Neuronetics (STIM) 13 May 232023 Q1 Earnings call transcript

Thank you for standing by, and welcome to the Neuronetics First Quarter 2023 Financial and Operating Results. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Mr. Mark Klausner. Please go ahead, sir.

you conference us call. thank first the and XXXX quarter morning, for for joining Neuronetics Good

Financial Joining President Officer, Chief and on Chief Steve me today's Executive Keith call Sullivan; are Neuronetics' Officer, Furlong. and

discussed financial covered XXXX, would Securities I strategy, Litigation the our revenue call caution certain this begin, we including Safe the to impact by forward-looking Harbor business, like during statements Before management include Private of statements the guidance, listeners related Reform to COVID-XX issues and that Act information under other and will and of conference provisions metrics. of operational

Actual to stated or risks results company's implied due associated from uncertainties statements the with forward-looking can differ and business. materially by those these

report encourage Securities For filings May on as the made XXXX, the course a will discussion Exchange risks law. as forward-looking statements and Form uncertainties March as this which of company's during I to company's company with XX-K quarterly you company's to any by and Annual on the associated including obligation except business, call, Commission, the review The in any XX. of Form Report XX-Q, update filed well Neuronetics on with required the filed be disclaims

performance not competitors indicative strategic relative financial for and that externally trends to non-cash information also useful are non-GAAP performance we'll our for During the financial conjunction measures compensation results. decisions. both in and basis, non-GAAP and a to on financial other taken provide EBITDA. and our uses non-GAAP benchmark management certain by call, against discuss plans Management information including information certain that our compare GAAP certain excluding believes with measures expenses of in investors operating U.S. to Management forecast

are between on be Reconciliations press GAAP which website. release, and accompanying can our our viewed results presented in tables non-GAAP the U.S.

and my to Officer, the President Chief With call over Neuronetics' that, it's turn Executive Sullivan. to pleasure Keith

financial overview an to on us. will for Mark. update. providing begin followed the by an with results performance, I'll and operational turning I'll thank some XXXX, by of conclude Good morning, review our before Q&A. you and you, Steve our joining of recent Thank rest then thoughts

quarter in results our we some as with cleanly expectations organization, were industry solid that first continued execute across line delivering headwinds. notwithstanding the The was to

As based quarter Steve the his will and in growth, the treatment our our past confidence remarks, three first session detail in year, results, raised on guidance. we in of annual quarters have increasing revenue

an driven million, up quarter NeuroStar was system strong Total expansion. the XX% on-plan NeuroStar primarily XXXX, million. treatment of $XX.X revenue combined revenue $X.X performance, was by first system with over session

previously amount appropriate per ship long-term for As we noted, which a to systems of resources teams XX up to and time devote optimal our believe to to customers plan set to is using NeuroStar. range our was the XX our success allow quarter, the

sold-out attended NeuroStar In line team all we are system plan, ongoing steady quarter yet which expansion XX Summit XX strong area is who ended our This strengthened practices. with participants by cylinders and another hard to by different Charlotte, firing with are Carolina, work that of from the success managers XX and systems on due sales North the was in of shipped.

summit sales result can the our to contributed in coming summits have educate of about capital continue quarter. NeuroStar cornerstone impact customers the patients' the of strategy attending a as to the directly to customers These be meaningfully Orders NeuroStar lives. on a

of X-STAR growth the training. highly training encouraging availability session XX% the use management year-over-year the result practice program expanded treatment U.S. revenue and University, at the This up quarter per-click over of million, The in sites, XXXX. and stemming NeuroStar local our tool of our greater was from of first investment was PHQ-XX $XX.X our

a return our slower to see Importantly, Service local customers. did albeit per-click segment at Provider rate in than quarter, we the growth the

Now turning highlights. to operational our

Our excellent classes classes courses high. participate first full customers. to May Demand continues from July, in who We to University. NeuroStar representing attendees By the booked currently our of be NSU with receive for with and XXX accounts. continues XX XXXX had out April, capacity. focus reviews capacity hosted XX is number quarter customers increasing at until end, we have June

