Neuronetics (STIM) 8 Aug 232023 Q2 Earnings call transcript

Thank you for standing by, welcome to the Neuronetics Second Quarter 2023 Financial and Operating Results Conference Call. At this time al participants’ are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. [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. Klausner. Mark sir. ahead, go Please

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

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

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

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

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

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

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

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

second We solid initiatives commercial traction. associated as performance our our a consistent delivered two capital customers. during and have headwinds the despite the customer of sales quarter to education some and with remain U.S. gain ongoing integration the largest of continued

revenues Total quarter with expansion. million, plan was strong Our continued the treatment by treatment $X.X million. increase. second session driven of XXXX, revenue growth primarily was system to revenue NeuroStar $XX.X session X% combined NeuroStar system over up on an

quarter. As mentioned, ship previously objective systems XX to XX to our is per

believe, the of this by total shipping and customers with NeuroStar. enables success systems. range plan, Consistent this to sufficient within As long-term to a dedicate of time our we ensure concluded resources team we our the quarter XX

treat the to nearly shift buying patients the delivering by Importantly, in and them helping second customers to quarter were we systems, the of are practices during to which points these half educate need. NeuroStar value their

The capital of impacts by the the NeuroStar be sales strength experienced sustained our our to can Summit. sales as positive as of equipment attributed our well team, continued capital execution

lives. remain was in a strategy, the during again in and our These of providing improving sales crucial patient’s Summit most educate Our event. to the about NeuroStar customers can recent held Arizona a have approximately resulted system platform Scottsdale, Summits XX sold ultimately on element impact out NeuroStar

comprehensive our key local XX% with accessibility our driven management Board, accounts. $XX.X the session revenue year-over-year our results million, training. NeuroStar these up quarter the utilization, national XXXX. X% the and second treatment was increase along among improving by was our X-STARS of over of utilization consumable in performance driven training expanded primarily the by initiatives increased U.S. The the program, performance the The the positive of the impacts such practice were PHQ-XX University, Across of as tool strong

an largest wanted progress customer we made on lines update our TMS. at provide Greenbrook the these Along

continue process. the team improving see across a During the Treatment remain as merger volumes sites. TMS result their stemming the Greenbrook the working session related depressed Success to address ongoing actively with quarter somewhat with we from but closures, of the office we performance and and challenges integration revenues active Greenbrook are to

care, leadership systems beneficial to We moving to team their levels recently expand a implement effectively patient enhance have forward. awareness, strategy at various the included redeploy from initiatives to collaborated closely mutually stores. and This access with implementing closed

systems XX to-date, stores, systems competitive due existing taken these of over into have XX approximately store where total, out And of replaced relocated systems. have been they to service In were closures.

the remaining relocated expect been have the to We end the of third systems by quarter.

scheduling classes of upcoming patients. attend Greenbrook's in better for and Greenbrook all their Regional and the have can Additionally, class to University NeuroStar growth, to success, them of with proven are treaters playbook their the support serve attended practice Presidents trainers they we a provide so Vice

the team, impact at had as have learned encouraged in As NSU clinic. they their deploy to are support tactics we we that Greenbrook continue them positive by the

performance. legacy While in are behind currently Greenbrook of stores success lagging stores terms

Greenbrook as to that back we partnership We continuing PMS get through on forward for illness. efforts, are of strong we education the together track. that the confident We of look therapy can help portion to mental adoption as advance with our work business and the training

turning Now highlights. our to operational

had By is classes booked our of participate of quarter-end, first reviews XXX increasing in who we Our the NSU. customers over attendees. to fully continues with XXXX NeuroStar XX University from number excellent hosted focus customers. receive

high program, of August, on twice make basis. out we anniversary customers' with three-month possible. sustained at celebrate NSU all streamline of fully to impactful We a as booked it our rolling to In one-year demand which are updated courses have experiencing the we will experience as our the

training Our customers NSU session. benefits continue to to the directly derive significant from

utilization, that same before Xst active experienced an experienced XX% only January became increase. X% XXXX, whereas NeuroStar that increase from have attendees sites for example, non-attendees University period For in a

empowering performance. time which Additionally, our increased program, led co-op to X-STARS other the techniques over increasingly deployed, that attendees to We can have impact to better -- the serve ensuring as the leveraged This and our properly overall positive remain our providing the customers, practices such highlights of their leverage training has their committed and when fully support they to patients. marketing, potential.

