treatment centers across 18 states in the U.S. This extensive network allows them to reach a wide range of patients in need of mental health services in some of the country s largest markets.
Greenbrook offers 3 distinct services for patients: med management, NeuroStar TMS therapy and SPRAVATO treatment. This comprehensive approach allows them to