We NSU are directly advantages to see the sessions. continuing to our customers related experience training

compared PHQ-XX identify NSU to their more need a monthly instance, For and utilization attendees who use see not practices, as yet have within attended. in as frequently patients to improved customers result, the

Our incorporate percentage a higher program. our our marketing second focus to is for co-op XXXX of customers into

only co-op leveraging has its the of to Not compared seen participating, program, accounts benefits participation but first once an the number the are XX%. increased we more. of over As have they XXXX, quarter in in increase

quarter roadmap In prescriptive marketing new the saw in program a easier marketing make tactics outside in featuring we that seeing than more Xst, market XX% to simplified things alone, participants, a amongst indicating customers, we of on they first the launched practice. April a inside our To even spend increase value effective and program. for the are

revamping collateral digitize new tools and and These marketing the of execution to include of myneurostar.com a training the program.

on and for accounts a network initiative. creating final is area across focus the practices NeuroStar we country making good follow of are Our XXXX and this best progress that third

for effective network taking a accounts. customers have these marketing we We developing of now broad our and invested to proven in practices significantly are strategies

standards, levels By utilize in practices, our fully offering as the reflected of setting customers and our progress service NeuroStar high the of within and increasing patient to market. uniqueness the the expect who consistently approach to such see certain we marketing

in continues Nashville, theme through marketing Neuronetics as be working National making with Turning from customers to training The clinical simplification, to sales seamless for other our recent as possible we our team highlights. In Tennessee. our support. of Meeting January, hosted Sales

which within their full identify also We they sessions; three when need patients are following treatment practice; and post-treatment emphasized key pillars, patients our ensuring complete of the identification retreatment. XX patient to

or and hardwired internet us given connectivity to of cellular FDA TrakStar into TrakStar recently an gears update will has allow enable WiFi and of clinical This efforts. all connect approval to between regulatory Shifting instead over via connection. accounts us time. to systems on the our The NeuroStar

benefits. three key us It provides

can accounts we data support that additional the submissions. collect be used FDA from to can First,

we to manually systems push can via them than And service we the engineer. account prevent order lastly, needing in rather a service remotely updates to issues. technology monitor Second, can install

Moving it NeuroStar disorder to significant patients This reimbursement, Neuronetics nurse a recently, mental BlueCross BlueShield suffering including health. non-physician of its Therapy Mississippi to from access updated allow our major policy for for for NeuroStar treatment. to is to milestone as increases receive practitioners, prescribe depressive healthcare practitioners Advanced

medications positive change to the for health XXX,XXX growing down over only in that with They payer lives, and is BlueCross with the prior for development to aligns expand therapy. four. TMS largest from a the treatment the two covered BlueShield payers momentum state require TMS Mississippi's As policy also failed coverage

This suffering change outcomes depression. receive from improved drug-resistant to for treatment patients will earlier help their TMS those leading potentially in journey, treatment

in company industry health TMS access dedicated health only with therapy. policy been the to to have that As NeuroStar advocate the policy a TMS broaden for team, we partnering changes with providers actively

Lastly, I Greenbrook. provide want to an update on

see executive to to both and of subsequent months of few resulting integration continue the on mutual with businesses. strategy and level leadership TMS met developed two have Success and a and teams, Greenbrook We merger an the field a the the deliver their We over success. disruption past from

them This access have the competitive make they from of replacing best To to patients and redeploy recently care systems. into stores and includes systems how stores strategies that from to a active systems seen more stores are drive greater point, help number move recently and productive. closed awareness we where closed

the efforts, our recovery advance we with our But of result their as with pick as We of have continue combined assumptions our adoption in a continuing is annual guidance. Greenbrook business partnership line we month-over-month. up As rate recently to strong illness. mental current therapy the forward of for of made TMS to the seen look part the

in successful growing additional systems, that of members their ensure months. their a utilization have leadership over to have the and members fleet Greenbrook we attend scheduled is the NeuroStar NSU To of team of coming as number possible scheduled team as

encouraged quarter. by the We performance are our first in

execute measured on expansion the treatment We continue strategy. capital deliver growth to solid session and