build for co-op NeuroStar. XXXX second the incorporate of focus of continue percent awareness our into Our was program a higher to marketing to to customers

have positive the practice. We tactics marketing roadmap co-op and of marketing new on program of a market inside which outside features effective launched our prescriptive the program, The April X. impacts seen to

and and created, to digitize New the collateral we revamped were program. myneurostar.com of execution training the marketing

also use demonstrating partnership its the program especially Since engagement implementation, platform. attendees. accounts our of by XX% program deeper we've of a observed adoption with increase co-op the their activity and with Existing increased co-op quarter-over-quarter. with in reflects increased NSU This are

participating Additionally, NeuroStar accounts saw utilization increase and sequentially. is co-op patient program in access a This to enhanced growth Therapy. notable increasing driving

our the of that area and across is demonstrate program for be creating NeuroStar to their for third providing opportunity the This a provide accounts final country XXXX Our of network will premier this a to XXX the of focus NeuroStar patient follow group part patient to best customers commitment that and And year. and our quarter program After Better best launch diagnosed third experience it been feedback with intend care Guarantee. with who the from have people, the are in advocate NeuroStar. depression, Me soliciting this branding we practices.

customers, Me advancement benchmarks delivering We among the outside specific anticipate high establishing the patient benefit of tangible practice. expanding provider. levels such By Guarantee efforts observing and Better leverage of distinctive marketing who a as consistently service within being and fully

expand our earnings specifics will third this on this program of We on call. quarter

we OCD patient's clearance OCD, delivering OCD. existing care treatment MT in This This capability, positioning Shifting provide for NeuroStar's on and latest commitment steps to unique cap gears to clinical TMS system treatment technology streamlines placement for by the to and announced XXX(k) and the cap technology motor individuals simplifying the for it the an determining The a reducing the efforts. only involved depressive innovation In disorder. the effective [Technical as with efficiency update struggling coil process regulatory signifies our threshold. June, Difficulty] optimize advancement complements NeuroStar.

use We unique expand our are the continuing to work for therapy. to

a FDA expand potential population. to recently seeking patient We filed our the have with submission XXX

for the filing on want the on of comment to sharing don't FDA do year specifics of occurs. the we as filing purposes, expect the end we competitive the by the progress While back forward from it hear to look to and

from expanded are coverage, By announce benefit of in to Shield Blue growing need payers to Cross eligibility of for pleased commercial of enabling recognition Moving reimbursement, of update prioritizing medications This policy TMS to two the Cross treatment our relief, reflects requirement prior This access has of government care policy to Michigan is particularly of patients to of the treatment. to change depression shortage by enhanced for four Michigan therapy. TMS people mental from mental nationwide attempted receive we health Blue antidepressant providers. health reduces the Shield eligibility. early and millions the Blue light Blue to

start CMS plans largest accessible. making our of supervision now individuals four-month a removed sooner. Additionally, it receive changes their nurse treatment that treatment before make has million Aetna trial Aetna over practitioners. and health patient can treatment behavioral healthcare their in for more the will the treatment, allows under one conducted TMS psychotherapy be of covering XX.X lives Aetna the implemented country to to requirement ordered Also, has the initial easier

we and reducing up TMS and the update nurse momentum payers, care commercial through access and step government have Aetna, is expanding eligibility latest The practitioners from with coverage seen other builds for to forward therapy. on a opening requirements

commercial strengthening We of training which in leadership appreciate our programs, are comprehensive the success. dedicated I support contributed made marketing our our our the to position the entire assistance, in ongoing and strong with industry. practice quarter, through received initiatives, pleased organization their the in efforts all dedication and effective second achievements team

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

being Thank made all otherwise noted, Unless you, for performance are XXXX. of versus second the comparisons XXXX of quarter the second Keith.

revenue prior $XX.X million, versus in the down Therapy $X.X year. $XX.X revenue XX shipped revenue from X% Total U.S. million of $X.X year We systems XX an million increase in million. was prior Advanced NeuroStar systems, of over XXXX. System was

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

quarter. was $XX,XXX compared second approximately in quarter active XXXX, of per the approximately year In $XX,XXX the revenue site prior to

last We that working. that our are as were highly programs We site. time encouraged sites, active this a evidence able see per despite the to we this are revenue year, to initiatives in maintain compared by fact and material increase

expense amortization to XX.X%, in in compared product gross margin the associated driven year the in prior were latest decline with an margins by The Gross XX.X% release. quarter. was increase

We $X $XX.X the these have a one-time to $XX.X related a new of expenses expenses to the manufacturer. quarter also contract been our million million, margins in decrease XX.X%. were of would transition incurred XXXX. quarter gross during Without X%, million second or compared to expenses, Operating

the our similar XXXX, savings some ELT to expense expenses. in identified review Consistent the related XXXX, met in which of million co-marketing expenses team $X.X XXXX operating justify will increased by and to the In be of in with exercise achieved Greenbrook. May, a with over offset results balance

demonstrating have management. achieved we our of reduction expenses, $X.X in result, a financial commitment prudent a to million As net

as loss we of $X.XX share, net the compared quarter $X.X million share the stock-based compensation quarter, incurred the During loss for $X.XX expense. year million million to or per in a quarter. prior $XX.X or Net of was noncash $X per approximately

related $X.X loss million, recognition quarter. million $X.X of the our negative in the to was retention reduced year prior quarter, negative EBITDA to was credit. by as In the million $X.X compared EBITDA employee the

We June, cash in to capital receivable of XX, related and which our quarter significant transition June million. contract expenses $XX.X manufacturing also equivalents As accounts increased and our incurred balance were at recognized significant XXXX, cash end. revenue

into principal $X As payments. which making accounts of senior and a has a reminder, we converted secured Greenbrook Greenbrook started million interest on receivable loan

guidance. to turning Now

range bottom the full-year, to revenue in the expect of million the range For by $XX $XX million, $X now the million. end increasing we of

million $XX million. $XX million, $XX expect to For guidance $XX to the we to of $XX expenses million operating revenue prior now year the to $XX million. of total in from million for be the improved of expect quarter, We range

our operating indicates which our flow that hand. on will cash breakeven with remain confident cash in current reach we We plan

growth, of Our supported a path management steady, top gross operating profile and projections profitability line margin our expenses. to by remains for diligent strong

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

and long, The achievements Thank work and hard it is team's goals. you, of significant progress the of reflects Steve. our We've in dedication first-half the our towards made year. list achieving

their capital focusing Greenbrook, attendee surpassing fully high our up growth, on increased aiming of efficiently has placements, classes, attention include and levels Some expenses, NSU excellent back all revenue reducing to non-attendees. targets accomplishments bring to receiving and our on heightened maximizing reviews previous utilization, on compared while to which utilization booking

adult non-physician Additionally, product TMS our eligibility positive administer We've also reducing achieved practitioners of to NeuroStar clinical software failures patients capabilities and And for efficacy data with prior made we've anxious TrakStar. for and Internet enabling supports the therapy. medication TMS notable policy depression. and order developments, for connectivity enhanced decisions,

by cap financing XXX(k) successfully regulatory million new manufacturers. in Furthermore, new the and contract obtained clearance MT On margins recently submitted a front, $XX label switching the for gross we expansion. debt we for OCD, improved secured and

the momentum. As we into the are move upon we to build second-half, eager

to deliver We take part of working and higher of a gives of to programs record of that follow in University, customers a accounts incorporate ability growing continue NeuroStar Our into focused who proven remain best us the on to NeuroStar across country our number confidence results. create in marketing the solid co-op practices. customers, track percentage execution network

provide we in NeuroStar place, to the of mental from health more and patients a disorders. suffering accelerate to aim relief well-defined With strategy adoption

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

you. Blair. line with the is Our Margaret first William from of to Kaczor Thank going [Operator Instructions] come question

is line go Your Please ahead. open.

Thanks Hey, everyone. good taking question. morning, for the

Hey, Margaret.

about -- to I the hey, wanted accounts to that system. purchased second start talk the

these Is to their accounts seems or of new the relative -- productivity is are practices? this then really increase. half meaningful of quarter should ramp that a traditional about So national kind And think this coming group how placements from -- we like sites? more

systems purchased you accounts private offices. Margaret. mostly second not that any purchased are the quarters. doing, of How in National Keith. couple This last accounts is The systems were have

run per to gotten need patients scheduling on they system six treatments physicians to have where second a that demand. are device. they're they're to And into that these level their conflicts or level, with doing day So the seven at starting that support and

maybe a that the productivity given seems like And little that familiar Okay. should the system. ramp already with they're Is normal fair? increase and faster than be