Our efforts marketing practice training supported enable customer and initiatives, success. by commercial were to support team's best-in-class programs,

dedication savvy we to position the continue thank would for like industry. the mission the I our to leadership in our have as and displayed to our build they organization entire

like to call over that, turn I'd the Steve. With to

quarter Thank first Advanced the versus year. you, XXXX. Total for an $X.X Keith. Unless revenue increase first prior otherwise System million Therapy versus of quarter U.S. made prior of noted, in NeuroStar all the XXXX performance of over are $XX.X was year comparisons $XX.X million. was being million, million revenue of $X.X XX% the revenue

shipped systems, in from XX We up XXXX. XX

XXXX strong session million, revenue per revenue growth per-click to our As between an our was performance ship of is $X.X XX% local increase driven over current U.S. by Keith The XX quarter. million. noted, within $XX.X primarily was treatment revenue and XX of systems customer segments. strategy

XXXX, per was to compared prior a quarter revenue active The first $X,XXX, active over prior sites was the result the In last material in decline the site in compared $X,XXX quarter. of to year. approximately primarily the year increase the of approximately year

release. typically the driven the associated gross capitalized and XX.X%, Gross XX.X% well as year treatment expense corresponding software margins increase seasonality. due primarily product as compared reminder, latest revenue a amortization As were to to in quarter lowest the an session margin prior revenues decline quarter. in The during year are mix, first with by the of was in the

X, quarter. Beginning a on slightly in we our impacted first XXXX, instituted which January margin policy, accounting new the gross

the we improvements over to of these software a of completion version products begin capitalized and our software two expenses. the years. make software continuously developed, are amortizing Upon upgrade, we As capitalize software new NeuroStar each period

this we goods this than it part of in previously as rather Beginning had recorded. as where been – R&D, expense year, amortization recording sold cost are

to accounting amortization a sold. goods margins required reflecting like-for-like are have change, to been expense XX% We this basis, On the year. this cost record would of

were increase quarter million, the an the just XXXX. $XX.X during of expenses first to Operating compared quarter $XXX,XXX, of

prudently of the leverage As our a managing toward drive result, been operating expenses, to drive to have profitability, beginning as operating and our part in are business. strategy we

we quarter, stock-based of million the approximately incurred During expense. non-cash $X.X compensation

as the year the million of Net per quarter first net million $XX.X $XX.X $X.XX share, $X.XX share loss a for prior or in to loss was compared per or quarter.

million, year EBITDA in million quarter. prior was negative the negative $X.X compared to $X.X as

with provide XX, SLR were facility have As million $XX In equivalents amended April, to cash and in credit an XXXX, up cash which million. we borrowings. that announced us Capital of we will early with Partners, secured $XX.X March

on March XXXX rate and maturity least facility based XX of of provides The will be interest at months the term date credit annual The XX, for the SOFR facility plus X.XX%. is amended it commercial continued the additional adoption milestone for as strengthen interest-only This credit facility provides to NeuroStar. and a of our company capital us support sheet with our payments. represents significant loan balance

will relationship. financing as this we goal remain focused our for our forward flow this would towards to We their breakeven of ongoing progress in and support goal. continuing on support our like our SLR cash long-term further efforts We to and to achieving XXXX express look appreciation we