I they've been the already these how to most Yes, speak accounts to have already exactly of and NSU. them it is. chair. into to And their -- think get understand patients They’ve

So these are the accounts accelerated. that have really

over months their the running. in past typically get think have that six it hard to get and reduce accounts the we I to quarters it we've and said And past takes for system that. several up worked

to the accounts we're So now new get in XX running. to XXX days range and up

what the I'm Okay. to increase. tear meaningful And attendees you in That's into, from NSU. pretty That's a helpful. increase trying XX% referenced for utilization

for You're the referencing back, those second are system that are I guess, coming ones sites purchases.

follow-up both And continue next several So where the this traction can as more about that the quarters XXXX, the we in more think queue. one attend pick-up to in NSU? I have of hop is and back accounts something I'll then

using classes we're honestly, mentioned, XX% just repeat an putting answer held staff are they Quite now we and simple We're -- emphasis accounts have to we've get the more getting increase, coming yes. there. customers back. XX the The is and you that

are data our we legacy accounts come all as as using possible. accounts get and NSU this the So to new soon to to

Okay.

would have So you. per what sense accounts, the quarter do. this Greenbrook obviously, because year, been as last better for can what you do guess, give the excluding will these the maybe be underlying lap seem I business or we just or that account pretty question headwinds, meaningful. that of excluding signal a national of, just, Greenbrook kind a Thank of us revenue steps Can this me

this Steve. Margaret, Hi, is

closures. Greenbrook so done that math have did We we office but yet, XX haven't or

the But per would and bit So obviously we'll to a and be that quantify have for lower. you back site you. get go to revenue back

Okay. Thank guys. you,

come Thank Bill from Instructions] Our line CG. Plovanic next [Operator you. question to going is of the with

open. Your ahead. go line is Please

Zachary it’s you Thank Hi, taking for on Day question. Bill the today.

BlueShield payers Can think think will you get and payer improvements. you. easier them commercial comes that with and of percent financial policy how revenue lot what you rules beyond drive Thank it and can other Aetna importance that Aetna, to about update? possibly when a So do a you've And about BlueCross quantify talked the similar metrics? other

morning. good Well,

very four in had that was went to back we encouraged two. And the in UnitedHealthcare policies. We by are one of are drugs March when biggest with follow the The most think payers changes from other I going to the it. suit

failed those drugs there there patients. What out four plenty have can and awareness I are to in think the means that to the are failed drugs they the chair that we to we've patients sooner. into get concerted patients making reduction said those in past effort a drive is of

for So we just to patient easier population have get them making payers are us large to it it. a treat. for The

the So awareness. is I and help drive physician's job our think that to job

Great, thank much. you very

And to line our Adam of going Maeder with Sandler. come you. Thank Piper next question is from the

is open. go Your Please ahead. line

Hey, Steve. for is Keith. what the more expectations the to you you Adam. so questions. saw I'd on from bit of you and kind like and over Can off sessions what into on and ramping this business I'll taking for July sort start your I This of on systems how relocated and progressed Thank the that for you And rest a Simran up? of QX have part different just be of treatment once sessions business. August curious back guess the color provide volumes look far? know Hey Greenbrook

are get have we that systems prioritized XX Not per that shipped past, been and to have them up of have to running. so can we Greenbrook placed, locations. The have level, help have back of get is moved sites level. all been them able for yet through four been want over getting his of to getting of Good we're them and Leonard said, the patients them working generate and trained we to with six to been training that competitive so morning. and team systems get all new I we Bill that In and Greenbrook using day them those to working This systems, to the was Keith. in have, and system the per that to as neighborhood

our our success, marketing sure utilization, are following awareness. be -- accounts the make to XX% that and AdWords the to growing the that accounts to ones other NSU, shape, follows map ones through includes on co-op road accounts to For at per-click to which greater they're the following make drive is in that website going are PHQ-XXs media growth, those their and able using our platform proper are the which includes sure ours Google buying the in their social that that

perhaps Okay, helpful. a sequential bit guidance at years. past of which midpoint, my then the around implies in than we've seen QX step-up follow-up, what And perfect. a to steeper kind is of from QX for That's XX% the

guess, And kind informs I level the you your for what So assumptions fourth walk that in quarter? baked us can of through confidence? of

if was example, we're that's and our quarter was programs sales. expecting year. for the Hi, under million QX this number then slightly higher the at strongest accompany up similar that's treatment anticipating of this QX. and what back that XXXX. the have session to quarter. capital And significant we a seasonality was third in do QX always And Yes, from capital And second assumption look go XXXX, we're is $X QX Steve. I and just than quarter the