Additionally, Greenbrook on This will buffer balance March announced additional growth we also a million approximately we and to note promissory $X forward. XX, Greenbrook's secured million note. support strategy that payable will outstanding senior into transaction expenses accounts converted bear The their interest of matures $X.X cash moving XXXX. provide with and

to guidance. turning Now

the year, to of in the million now For expect full million. $XX we revenue $XX range

guidance our quarters certain customers service and remaining of session strength the during XXXX in from three recovery the for Our assumes modest from continued year. revenue updated a per-click treatment local providers

million. $XX quarter, of to the million For second expect we revenue $XX

the range We continue million expect year the $XX million. to to to for expenses $XX operating be total of full in

and year due XXXX, primarily quarter, in of to bonuses, cash year-over-year to highest costs. our with for expect a sales we Meeting commissions the payments being reduction National continue full and the retention our the Sales first For burn

cash gross with growth, plan top expense hand remains Our operating and margin for reaching we anticipate and flow have due our we operating to expansion on cash management. the projections track on breakeven line

I to would turn the over to like Keith. call now back

NeuroStar NeuroStar remain into co-op University, excited continue number balance to customers who increasing of the Looking a and customers focused about to of the marketing execute. a to country the I'm the network program follow working ability across We percentage of participate accounts to the opportunities creating higher ahead practices. incorporate about of on XXXX, that our best and in that lie

as Lisa and our help to Officer, With that expertise wealth and over having on Sientra, Allergan. experience May effective years XXXX. Vice I'm joined a initiatives, these X, Marketing at Senior leadership ZELTIQ, Lisa Obalon of our previously has To and execute to President team, held Therapeutics, team marketing, pleased of in XX leadership Metasys Chief Rosas roles senior announce knowledge brings

awareness, building to attest personally her experience driving can practice Neuronetics. I increasing market beneficial which success, and capabilities, highly in are extensive share at

on disorders. our to TMS and look as are forward mental Lisa leader strengthening board for We in the position have excited to

With the open that, questions. I'd line like to for

Plovanic first comes the Canaccord. Instructions] [Operator from question Our of William from line

Your question please.

taking Good Thanks. morning. great. Hi, And my thanks for questions.

I and QX off, with - with if what gives is just to line guidance is was - there. line you the raise your First guide original in given consensus in that guidance wondering was conviction or QX actually

quarter, an line, a why raise solid but guidance this at it's in-line considering in Just quarter, point?

Steve. it’s Bill,

good in from So basically, things we Even all and Greenbrook were we track thought. weakness were early our fixed didn't purchases utilization we a price store really thing, which though partially saw also positive offset until that is They than April, accounts, considered. late the closures being signs during commence their quarter. actually some the metrics March, by stronger

they're part the how they're us we're comfortable conviction $X by end gave low doing how high that million. QX the end by looking at the So, of and doing increasing and million early $X through that just

then, bringing And on board. great. congrats on Lisa Okay,

great You've of a got VP Marketing there.

new on that off, us the more you're that changing you're a Thanks. on exactly program kicking talked what could about external internal wondering you specifically? little that just if give Just with co-op color you

Bill, this is Keith.

a co-op our know, the program, marketing that's On as you piece key to program.

tried it their up, to to accounts it. make reimbursed smooth have easier our to out for sign participate, to submit ads get to then and for We it

are regulations smoothing think it So, – for it now too we accounts to our felt and rolled rules first though had when as it simpler make just and out it was I many we them. it out,

answer question? That your

Keith. Thanks, Steve. Thanks, Yes.

Thank you. question. you. moment for One our next Thank

from question the comes from next Margaret Blair. Our line Kaczor of William

Your question please.

wanted Greenbrook What and guide, and little utilization with QX of little start normalizing bit for guys. question or implied to maybe active follow-up I for site morning, the I per good go guidance, Hey, maybe without Thanks QX, into a a Greenbrook on a with taking deeper that? questions. for and the revenue is Bill's guess, bit both kind

QX a we as rates slowdown. doesn't then, first we company little and obviously, QX And kind go the we it throughout as out back imply at half But look a can bit year. year, the the of on growth a total of basis for of

So and I and wanted walk that all low end? that dynamics, to Thanks. gets just those are how to thinking you high what through about you

strongest site, particular some the because guidance, consistent Steve. it's usually up actually so you to closed the for it's our Yes, year. that pinpoint they've QX of is per a number sites and then guess, And right it’s strongest Hi, dissecting is far, of I relocated mentioned Margaret, historically so, and systems of in that then our QX in are second still know influx. We revenue our our quarter QX Analyzing quarter. lot difficult a running now, Greenbrook XX are that already. the metrics

steady to QX. So I per continue remain in are through That again, to increase somewhat increase QX, in QX. question. momentum that was do long to QX site in a active revenue we anticipating expect and

I not answered sure it totally. if So I'm

of That half like it go 'XX? part year, towards of what could back we it again, rate helpful was as that is, for what and imply and looks the exit the

Yes.

So be strong our utilization after. Consumables the that we that's – we're to really Local segment continues in target and

session treatment the half to the going to Assuming more the is, positively continues they're of way revenues to our contributing start the second the Greenbrook – it transition towards year.

NeuroStar working. is University are programs co-marketing the So, immensely. working

help we that get So going flow momentum cash XXXX have to exiting that breakeven will target. XXXX, into the will us

guys and true in policies and policy again, some year-over-year But of before net as helpful. we Okay. and And on a the the it's to press number up at of better encouraging the this reimbursement releases. can take changes, comps basis, see maybe decrease us basis, obviously, what's would AV then, on year change been a terms that and drugs And coverage and Thanks. been that’s covering? policies failed the down you of that look

going have two that physicians focused we Margaret, to comes on to practitioners for changes. So, actively adding each list. review, as of has four suggest the we the with up payers changes one and non-physician are even from And drugs reimbursement to policy drugs working a team

us. patients out companies trying is all an for to that So, for these have focus are it's failed Honestly, our that to that patients active. TMS of the drugs process with ongoing keep are think there enough to access But there get greater provide for care I depression. suffering

there But have patients. are solid honestly, that So a if do we that, failed plenty quite have can of four, we then so. pipeline

Okay.

follow-up back changes a there on of you see And those in then been where squeeze one kind or Is a of see to and – some that. change maybe positive coverage the those as momentum geographies last sorry, any just in I'm do you make one able hop regional fair in to going But queue. impact I'll have to utilization you?

that Yes, challenges on to Medicare and treatment. we and nurse practitioners now out NeuroStar allowing an have educate practitioners have the then the change the the go – TMS we with we is, one of is, of as example, the benefits nurse

we in process. attention The a So the of begun one newest are seeing was New and lot that up have region. we in that practitioners nurse from England

trying are it's practitioners a an basis to wider education process. expand and So we then the on

you. Thank

our Our question. One next question. moment for next

Piper Our from the next question line from Adam Sandler. comes of Maeder

question Your please.

questions. and couple Hi, Margaret's Hi, a Keith. on Congrats of the just thanks and Good for follow-ups morning. Steve. question. solid the Bill taking Maybe start to

of and treatment of of exiting into progressed the kind on and guidance that you raised think over bit and you're you QX a on out first, coming little March exit velocity momentum color kind to curious side? QX, business April guess, just of just the the kind as I the of if willing here the the in So we business saw more about how the on course as provide –

then any two. color could helpful. had Just follow-up provide more you be would there or I And Thanks. a

Adam. Thanks,

key going is of investigations, metrics in that for of benefits week it's around a good treated BI first benefits third because investigations. at Historically, with that we the which really a a requesting see usually the metric be January XXX specifically a if their they're look we in usually patients, One to the indication XXX a peak key the around are is NeuroStar. doctor to quarter,

into team and the peaking of That still and BIs still May peak towards this XXX doing is month. April end the early around is

there is line no goes historical in slowdown the really the key that QX site, indicator of So is QX. which performance that in with and