And so six normal the just months. really cadence final for it's the

to year. Greenbrook We be of first-half the do their compared consistent, to this performance see

from Many time a into We have that service into going field systems engineers As are our from to, Brainsway these of little and Keith storage transition deinstall NeuroStars accounts install. active have were do moving is the consuming. formerly units sites. to the alluded

a is effort So these. training that there goes significant into

could there again, upon significant. so QX be activities. really And the training in and depending lift we don't upside the speed But think is

forecast. reflective digits in that's, almost we've As been that a QX reminder, performance growing double again, and

really could gross And I margin Okay. squeeze Thank quickly. if you. one one last just on

of just you So new contract about out over should XXXX? the of expenses we margin impacts as think on and year how some into look the hit gross one-time manufacturer. second-half with we of the But to the the levels the related

Yes. this gradual QX in We'll to XXXX, we're QX range. then see. and new really And again, of XX% in inching our see that I year. improvements going once up to contract up gross is and running manufacturer would margins say,

helps of so underway, an margins. efforts as number cost as that capital have mix, we a product reduction revenue increasing revenue, also versus transition, well treatment And session which

So to get to we XX% are that we're in range going confident up XXXX.

you. Thank

welcome. You’re

to Thank JMP Securities. Our you. of from line with Instructions] going Stauder next the is [Operator come Daniel question

Your open. go line is Please ahead.

Great, thanks.

year? revenue mid-$XX,XXX. Any quick, just think real is XXXX, site talked this you to for back could as expect expectations targets And active for broader mid-term you But just about cohort you quarter, us to this the So exit this per these that levels? how guess, into that about comfortable near any you reach modestly I Or Thanks. exit metric? what's into time? up remind here over you

key metrics. Hey continue Steve. is variable existing the of say an the would I of it's sold activities a does and the depending and different number increase. highlight that bit into also the this the a will of system site. performance we is with I upon Danny, have, segments. It lot initiatives sites to really one It individual mean customer

to consumables of continues the So that's of many segment for really and shine the focus our initiatives. local us,

so would we XX% And maybe as that get expect next higher we to work year. through

And then That's just… great.

are now. calculation. you There right pretty that that treatment the revenue the or $X system, per at into if translate higher upside much on obviously, I $X it's Dan, going And number, still which a was capacity. is look is runway much to done a So say, compared site in to will to where sessions significant that system, average per we getting

cash just And that. you Thank Great. one then usage. on more for

well helpful. half be on but in here had Thanks. of just give exiting items your as would as us the first-half of could in year, burn one-time year, You cash very the back more any XXXX the rate you this some rate color

Sure.

quarter, it pretty we push had this AR in by, a I very would June. a actually So masked collections was healthy say, good but

significantly, you also in balance, expect QX. AR XX-day inventory month. final which see can we in leverage with shipped number work reflective the up receivable do is of so And We it's of our systems to towards as zero we the and

release we saw did employee also retention that with IRS. our submit press for the credit the in You

So prepared KPMG. that was by

we're QX So hand that either pretty QX. confident have late we'll or early in

that will So help.

be that to modest we're historically timing usually subjected burn anyway. function And and so to burn-neutral. much expecting pretty close strongest the Again, and And be Again, shipment in then out timing the the we're to a mix lower QX. in the of somewhat collections QX burn of cash going also us pretty December. a It's activity door of in a have of will the should quarter June. goes it for revenue year

flat So cash. operating going line. end we've continue to then to expenses been hold low and year top the we think XXXX grow we're the to is plan Again, to in communicating, mid-XXs the in as

get, we to to where if that this and year, for we the cadence, get think top their example, where top we growth get can so mid-teen Greenbrook line And -- were line accounts our expecting back to range. can in normal can some other

you Thank much. very Great.

You’re welcome.

Keith no back I'm the would questions, hand further like any Thank to closing over remarks. you. And showing for conference I to Sullivan and

you updating operator. call. all for Thanks you Thank very to on in next your quarterly forward our you look Neuronetics. much, interest We

concludes participating. Thank today's you for call. This conference

disconnect. You now may