And only really the so, start we've that's lot and really was the reset beginning the every treatment segment. historically to other what behind of but of administrative occur programs and segment we The seen QX. that's once another are the again, and into year, the utilization, has at paperwork there to is strong that physicians that deductibles this price. quarter accelerate session, was by look our quarter metrics, the Again, them, at once the fixed down in a

the Consumable targeting Local focusing really are ones segment. but on historically that customers helping we're also so, Those them, older and really

into there many number helpful color, just think you sidelines? That’s the Steve. of wanted have those how then on specifics Greenbrook on sure been going of I some one my And have I make different that. more are been be centers field? of guess, that the And currently field, that next the systems how Thank systems the and about placed have and in pulled number you terms at back follow-up. do already kind I had from of would of for And to question

down. their the the in They're announced XX at Not completely patients to Greenbrook They're still stores. working those of the treatment. all through that have stores way were close So, they're that moment. has shut going in XXs

stores have do So to we to completely active systems that. have from several and moved shut down stores that continuing we're

new We're service in then monitor send that up stores. are to because it and a we it ones able reinstall pack the the that engineer,

color. non-physician Keith, specifically changes And just and maybe then, one or helpful, for the on NPPs. last thanks That’s one practitioners Okay. reimbursement

type baseline. a is over business you or the of to, of a of think lives a guess, get impacts percentages think trending kind level time little time? today? lift just access? about setting more need of wanted do that bit of for And of What How Just covered I do something bit you term? to policy this that have little kind ultimately we near Or this

non-physician as the to think nurse we're to I particular. a we in I think able pickup those practitioners education provide see Well, in practitioners,

to nurse We NeuroStar have into number an on seen and practitioners it they their how summits increased NeuroStar be practices. of educated attend incorporate would our

know, payers will lives, a actually as you I the as So, Max policy, adopt over Medicare – adopt as commercial when – increasing policy. new it's as then time similar far the covered our think,

just - starting. and that's So

So, I think we're encouraged by it.

opens the it for of infancy think market up practitioners. group this a at educating But I of new whole us. we're

Thanks for questions. taking the

moment One Securities. next our from JMP from Stauder you. the Thank our question And question. of next line for comes Daniel

please. question Your

Yeah, great. Thanks.

an per-click sites? first Thanks. timing a just to I'm how session give just So run remind new us the more typically how or could it But rate? on incremental ramped off off, treatment you a many newer you then get that's typical far sites takes site up on you introduced to on as assuming were first us the those base. secondly, long installed of your as just And year-over-year of into could idea XXX basis.

introduced are price of Daniel, sites, the doing? them are don't How So, XXX fixed morning. you anymore. those all per-click. We offer Good we

to we somewhere run order strength. So per-click. but open when they full that on are now, they rate up that to time are in, from it new that a accounts takes is regular the around to to them any were accounts right fixed the XXX the price XX days get And grandfathered get all place

cases, them payers. ramp-up many to to and have So get there's credentials help their on period. get In we a the

to them bit little a ramped takes time it up. get So of

one very just you Thank much. And one. then Great. quick

impacts before, Any out appreciated. think margin we as gross the But through should you. on but touched bit the rest look well about additional some the margin, levels just little be year? of of we changes. of as Thank of it as cadence you there a You how or would much commentary gross the accounting hit some on

a Sure. work amortization we're Yes, the through margins to two margins. expense, with hit gross almost to year. point the see tailwinds reclassification as We we forecasting of do the respect

base, to as will a So treatment accelerate continue and increase. part margins revenue sessions larger become our of

strategies some on We goods working cost also lower we're cost that will on that reduction have the of system. the

And within our would goods throughout operating are then, the expenses I cost say sold of consistent year.

as increase, will also revenues increase. So our margins

we high to So, as upon then we exit XXs expect to year the XXXX. continue to continue mid into for gross margins expand and that

Great. lot. Thanks a

like This question-and-answer you. the program conclude I'd does hand remarks. session to back of Sullivan Thank for program. today's any to the Keith further

you Thank for joining you, We us today. on again our forward updating quarterly call. look operator. you next to Thank

Thank you, program. your today's for in and conclude does This ladies participation the gentlemen conference.

now You day. disconnect. Good may